BST135 2013-14 - Lectures 2 & 3 Operations Strategy - FULL

BST135 Operations ManagementAcademic Year 2013/14Daniel EyersLectures 2 & 3:Operations Strategy3BST135 Spring Semester 2014#Date Lecture (Law 0.22 14:10 –16:00)Tutorial (C23)Tutorial Grp117 Jan Module IntroductionThe History of Operations Management --224 Jan Formulation of Operations Strategy I --331 Jan Formulation of Operations Strategy II The Production FunctionA c t i v i t yB a s e dC o s t i n gGroup A 47 Feb Process Choice & The Process Game (Even No’s)Group B 514 Feb Process Choice & The Process Game (Odd No’s)Group C 621 Feb Professor Disney –topic to be advised Group D 728 Feb Advanced Operations Strategy I O p e r a t i o n s S t r a t e g y Group A 87 MarAdvanced Operations Strategy IIGroup B 914 Mar Emergent themes in Operations Management Group C 1021 Mar Guest LectureGroup D1128 Mar RFID in Operations ManagementRevision Class Directed by students--Easter Recess 29 March –04 May 20144Learning ObjectivesBy the end of Lecture 2 & 3 you should:1.Understand the nature of strategy and the motivations behind strategic decisions–From the corporate strategy through to the operations strategy2.Understand a market requirements orientated approach to operations strategy–Learn practical tools and techniques to understand the customer–Understand their application5So you have a mission statement…But how do you get there?67What is strategy?•There is no single definition of strategy–We will cover some definitions in this course•It is something which isn’t tangible–But, as we shall see, influences the whole organization•In terms of Operations, strategy is crucial8A definition of strategy“A strategy is the pattern or plan that integrates an organisation’s major goals, policies and actionsequences into a cohesive whole. A well-formulated strategy helps to marshal and allocate anorganisation’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents”(Mintzberg et al., 1998, p.5)9What is strategy? (Slack)•Direction (what to do)–Which markets to compete in?–What are the competitive drivers?–How can the organization influence market position?•Implementation (how to do it)–Prioritize allocation of the resources to better meet the competitive drivers10Slack’s view on Strategic Decisions•Strategic decisions are those decisions which:1.are widespread in their effect on the organization to which the strategy refers2.define the position of the organization relative to its environment3.move the organization closer to its long-term goals.1112Mintzberg’s Five P’s for StrategyPlan•A consciously intended course of action•A guideline (or set of guidelines) to deal with a situationPlans are made in advance of making actions!Ploy•A ‘manoeuvre’ to outwit a competitor13Mintzberg’s Five P’s for StrategyPattern• A pattern in a stream of actions i.e. consistency in behaviour whether (or not) intended•Plans are intended strategy; patterns are realized strategyPosition• A means of locating an organization in ‘the environment’ i.e. outward looking–The match between the internal and the external14Mintzberg’s Five P’s for StrategyPerspective•An internal view of the organization–So not just the position of the organization, but an ingrained way of perceiving the world–Strategy in this respect is what personality is to the individual–Key importance: strategy is a perspective shared by the members of the organizationstrategystrategystrategyUnrealized strategy Emergent strategy16Manufacturing Strategy•Wickham Skinner (1969) wrote a seminal article linking manufacturing with corporate strategy–Argued that manufacturing is often overlooked as a contributor to the organization•Observed that it is a competitive weapon which can be deployed for the benefit of the organization•Focus of the earlier strategy work is distinctlymanufacturing orientated, but it is still relevant to operations17Skinner (1969)“Manufacturing is part of the strategic concept that relates to a company’s strengths andresources to opportunities in the market [and] each strategy creates a unique manufacturing task”Therefore,“Manufacturing management’s ability to meet that task is the key measure of its success”(Skinner, 1969)18Case Study: Tough Times at Tesco?•The UK has traditionally been Tesco’s strongest market, though in recent years it has expanded into a number of countries•It has also diversified into a range of other sectors, including finance, insurance, electrical etc•In terms of groceries, Tesco is currently market leader with approximately 30% share–In 2011 it launched the Big Price Drop23Small Group (4 persons) ExerciseResources•Tesco plc strategy document•Tesco Big Price Drop overview •Investor Report •Newspaper article•Your own knowledge of Tesco and the food retail market 1.What was the objective of the Big Price Drop strategy?2.Can you link this to the 5P’s of Strategy?3.What is your evaluation of the Big Price Drop?4.How has Tesco responded? What is the revised strategy?5.What is your evaluation of the revised strategy?Prepare to provide feedback to the rest ofthe class24Hierarchical View of Strategy• A traditional way of thing about strategy is the hierarchical view•Corporate : Determining the overall direction of theorganization; acquire and allocate resources to businesses •Business Unit : Identify the scope of the business, linking the corporate strategy to the functional strategy to achieve and maintain a competitive advantage•Functional : Develop and implement a strategy which supports the business strategy25Hierarchical View of StrategyDetermine the overall direction of the organisation; Specify the set of businesses; Acquire & allocate corporate resources to each of those businessesIdentify the scope of the business; Link the corporate strategy to functional strategy to achieve and maintain a competitive advantageDevelop a strategy that supports the business strategy26Top-down perspective What the business wants operations todoOperations resources perspective What operations resources can doWhat day-to-day experience suggests operations should doBottom-up perspectiveMarket requirement perspective What the market position requires operations to doOperations strategy Slack et al. (2009)27Strategic role of operationsOperations strategy concerns the pattern of strategic decisions which set the role, objectives and activities of the operation.(Slack et al. 2009)Academics and practitioners who believe that the study of operations is limited to operational matters are fundamentally misunderstanding the contribution of operations management to strategy and, moreimportantly, the huge potential that operations has to deliver to sustainable competitive advantage .(Slack 2005; emphasis added )28Hierarchy of operational planningType of planningTime frameTypical issuesStrategic Long rangePlant size, location, type of processTactical Intermediate rangeWorkforce size, material requirements Operational planning and control (OPC)Short rangeDaily scheduling of workers, jobs and equipment29Role of the operations function•Implementing business strategyThe most basic contribution: putting the desired strategy into practice•Supporting business strategyDeveloping the capabilities to support the organization and refine its goals•Driving business strategyBeing innovative to provide capabilities which give a unique and long term advantage30Operations as implementer of strategyOperations implementsstrategyOperations drivesstrategyOperations as driver of strategyOperations supportsstrategyOperations as supporter of strategyRole of the operations functionSlack et al. (2009)31I n c r e a s i n g s t r a t e g i c i m p a c tIncreasing operations capabilitiesExternally supportiveRedefining industry expectationsSTAGE 4Give an operations advantageDriving strategyInternally supportive Clearly the best in the industry STAGE 3Link strategy with operationsSupporting strategyExternally neutral As good as competitors STAGE 2Adopt best practiceImplementing strategyInternallyneutralSTAGE 1Correct the worst problemsHolding the organizationbackSlack et al. (2009) based on Hayes & Wheelwright (1984)32See: Hayes, R. and Wheelwright S. C. Restoring our competitive edge (Ch 14)33A question for you•Can Operations really drive a strategy?–Or does the market drive the company’s strategy?–What does this mean for the role of operations?345 Competitive Objectives of OperationsQuality Speed Dependability Flexibility CostCOMPETITIVENESSSlack’s textbook provides a good coverage of thistopic35QualityDoing things RIGHTInternally•Quality reduces costs–Reducing wasted time and effort•Quality increases dependability–Improves reliabilityExternally•Enhances the product or service in the market •Makes it more attractive to potential customers •Quality means different things in different situationsSpeedDoing things FASTInternally•Speed reduces inventories•Speed reduces risksExternally•Meeting the customers requirements in terms of responsiveness in order satisfaction37FlexibilityBeing able to CHANGEFour basic types of flexibility (Slack 1987)•Product/service flexibility•Mix flexibility•Volume flexibility•Delivery flexibilityNote: Many other types of flexibility are proposed, (see e.g. Naim et al. (2006); Sethi& Sethi(1990) etc), and we will return to think more about flexibility in the Advanced Operations Strategy lectures later in the semester.39DependabilityDoing things ON TIMEInternally•Dependability saves time•Dependability saves moneyExternally•Enhances the customer perception of the product or service in the market4143CostDoing things CHEAPLY•Minimising costs is usually attractive to companies •Two important contributors–The Four V’s (Volume, Variety, Variation, Visibility)–The internal performance of the operation (Quality, Speed, Dependability, Performance)45A question for you to consider•Can an operation compete on all of the objectives simultaneously, or are there trade-offs to consider?BST135 Operations ManagementAcademic Year 2013/14Daniel EyersLectures 2 & 3:Operations Strategy48Boston Consultancy Group Matrix•The “Boston Box” is used to plot products/services to understand the positioning in terms of market share and market growth•Matrix is divided into 4 areas:•Star: High growth, high market share. Often need investment to fuel rapid growth.•Cash Cow: Low growth (<10% annually), highmarket share. Established and successful, needing less investment to sustain market share. Revenue 50Boston Group Consultancy Matrix•Question Mark: Low market share, but high growth markets. Need cash to hold share (and more to develop it) –needs careful management intervention.•Dog: Low market share, low market growth. Can be loss-making, or barely profitable. Potential for growth limited.Relative Market ShareL O WHIGHLOWH I G HBoston Group Consultancy Matrix52What to do with dogs?•Typically the advice is to be divested/decommissioned•BUT do they have a strategic purpose?–Guard dogs may be blocking a competitor–Guide dogs may compliment the existing range, and help with future promotion•Might they have a purpose in the future?–Can be worth retaining in the short-term if there is an expectation they might move to another segmentRelative Market ShareL O WHIGHLOWH I G HRelative Market ShareM a r k e t G r o w t h R a t eL O WHIGH LOWH I G H55SWOT Analysis•Used to identify the characteristics of the organization to help develop strategy Internal factors•S trengths : Things the company is good at•W eaknesses : Things the company is not good at External factors•O pportunities : Potentials for the future •T hreats : Challenges and risks faced56SWOT AnalysisStrengths WeaknessesOpportunitiesThreats57Example: SWOT Analysis for LOMQuality of building Reliance on key staffIncrease market share Develop new marketsCollaborate with other institutionsPotential changes to governmentpoliciesCompetition from other providers Economic difficulties extend toeducation marketReputation Research profile Staff quality Size of section58Exercise: MarsStrengthsWeaknessesOpportunities Threats59Exercise: Mars (by Datamonitor)60Criticisms of SWOT•There are some criticisms of the model.•As a tool is it relatively quick and simple to deploy, and reasonably easily communicated•Hill & Westbrook (1997) highlighted SWOT analysis leading to long lists, general/meaningless descriptions, issues with prioritization, and a failure to verify points61So we know what we’re good (and not good)at •Organizations should critically appraise themselves to understand these strengths and weaknesses, and plan to improve•But: we must look externally, not only internally to understand customer requirements62Listening to the Customer•The Kano model (Professor Noriaki Kano 1980’s)•Helps explain why customers choose one option (product/service) instead of another offering •Visual tool with three lines–Must Be (basic)–Performance (one-dimensional)–Attractive (delighter)63Kano Model•Identifies the Voice of the Customer•Establish the customer requirements typically using a questionnaire •Rank the requirements into three categories:o Must-have factors (basic)If the product/service does not have these specific features the customer will be disappointed o One dimensional (performance)The customer satisfaction is directly proportional to the degree of improvement provided o Attractive (delighter or excitement)Customer satisfaction is most greatly affected by these categories: increasing performance leads to more than proportional satisfaction64Customer SatisfiedCustomer DissatisfiedFully FunctionalDysfunctionalAttractiveOne dimensionalMust-be66Example: A new car Source: Walden (1993)67Advantages of the Kano model•Helps understand the customer requirements •Helps identify priorities for product development–Especially if there are trade-offs to consider•By understanding the attractive/performance requirements the potential to improve differentiation is made possible.68Order Winners & Order Qualifiers•By now it should be clear that customer orders are not only based on the service or productspecification, but that other factors have influence –E.g. price, delivery speed and quality conformance •Terry Hill proposed the Order Winner / Order Qualifier tool to separate out the competitive criteria to better understand the market69Order Winners & Order Qualifiers•Qualifiers–The minimum requirements of a product/service which allow entry to the marketplace.–They do not win orders, but without them the supplier is not even in the game.•Winners–Once qualified to be in the marketplace, these are the attributes which achieve competitive advantage in the marketplaceThese may be weighted to indicate their relative importance70Example: New voice recorder DRE’s personal OQ/OW EvaluationQualifiers: Price, QualityWinners: Speed71Groupwork: Your next flightConsider the next flight you plan to take. What are the–Order Qualifiers?–Order Winners?72OWOQ’s change with different customergroups•Consider the previous example in the context of:•A billionaire businesswoman•A family with six children under 2 years of age •A physically disabled person73Effect of product/service lifecycle onoperations•So far we have ignored the temporal factors which affect Operations Strategy•In reality this would be a mistake: everything changes with time–Operations strategy must reflect this and adapt to meet the new circumstancesIntroductionGrowthMaturityDeclineS a l e s v o l u m eTimeVolume Slow growth in sales Rapid growth in sales volume Sales slow and level off Market needs largely met Customers Innovators Early adopters Bulk of market Laggards Competitors Few or noneIncreasing numbersStable number Declining numbers VarietyCustomization or frequent design changesIncreasingly standardized Emergingdominant typesPossible move to commodity standardizationEffect of product/service lifecycle onoperationsSlack et al. (2009)IntroductionGrowthMaturityDeclineS a l e s v o l u m eThe effects of the product / service life cycle (Continued)Time Likely order winners Product/service characteristics Availability Quality Low Price Dependable Supply Low priceLikely qualifiersQuality rangePrice Range Quality Range Dependable Supply Dominant performance objectivesFlexibility Quality SpeedDependability QualityCostDependabilityCostEffect of product/service lifecycle onoperationsSlack et al. (2009)76Learning Objectives Revisited1.Understanding the nature of strategy and the motivations behind it–From the corporate strategy through to the operations strategy2.Focusing on the customer: a market requirement orientated approach–Tools and techniques to understand the customer77Process Game –Weeks 4/5•An opportunity to put some of your learning into practice •Class split in two–If your student number ends 0, 2, 4, 6, 8 attend week 4–If your student number ends 1, 3, 5, 7, 9, X attend week 5–To play the game it is essential that you bring:•Calculator •Pen •Pencil•Small mirror•For the week that you will not be in class, a self-directed groupwork activity is issued. It does not form part of your module mark, but it is compulsory that you attempt and submit it.78Assessment Details•Worth 15% of the module mark •Issue Date: 31 January 2014•Hand In: 14 March 2014Assessment Schedule•General feedback: 28 March 2014•Assignment marks should be ready after Easter recess79Assignment GuidanceI want you to do well in your assignment •You need to demonstrate to the best of your ability what you can achieve•It should be an opportunity to develop and reinforce what you have learned on the course •It should show me that your knowledge extends beyond the content of lectures–Don’t just reproduce my slides or the textbooks!80What makes a good assignment?•You need to answer the question!•You need to structure your assignment appropriately–Order your work logically and coherently•Use appropriate section headings if it helps–Make best use of the word count allocation•Link your work to the appropriate theory •Create (and sustain) a persuasive argument•Check, check, and re-check your use of language •Referencing needs to be impeccable (and in the Cardiff Harvard style).•Be aware of the markscheme81What makes a poor assignment?•Not answering the question •Poor structure•Poor use of language / grammar •Poor referencing-Sources should be acknowledged in text and supported by bibliography•Poor presentation•Over reliance on Wikipedia82Unfair Practice•Will not be tolerated at all–I will report every suspected instance to the Unfair Practice Officer (Dr Andrew Potter)–The rules for unfair practice are available at /regis/sfs/regs/index.html•This upholds the standards of the University–And also keeps assessment fair for your colleagues•There is no excuse for engaging in Unfair Practice83Questions about the Assignment?Remember:•The more you put in, the more you get out •But assignments tend to follow the law of diminishing marginal returns•Only you can decide when your work is “good enough” for submission<50% Fail 50% Pass60% Merit70%Distinction84Further Reading (for both lectures)Required •Slack, N. et al. 2010. Operations and Process Management, Pearson Education, pp.60-81•Mintzberg, H. 1987. The Strategy Concept I: Five Ps For Strategy. California Management Review 30(1), pp. 11-24.•Hayes, R. and Wheelwright, S. 1984. Restoring our Competitive Edge: Competing Through Manufacturing, Wiley(handout)•Hayes, R & Upton, D. 1998. Operations Based Strategy. California Management Review. 40 (4) 8-25•Slack, N. 2005. Operations Strategy: Will it ever realize its potential? Gestão e Produção (12) 3 323-332ExerciseA worksheet is available on Learning Central for you to attempt in weeks 4 or 5. This is not assessed, but you are requiredto upload your findings to Learning Central before week 7’s class.Additional reading •Boyer, K. et al. Operations Strategy research in the POMS Journal. Production and Operations Management 14(4) 442-449•Dyson, R. G.. Strategic development and SWOT analysis at the University of Warwick European Journal of OperationalResearch (152) 3 631-640•Hill, T. and Westbook, R. 1997. SWOT Analysis: It’s time for a product recall. Long Range Planning 30 (1) pp 46-52•Matzler, K. et al. 1996. How to delight your customers. Journal of Product and Brand Management. (5) 2 6-18•Skinner, W. 1969. Manufacturing –missing link in corporate strategy. Harvard Business Review. May-June, p.136-145•Walden et al 1993. Kano’s Methods for Understanding Customer-defined Quality. Centre for Quality of ManagementJournal (2) 4.85Other References & Acknowledgements•Airbus A380 image •Sony voice recorder •IBO’s mission statement •YouTube BMW advertisement /watch?v=hE5iNOZfRrgDaniel EyersBST135 Module LeaderLecturer in Manufacturing Systems ManagementOffice Aberconway B07Email eyersDR@Tel+44 29 2087 4516Web /contact/staff/eyersMy office hours for this semester are Tuesdays 14:00 to 16:00If I am not available, or you wish to see me at another time please email first My secretary is Elaine Adams(adamsE27@) in Aberconway C5286。