OPERATIONS STRATEGY

AND POSITIONING
B Y: K A R A N M AT H U R ( W M G - 2 4 2 0 0 7 )

OPERATIONS STRATEGY
A plan specifying how an organization will
allocate
resources
in
order
to
support
infrastructure and production
An operations strategy is typically driven by the
overall business strategy of the organization, and
is designed to maximize the effectiveness of
production
and
support
elements
while
minimizing costs
Operations strategy is to provide an overall
direction that serves the framework for carrying
out all the organizations functions

LEVELS OF STRATEGY

Strategy
Level
Corporate

Business

Function

CORPORATE STRATEGY
Highest Level of Strategy
Sets the long-term direction and scope of the whole
organization
Relating the Organizations efforts to its long term
future

What Business are we in?

Who are Our Customers?
What are our Concepts and Beliefs?
How Do We Measure Performance

Growth?
Profits?
Market Share?
Innovation?

CORPORATE STRATEGY
Distinct Competencies:
Organizations Unique Strengths-- those that are
difficult for others to duplicate

Examples:
Competent Workforce
Advantageous Location
Innovative Capability
Technology

KEY ISSUES
What businesses shall we be in?
What businesses shall we acquire or divest?
How do we allocate resources between
businesses?
What is the relationship between businesses?
What is the relationship between the centre and
the businesses?

BUSINESS STRATEGY
A business strategy is the means by which it sets
out to achieve its desired ends (objectives)
Business strategy will cover a period of about 3-5
years (sometimes even longer)
Primarily concerned with how a particular
business unit should compete within its industry,
and what its strategic aims and objectives should
be
The business strategy is implemented,
communicated, and ultimately tested and
evaluated by business management through a
business model

KEY ISSUES
How do we compete in this business?
What is the mission of this business?
What are the strategic objectives of this
business?
Which customers should we continue to serve or
start serving?
Why have we decided on these strategic
directions?

FUNCTIONAL STRATEGY
The bottom level of strategy is that of the
individual function(operations, marketing,
finance, etc.)
Functional business strategy enables a company
to deal with the nuts and bolts of its long-term
organizational plan and short-term goals and
objectives.
These strategies are concerned with how each
function contributes to the business strategy,
what their strategic objectives should be and how
they should manage their resources in pursuit of
those objectives

KEY ISSUES
How does the function contribute to the business
strategy?
What are the strategic objectives of the function?
How are resources managed in the function?
What technology do we use in the function?
What skills are required by workers in the
function?

OPERATIONS PERFORMANCE
OBJECTIVES
Cost: The ability to produce at low cost
Quality: The ability to produce in accordance
with specification and without error
Speed: The ability to do things quickly in
response to customer demands and thereby offer
short lead times between when a customer orders
a product or service and when they receive it.

OPERATIONS PERFORMANCE
OBJECTIVES
Dependability: The ability to deliver products and
services in accordance with promises made to customers
Flexibility: The ability to change operations. Flexibility
can comprise up to four aspects:
o The ability to change the volume of production
o The ability to change the time taken to produce
o The ability to change the mix of different products or
services produced
o The ability to innovate and introduce new products and
services

THE SANDCONE MODEL

Cost
Flexibility

Dependability
Quality

OPERATIONS STRATEGY PERSPECTIVES

Top down

Operatio
ns led

Operatio
Operatio
ns
ns
Strategy
Strategy

Bottom
up

Market
led

MEASURING PRODUCTIVITY
Productivity is a measure of how efficiently
inputs are converted to outputs
Productivity = output/input

Total Productivity Measure:

Total Productivity = (total output)/(total of all
inputs)

Partial Productivity Measure:

Partial Productivity = (total output)/(single input)

Multifactor Productivity Measure:

Multi-factor Productivity = (total output)/(several

inputs)

TOTAL PRODUCTIVITY EXAMPLE

Bluegill Furniture makes kitchen chairs. The
weekly dollar value of its output, including
finished goods and work-in-progress, is $14,280.
The value of inputs (labor, materials, capital) is
approximately $16,528. What is the total
productivity measure for Bluegill?
Total productivity = output/input
= $14,280/$16,528 = .864 or 86.4%

PARTIAL PRODUCTIVITY EXAMPLE

Bluegill Furniture has hired 2 new workers to paint
chairs. Together they have painted 10 chairs in 4
hours. What is labor productivity for the pair?
Labor productivity = output/labor
= (10 chairs)/(2 x 4 hr)
= (10 chairs)/(8 hr) or 1.25 chairs/hr

MULTIFACTOR PRODUCTIVITY EXAMPLE

Bluegill Furniture averages 35 chairs/day. Labor
costs average $480, material costs are typically
$200, and overhead cost is $250. Bluegill sells
the chairs to a retailer for $70/unit. Find
multifactor productivity.
Multifactor productivity =
(value of output)/(labor + material + overhead
costs)
= ($70/chair x 35 chairs)/(480+200+250)
= ($2450)/($930) or 2.63

Customizatio
n

POSITIONING TRADE-OFF

Process
Focus
Intermediat
e Focus

Volume

Produc
t Focus

POSITIONING STRATEGY
Product Focused (Organizing the Productive Resources
Around the Product)
High Volume
Limited variety Products/Services
Line Flows
Special Purpose Equipment
Low Labor Skills
Capital intensive/ High Automation
Efficient

POSITIONING STRATEGY
Process Focused (Organizing the Productive
Resources According to Capability)

Low Volume
Wide Variety /High Customization
Not as Efficient/ Highly Flexible
General Purpose Equipment
High Skilled and Highly Trained Workforce
Jumbled and Complex Work Flow

THANK YOU