Operation Strategy in Global Environment

Some Multinational Corporations

% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce
Nestle Switzerland 98 95 97
Philips Netherlands 94 85 82
Electronics
Siemens Germany 51 NA 38
Microsoft USA 74 69
Reasons to Globalize
Reduced cost
Lower wage rates, latest technology of production
Less stringent government regulations
Shifting low skilled jobs to other countries
Improved Supply Chain
By locating facilities in the countries where resources are available. Such as
Athletic shoe production to China
Provide better goods and services
Knowledge about culture and ways in which business is handled globally in
different countries.
It helps in the customization of products and services to meet customers changing
products and services.
Reduce response time to meet customers changing habits for products and
services.

Understand Market
Europe lead market with cell phone innovation
Japanese lead with the latest cell phone fashion
Opportunity to expand product life cycle by operating in the
foreign market.
Attract and retain global talent
Better growth opportunities
Relocate unneeded personals to more prosperous locations.
Learn to improve operations
Remain open to the free flow of ideas

Developing Mission Vision and Strategy

Mission
It is the purpose or rational for the existance of organisation. As Aditya Birla
Group : mission is to deliver superior services to the customers, shareholders,
employees and society.
Vision
An aspiration description of what an organization would like to achieve or
accomplish in the mid-term or long-term future. It is intended to serves as a clear
guide for choosing current and future courses of action.
Strategy
It is a unified, comprehensive and integrated plan that is designed to ensure that
basic objectives of the enterprise are achieved through proper implementation
process. i.e. how to get there.
Strategy
Action plan to achieve
mission.
Functional areas have
strategies.
Strategies exploit
opportunities and strengths,
neutralize threats, and avoid
weaknesses.
Strategies for Competitive Advantage
Differentiation better, or at least different
Cost leadership cheaper
Response rapid response
OMs Contribution to Strategy
Product
Quality
Process
Location
Layout
Human
resource
Supply chain
Inventory
Scheduling
Maintenance
FLEXIBILITY:
Samsung's constant innovation
of new products....Design
HPs ability to lead
the printer marketVolume

Southwest Airlines economy service....LOW COST

DELIVERY:
Pizza Huts 5-minute guarantee
at lunchtime.....Speed
Federal Expresss absolutely,
positively on time...Dependability

QUALITY:
Motorolas pagers...Performance

Toyota s after-sale service
on heavy equipment....AFTER-SALE SERVICE

Fidelity Securitys broad
line of mutual funds.BROAD PRODUCT LINE
Operations Specific Competitive
Decisions Examples Strategy Used Advantage
Response
(Faster)
Cost leadership
(Cheaper)
Differentiation
(Better)
10 Strategic OM Decisions
1. Goods and service design
2. Quality
3. Process and capacity
design
4. Location selection
5. Layout design
6. Human resources and
job design
7. Supply chain
management
8. Inventory
9. Scheduling
10. Maintenance
Difference between Goods and Services influence how the
10 OM Decisions
Operations
Decisions Goods Services
Goods and
service design
Product is usually
tangible
Product is not tangible
Quality Many objective standards
- TQM
Many subjective
standards
Process and
capacity design
Customers not involved Customer may be directly
involved
Capacity must match
demand
Table 2.1
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Location
selection
Near raw materials and
labor
Near customers
Layout design Production efficiency Enhances product and
production
Human resources
and job design
Technical skills,
consistent labor
standards, output based
wages
Interact with customers,
labor standards vary
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Supply chain Relationship critical to
final product
Important, but may not be
critical
Inventory Raw materials, work-in-
process, and finished
goods may be held
Cannot be stored
Scheduling Level schedules possible Meet immediate customer
demand
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Maintenance Often preventive and
takes place at production
site
Often repair and takes
place at customers site
Operations Strategies for Two Drug
Companies
Brand Name Drugs, Inc. Ciphla Generic Drug Corp. xyz
Competitive
Advantage
Product Differentiation Low Cost
Product Selection
and Design
Heavy R&D investment; extensive
labs; focus on development in a
broad range of drug categories
Low R&D investment; focus on
development of generic drugs
Quality Major priority, exceed regulatory
requirements
Meets regulatory requirements on
a country by country basis
Table 2.2
Operations Strategies for Two Drug
Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Process Product and modular process;
long production runs in
specialized facilities; build
capacity ahead of demand
Process focused; general
processes; job shop approach,
short-run production; focus on
high utilization
Location Still located in the city where it
was founded
Recently moved to low-tax, low-
labor-cost environment
Table 2.2
Operations Strategies for Two Drug
Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Scheduling Centralized production planning Many short-run products
complicate scheduling
Layout Layout supports automated
product-focused production
Layout supports process-focused
job shop practices
Table 2.2
Operations Strategies for Two Drug
Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Human Resources Hire the best; nationwide
searches
Very experienced top executives;
other personnel paid below
industry average
Supply Chain Long-term supplier relationships Tends to purchase competitively
to find bargains
Table 2.2
Operations Strategies for Two Drug
Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Inventory High finished goods inventory to
ensure all demands are met
Process focus drives up work-in-
process inventory; finished goods
inventory tends to be low
Maintenance Highly trained staff; extensive
parts inventory
Highly trained staff to meet
changing demand
Table 2.2
Issues In Operations Strategy
Research about effective operations management strategies
Preconditions for developing effective OM strategies
The dynamics of OM strategy development
Strategic Options to Gain a Competitive
Advantage
28% - Operations Management
18% - Marketing/distribution
17% - Momentum/name recognition
16% - Quality/service
14% - Good management
4% - Financial resources
3% - Other
Elements of Operations Management Strategy
Low-cost product
Technical superiority
Product characteristics/differentiation
Continuing product innovation
Low-price/high-value offerings
Efficient, flexible operations adaptable to consumers
Engineering research development
Location
Scheduling
Product Life Cycle
Best period to increase
market share

R&D engineering is
critical
Practical to change price
or quality image

Strengthen niche
Poor time to change
image, price, or quality

Competitive costs become
critical
Defend market position
Cost control critical
Introduction Growth Maturity Decline
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Figure 2.5
Internet search engines
Sales
Smart
Phones
Drive-through
restaurants
CD-ROMs
3 1/2
Floppy
disks
LCD & plasma TVs
Analog TVs
iPods
Strategic issues in Product Life Cycle
Product design and
development critical
Frequent product and
process design changes
Short production runs
High production costs
Limited models
Attention to quality
Introduction Growth Maturity Decline
O
M

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Forecasting critical
Product and process
reliability
Competitive product
improvements and
options
Increase capacity
Shift toward product
focus
Enhance distribution
Standardization
Less rapid product
changes more
minor changes
Optimum capacity
Increasing stability
of process
Long production
runs
Product
improvement and
cost cutting
Little product
differentiation
Cost
minimization
Overcapacity in
the industry
Prune line to
eliminate items
not returning
good margin
Reduce capacity
Figure 2.5
Global Operation Strategy Options
International Business
Multi National Corporation
Strategy Options
International Strategy
Multi domestic Strategy
Global strategy
The plans developed by n organization to target growth on a global level for
sales of products or services.
Transnational strategy

Four International Operations Strategies
C
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High
Low
High Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Import/export or license
existing product

Examples
U.S. Steel
Harley Davidson
International
Strategy
Four International Operations
Strategies
C
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C
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High
Low
High Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
International Strategy
Import/export or license
existing product

Examples
U.S. Steel
Harley Davidson
International Strategy
Import/export or license
existing product

Examples
U.S. Steel
Harley Davidson
Four International Operations
Strategies
C
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C
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High
Low
High Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Standardized product
Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator
Global
Strategy
Four International Operations
Strategies
C
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t

R
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t
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n

C
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a
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s

High
Low
High Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Standardized product
Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy
International Strategy
Import/export or license
existing product

Examples
U.S. Steel
Harley Davidson
Standardized product
Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy
International Strategy
Import/export or license
existing product

Examples
U.S. Steel
Harley Davidson
Four International Operations
Strategies
C
o
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t

R
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t
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n

C
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s

High
Low
High Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Use existing domestic
model globally
Franchise, joint ventures,
subsidiaries

Examples
Heinz
McDonalds
The Body Shop
Hard Rock Cafe
Multidomestic
Strategy
Four International Operations
Strategies
C
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R
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n

C
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r
a
t
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n
s

High
Low
High Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Standardized product
Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy
International Strategy
Import/export or license
existing product

Examples
U.S. Steel
Harley Davidson
Multidomestic Strategy
Use existing
domestic model globally
Franchise, joint ventures,
subsidiaries

Examples
Heinz The Body Shop
McDonalds Hard Rock Cafe
International Strategy
Import/export or license
existing product

Examples
U.S. Steel
Harley Davidson
Multidomestic Strategy
Use existing
domestic model globally
Franchise, joint ventures,
subsidiaries

Examples
Heinz The Body Shop
McDonalds Hard Rock Cafe
Standardized product
Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy
Four International Operations
Strategies
C
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t

R
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C
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High
Low
High Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Move material, people,
ideas across national
boundaries
Economies of scale
Cross-cultural learning

Examples
Coca-Cola
Nestl
Transnational
Strategy
Four International Operations
Strategies
C
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R
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C
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r
a
t
i
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n
s

High
Low
High Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Standardized product
Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy Transnational Strategy
Move material, people, ideas across
national boundaries
Economies of scale
Cross-cultural learning

Examples
Coca-Cola
Nestl
International Strategy
Import/export or license
existing product

Examples
U.S. Steel
Harley Davidson
Multidomestic Strategy
Use existing
domestic model globally
Franchise, joint ventures,
subsidiaries

Examples
Heinz The Body Shop
McDonalds Hard Rock Cafe