Operations Strategy in A Global Environment

2
Operations Strategy in a
Global Environment
PowerPoint presentation to accompany

Heizer and Render
Operations Management, 10e
Principles of Operations Management, 8e
PowerPoint slides by Jeff Heyl
2011 Pearson Education, Inc. publishing as Prentice Hall
2-1
Growth of World Trade

35
30
Percent
25
Collapse of the
Berlin Wall
20
15
10
5
0
|
|
|
|
|
|
|
|
|
|
|
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 (est*)
Year
Figure 2.1
2-2
Some Multinational
Corporations
Home
Country
% Sales
Outside
Home
Country
% Assets
Outside
Home
Country
% Foreign
Workforce
Citicorp
USA
34
46
NA
ColgatePalmolive
USA
72
63
NA
Dow
Chemical
USA
60
50
NA
Gillette
USA
62
53
NA
Honda
Japan
63
36
NA
USA
57
47
51
Company
IBM
2-3
Some Multinational
Corporations
Home
Country
% Sales
Outside
Home
Country
% Assets
Outside
Home
Country
% Foreign
Workforce
Britain
78
50
NA
Switzerland
98
95
97
Philips
Netherlands
Electronics
94
85
82
Siemens
Germany
51
NA
38
Unilever
Britain &
Netherlands
95
70
64
Company
ICI
Nestle
2-4
Reasons to Globalize
Reasons to Globalize
Tangible 1. Reduce costs (labor, taxes, tariffs, etc.)
Reasons 2. Improve supply chain
3. Provide better goods and services
4. Understand markets
Intangible 5. Learn to improve operations
Reasons 6. Attract and retain global talent
2-5
Developing Missions and

Strategies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there
2-6
Mission
Mission - where are
you going?
Organizations
purpose for being
Answers What do
we provide society?
Provides boundaries
and focus
2-7
Hard Rock Cafe

Our Mission: To spread the spirit of
Rock n Roll by delivering an
exceptional entertainment and dining
experience. We are committed to being
an important, contributing member of
our community and offering the Hard
Rock family a fun, healthy, and
nurturing work environment while
ensuring our long-term success.
Figure 2.2
2-8
Arnold Palmer Hospital

Arnold Palmer Hospital for
Children provides state-of-the-art,
family centered healthcare
focused on restoring the joy of
childhood in an environment of
compassion, healing, and hope.
Figure 2.2
2-9
Factors Affecting Mission

Philosophy
and Values
Profitability
and Growth
Environment
Mission
Customers
Public Image
Benefit to
Society
2 - 10
Sample Missions
Sample Company Mission
To manufacture and service an innovative, growing, and
profitable worldwide microwave communications business
that exceeds our customers expectations.
Sample Operations Management Mission

To produce products consistent with the companys mission
as the worldwide low-cost manufacturer.
Figure 2.3
2 - 11
Sample Missions
Sample OM Department Missions
Product design
To design and produce products and

services with outstanding quality and
inherent customer value.
Quality management
To attain the exceptional value that is

consistent with our company mission and
marketing objectives by close attention to
design, procurement, production, and field
service operations
Process design
To determine, design, and produce the

production process and equipment that will
be compatible with low-cost product, high
quality, and good quality of work life at
economical cost.
Figure 2.3
2 - 12
Sample Missions
Location
To locate, design, and build efficient and

economical facilities that will yield high
value to the company, its employees, and the
community.
Layout design
To achieve, through skill, imagination, and

resourcefulness in layout and work methods,
production effectiveness and efficiency
while supporting a high quality of work life.
Human resources
To provide a good quality of work life, with

well-designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange
for outstanding individual contribution from
employees at all levels.
Figure 2.3
2 - 13
Sample Missions
Supply-chain
management
To collaborate with suppliers to develop

innovative products from stable, effective,
and efficient sources of supply.
Inventory
To achieve low investment in inventory

consistent with high customer service levels
and high facility utilization.
Scheduling
To achieve high levels of throughput and

timely customer delivery through effective
scheduling.
Maintenance
To achieve high utilization of facilities and

equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.
Figure 2.3
2 - 14
Strategic Process
Organizations
Mission
Functional
Area Missions
Marketing
Operations
Finance/
Accounting
2 - 15
Strategy
Action plan to
achieve mission
Functional areas
have strategies
Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
2 - 16
Strategies for Competitive

Advantage
Differentiation better, or at
least different
Cost leadership cheaper
Response rapid response
2 - 17
Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customers perception
of value
Safeskin gloves leading edge products
Walt Disney Magic Kingdom
experience differentiation
Hard Rock Cafe dining experience
2 - 18
Competing on Cost
Provide the maximum value as
perceived by customer. Does not
imply low quality.
Southwest Airlines secondary
airports, no frills service, efficient
utilization of equipment
Wal-Mart small overhead, shrinkage,
distribution costs
Franz Colruyt no bags, low light, no
music, doors on freezers
2 - 19
Competing on Response
Flexibility is matching market changes in
design innovation and volumes
A way of life at Hewlett-Packard
Reliability is meeting schedules

German machine industry
Timeliness is quickness
in design, production,
and delivery
Johnson Electric,
Pizza Hut, Motorola
2 - 20
OMs Contribution to Strategy

10 Operations
Decisions
Product
Quality
Process
Location
Layout
Human
resource
Approach
DIFFERENTIATION
Innovative design
Broad product line
After-sales service
Experience
COST LEADERSHIP
Low overhead
Effective capacity
use
Inventory
management
Supply chain
Inventory
Scheduling
RESPONSE
Flexibility
Reliability
Quickness
Maintenance
Example
Competitive
Advantage
Safeskins innovative gloves

Fidelity Securitys mutual
funds
Caterpillars heavy equipment
service
Hard Rock Cafs dining
experience
Franz-Colruyts warehousetype stores
Differentiation
(better)
Southwest Airlines
aircraft utilization
Wal Marts sophisticated
distribution system
Hewlett-Packards response to
volatile world market
FedExs absolutely, positively,
on time
Pizza Huts 5-minute guarantee
Response
(faster)
Cost
leadership
(cheaper)
Figure 2.4
at lunchtime
2 - 21
SWOT Analysis
Mission
Internal
Strengths
External
Opportunities
Analysis
Internal
Weaknesses
External
Threats
Strategy
2 - 22
Strategy Development Process

Analyze the Environment
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
Determine the Corporate Mission

State the reason for the firms existence and identify the
value it wishes to create.
Form a Strategy
Build a competitive advantage, such as low price, design, or
volume flexibility, quality, quick delivery, dependability, aftersale service, broad product lines.
Figure 2.6
2 - 23
Strategy Development and

Implementation
Identify key success factors
Build and staff the organization
Integrate OM with other activities
The operations managers job is to implement
an OM strategy, provide competitive
advantage, and increase productivity
2 - 24
Key Success Factors

Support a Core Competence and Implement Strategy by
Identifying and Executing the Key Success Factors in the Functional Areas
Marketing
Service
Distribution
Promotion
Channels of distribution
Product positioning
(image, functions)
Finance/Accounting
Leverage
Cost of capital
Working capital
Receivables
Payables
Financial control
Lines of credit
Decisions
Product
Quality
Process
Location
Layout
Human resource
Supply chain
Inventory
Schedule
Maintenance
Production/Operations
Sample Options
Customized, or standardized
Define customer expectations and how to achieve them
Facility size, technology, capacity
Near supplier or near customer
Work cells or assembly line
Specialized or enriched jobs
Single or multiple suppliers
When to reorder, how much to keep on hand
Stable or fluctuating production rate
Repair as required or preventive maintenance
Chapter
5
6, S6
7, S7
8
9
10
11, S11
12, 14, 16
13, 15
17
Figure 2.7
2 - 25
Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Lean,
Productive
Employees
Short Haul, Point-toPoint Routes, Often to

Secondary Airports
Competitive Advantage:
Low Cost
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
2 - 26
Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Lean,
Productive
Employees

Secondary Airports
Automated ticketing machines

Competitive
Advantage:
No seat assignments
Low Cost
No baggage transfers
High
Aircraft
Utilization
No meals (peanuts)
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
2 - 27
Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
No meals (peanuts)
Lean,
Lower gate costs at
Productive
secondary airports
Employees

Secondary Airports
High number of flights

reduces employee
idleCost
time
Low
between flights
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
2 - 28
Activity Mapping at
Southwest Airlines
Courteous,
but
High number
of flights
Limited Passenger
reduces employee
idle time
Service
between flights
Lean,
Saturate a city with flights,
Productive
lowering administrative
Employees

Secondary Airports
costs (advertising, HR, etc.)

Competitive
Advantage:
per passenger
for that
city
Low Cost
Pilot training required on
Highonly one type of aircraft
Aircraft
Reduced
Utilization
maintenance
Standardized
inventory required
because
Fleet of
Boeing
of only one type737
ofAircraft
aircraft
Frequent,
Reliable
Schedules
Figure 2.8
2 - 29
Activity Mapping at
Southwest Airlines
Pilot training required on
Courteous,
butaircraft
onlyLimited
one
type
of
Passenger
Service
Reduced
maintenance
inventory required because
Lean,
Short Haul, Point-toProductive of only one type of aircraft
Point Routes, Often to
Employees
Secondary Airports
Excellent supplier relations
with Boeing
has aided
Competitive
Advantage:
financing
Low
Cost
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
2 - 30
Activity Mapping at
Southwest Airlines
Courteous, but
Limited
Passenger
Reduced
maintenance
Service
Lean,
Productive
Flexible
union
Employees
inventory required because

of only one type of aircraft
Short Haul, Point-to-
Point Routes, Often to
Flexible employeesSecondary
and
Airports
standard planes aid
contracts
scheduling
Low Cost
Maintenance personnel
trained only one type of
Frequent,
High
Aircraft
Reliable
aircraft
Utilization
Standardized
20-minute
gate
Fleet of Boeing
737 Aircraft
Schedules
turnarounds
Figure 2.8
2 - 31
Activity Mapping at
Southwest Airlines
Automated ticketing
Courteous,
but
machines
Limited Passenger
Service
Empowered
employees
Lean,
Productive
Employees
High
Aircraft
Utilization
High employee
compensation
Secondary Airports
Hire for attitude, then train

High
level of stock
Low
Cost
ownership
High number of flightsFrequent,

Reliable
reduces
employee idle time
Schedules
Standardized
Fleetbetween
of Boeing flights
737 Aircraft
Figure 2.8
2 - 32
International
Strategy
Cost Reduction Considerations
High
Four International
Operations Strategies
Figure 2.9
Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
2 - 33
High
Four International
Figure 2.9
International Strategy
Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
2 - 34
Strategy
High
Four International
Operations
GlobalStrategies
Figure 2.9
Standardized
product
Economies of scale
Cross-cultural
learning
Import/export or
Examples
license existing
product
Texas Instruments
Examples
U.S.Caterpillar
Steel
Harley Davidson
Otis Elevator
Low
Low
High
2 - 35
High
Four International
Figure 2.9
Global Strategy
Standardized product
Economies of scale
Cross-cultural learning
Examples:
Texas Instruments
Caterpillar
Otis Elevator
Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
2 - 36
High
Four International
Multidomestic
Operations
Strategies
Strategy
Figure 2.9
Global Strategy
Use existing
Economies of scale
domestic
model
Cross-cultural
learning
Examples:globally
Texas Instruments
Caterpillar
Franchise, joint
Otis Elevator
ventures,
subsidiaries
Import/export or
license existing
product
Low
Low
Examples
Heinz
Examples
U.S. Steel
McDonalds
Harley
Davidson
The Body Shop
Hard Rock Cafe
High

2 - 37
High
Four International
Figure 2.9
Global Strategy
Economies of scale
Examples:
Texas Instruments
Caterpillar
Otis Elevator
Import/export or
license existing
product
Multidomestic Strategy
Use existing
domestic model globally
Franchise, joint ventures,
subsidiaries
Examples
U.S. Steel
Harley Davidson
Examples
Heinz
The Body Shop
McDonalds Hard Rock Cafe
Low
Low
High
2 - 38
Strategy
Global Strategy
High
Four International
Operations
Strategies
Transnational
Figure 2.9
Move material,
people, ideas
Examples:
Texas Instruments
across national
Caterpillar
Otis Elevator
boundaries
Economies of scale
Use existing
Cross-cultural
Import/export or
license
existing
learning
subsidiaries
product
Economies of scale
Examples
Coca-Cola
Nestl
Examples
U.S. Steel
Harley Davidson
Low
Low
Examples
Heinz
The Body Shop
High

2 - 39
High
Four International
Global Strategy
Transnational Strategy
Economies of scale
Move material, people, ideas

across national boundaries
Economies of scale
Examples:
Texas Instruments
Caterpillar
Otis Elevator
Examples
Coca-Cola
Nestl
Import/export or
license existing
product
Use existing
subsidiaries
Examples
U.S. Steel
Harley Davidson
Examples
Heinz
The Body Shop
Figure 2.9
Low
Low
High
2 - 40

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2

PowerPoint presentation to accompany

2011 Pearson Education, Inc. publishing as Prentice Hall

Growth of World Trade

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

Developing Missions and

2011 Pearson Education, Inc. publishing as Prentice Hall

Hard Rock Cafe

Arnold Palmer Hospital

Factors Affecting Mission

2011 Pearson Education, Inc. publishing as Prentice Hall

Sample Operations Management Mission

To design and produce products and

To attain the exceptional value that is

To determine, design, and produce the

To locate, design, and build efficient and

To achieve, through skill, imagination, and

To provide a good quality of work life, with

To collaborate with suppliers to develop

To achieve low investment in inventory

To achieve high levels of throughput and

To achieve high utilization of facilities and

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

Strategies for Competitive

2011 Pearson Education, Inc. publishing as Prentice Hall

Reliability is meeting schedules

OMs Contribution to Strategy

Safeskins innovative gloves

2011 Pearson Education, Inc. publishing as Prentice Hall

Strategy Development Process

Determine the Corporate Mission

Strategy Development and

Key Success Factors

2011 Pearson Education, Inc. publishing as Prentice Hall

Short Haul, Point-toPoint Routes, Often to

2011 Pearson Education, Inc. publishing as Prentice Hall

Short Haul, Point-toPoint Routes, Often to

Automated ticketing machines

2011 Pearson Education, Inc. publishing as Prentice Hall

Short Haul, Point-toPoint Routes, Often to

High number of flights

2011 Pearson Education, Inc. publishing as Prentice Hall

Short Haul, Point-toPoint Routes, Often to

costs (advertising, HR, etc.)

2011 Pearson Education, Inc. publishing as Prentice Hall

2011 Pearson Education, Inc. publishing as Prentice Hall

inventory required because

Point Routes, Often to

2011 Pearson Education, Inc. publishing as Prentice Hall

Hire for attitude, then train

High number of flightsFrequent,

2011 Pearson Education, Inc. publishing as Prentice Hall

Cost Reduction Considerations

2011 Pearson Education, Inc. publishing as Prentice Hall

Cost Reduction Considerations

2011 Pearson Education, Inc. publishing as Prentice Hall

Cost Reduction Considerations

2011 Pearson Education, Inc. publishing as Prentice Hall