PS4S26, Strategic Operations

Management and Research

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 Module Format
• Wk1 Reflective Writing and Introduction
• Wk2 People
• Wk3 Operations
• Wk4 Lean Thinking and JIT
• Wk5 Quality
• Wk6 Lean and Agile Strategies
• Wk7 Quality Systems
• Wk8 Assessment Review
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Operations – Strategic Significance
• “For most countries, manufacturing is the most significant wealth-
creating activity” (Hill & Hill, 2009, p4)
– Traditional manufacturing nations have lost ground
– Emerging nations are competing on a global scale

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Operations – Strategic Significance
• Losing ground in the manufacturing
sector:
–Failing to recognize competition
–Over-capacity
–Lack of R&D investment
–Short term focus and lack of experience
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 Operations – Strategic Significance
• “Overcapacity means…productivity will remain key to an
organization’s success” (Hill & Hill, 2009, p9)
– this reinforces the strategic importance of Operations
Management

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Operations – Strategic Significance
• Comparative Measures:
– Country vs Country
– Sector vs Sector
– Company vs Company
– Site vs Site

• Productivity
– Labour Productivity
– Total Factor Productivity

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 Operations – Strategic Significance
• Corporate strategy may be defined as:

– The direction and scope of an organization over the long term, which achieves
advantage in a changing environment through its configuration of resources
and competences with the aim of fulfilling stakeholder expectations (Johnson,
Scholes and Whittington, 2008)

– A firm’s theory about how to gain competitive advantage (Barney and

Hesterly, 2008)

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 Operations – Strategic Significance
• Manufacturing strategy may be defined as

– The development and deployment of manufacturing capabilities in total alignment

with the firm’s goals and strategies (Swamidass, 1986)

– The patterns of decisions in major areas of manufacturing operations, and the

domain of manufacturing as those activities that encompass product design and
manufacture, including production planning and control policies, plant layout and
location, logistics, manufacturing process technology decisions, degree of vertical
integration, and assignment of activities to plants in a multi-plant network
(Wheelwright, 1984)

– How the operations management function contributes to a firm’s ability to achieve

its competitive advantage in that marketplace (Davis, Aquilano and Chase, 2003)

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 Operations – Strategy Development
• The components of corporate and functional
strategy are usually simplified:
Marketplace

Corporate Strategy

Marketing Strategy Manufacturing Strategy Finance Strategy

SWOT and STEEPLE frameworks

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 Operations – Strategy Development
• Internal stakeholders
– Employees
– Trade Unions
– Functional or Departmental Managers

• When developing complementary functional strategies the Functional or

Department Managers are always significant stakeholders.

• Forms of Internal Stakeholder Power:

– Formal, through the ability to make decisions
– Informal, by being charismatic
– By having control of important resources
– Through possession of specialist knowledge and skills
– By having power over others through negotiation
(Adapted from Johnson, Scholes and Whitington, 2008)
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 Operations – Strategy Development
• Different stakeholders have different levels of
interest and power, and are managed
differently:
Level of Interest
low high

low

A B A – Minimal Effort
Level of Power B – Keep Informed
C – Keep Satisfied
C D D – Key Players
high

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 Operations – Strategy Development
• “Since operations accounts for some 60-70 per cent of assets,
expenditure and people, operations managers must be more
involved in strategic decisions and senior executives must fully
appreciate their arguments” (Hill & Hill, 2009, p14)
Decline in
Manufacturing Output

Decline in Skilled
Operations Managers

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 Operations – Strategy Development
• Other factors can also influence manufacturing strategy development and
effectiveness:

– Organisational culture and learning (Fang and Wang, 2006)

• “firms that wish to raise their manufacturing quality and capability
should also be concerned about organizational structure, decision
models and managerial styles.”

– Organizational culture (Bates, Amundson, Schroeder and Morris, 1995)

• “a manufacturer with a well-aligned and implemented manufacturing
strategy exhibits a group-oriented culture with coordinated decision
making, decentralized authority and a loyal workforce.”

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 Operations – Strategy Development
• Generic plan of strategy development:

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 Operations – Strategy Development
• “The failure of a company to monitor its competitors is at best a
mark of corporate complacency and at worst a sign of strategic
naivety” (Hill & Hill, 2009, p97)

Can be undertaken in different ways:

– Internal comparison between areas of the same company
– External against direct competitors
– External against similar non-competitors
– External against dissimilar industry leaders

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 Operations – Strategy Development
• Strategies are:

– Market-driven
– Market-driving
– Combination of both

– Developed iteratively
strategy must change to fit shifting markets
strategy may change to accommodate changes in capabilities

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 Operations – Strategy Development
• The process of strategy development can be
broadly divided into two phases and five stages:

Analyze Markets Develop an Operations Strategy

Agree Determine market Identify key Review current Prioritize
markets order-winners and strategic performance and investment and
qualifiers task identify development
improvements

See: Exhibit 4.1, p112-113

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 Operations – Strategy Development
• Business Focus:

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 Operations – Strategy Development
• Operations Focus:
– Individual manufacturing facilities will also require focusing upon the needs
of their intended market and their intrinsic capabilities.

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 Operations – Strategy Development
• Maintaining Focus

– Strategy development is iterative

corporate strategy cascades into manufacturing strategy while
manufacturing capabilities feed into corporate strategy
manufacturing strategy needs to harmonize with other functional
strategies

– Strategies are dynamic

corporate strategy must take account of changes in the marketplace
as well as changes (improvements) in internal capabilities
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 References
• Hill, A. and Hill, T. (2009) Manufacting Operations Strategy, Text and Cases,3rd edn.
Basingstoke: Palgrave Macmillan.
• Johnson, G., Scholes, K. and Whittington, R. (2008) Exploring Corporate Strategy,8th edn.
Harlow: Pearson Education Ltd.
• Barney, J.B. and Hesterly, W.S. (2008) Strategic Management and Competitive Advantage:
Concepts and Cases, 2nd edn. Pearson/Prentice Hall.
• Swamdass, P.M. (1986). ‘Manufacturing Strategy: Its assessment and Practice’. Journal of
Operations Management—Special combined edition, Vol. 5, No. 4, pp 471-484.
• Wheelwright, S.C. (1984). ‘Manufacturing Strategy: Defining the Missing Link’. Strategic
Management Journal, Vol. 5, No. 5, pp 77-91.
• Davis, M. M., Aquilano, N. J., & Chase, R. B. (2003). Fundamentals of operations
management. Boston: McGraw-Hill/Irwin.
• Fang, S. and Wang, J., (2006), ‘Effects of organizational culture and learning on manufacturing
strategy selection: An empirical study’, International Journal of Management, Vol. 23, No. 3
Part 1, pp 503-514.
• Bates, K.A., Amundson, S.D., Schroeder, R.G. and Morris, W.T., (1995), ‘The crucial
interrelationship between manufacturing strategy and organizational culture’, Management
Science, Vol 41, No. 10, pp 1565-1580.
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