Global View of Operations

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Chapter 2 Operations Strategy in a Global
Environment

Professor Ahmadi
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Learning Objectives

• DEVELOPING MISSIONS AND STRATEGIES
• Mission
• Strategy
• DEFINING GLOBAL OPERATIONS
• International business
• Multinational corporation
• Global company
• Transnational company
• REASONS FOR GLOBALIZATION
• Pros
• Cons

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Learning Objectives - Continued

• ACHIEVING COMPETITIVE ADVANTAGE THROUGH
  OPERATIONS
• Competing on Differentiation
• Competing on Cost
• Competing on Response
• TEN STRATEGIC OM DECISIONS
• STAGES OF PRODUCT LIFE CYCLE
• Introduction
• Growth
• Maturity
• Decline

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Corporate Mission

• A corporate mission is a set of long-range goals
  and including statements about
• the kind of business the company wants to be in
• who its customers are
• its basic beliefs about business
• its goals of survival, growth, and profitability
• Mission - where you are going

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Business Strategy

• Business strategy is a long-range game plan of an
  organization and provides a road map of how to
  achieve the corporate mission.
• Inputs to the business strategy are
• Assessment of global business conditions -
  social, economic, political, technological,
  competitive
• Distinctive competencies or weaknesses - workers,
  sales force, RD, technology, management
• Strategy - how you are going to get there an
  action plan

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Factors Affecting Mission
Philosophy
Values
Profitability
Environment
Growth
Mission
Customers
Public Image
Benefit to
Society
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Strategy Process
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Defining Global Operations

• International business - engages in cross-border
  transactions
• Multinational Corporation - has extensive
  involvement in international business, owning or
  controlling facilities in more than one country
• Global company - integrates operations from
  different countries, and views world as a single
  marketplace
• Transnational company - seeks to combine the
  benefits of global-scale efficiencies with the
  benefits of local responsiveness

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Reasons to Globalize Operations
Tangible Intangible

• Reduce costs (labor, taxes, tariffs, etc.)
• Improve the supply chain
• Provide better goods and services
• Attract new markets
• Learn to improve operations
• Attract and retain global talent

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Pros and Cons of Globalization

• Pros (Pluses)
• Productivity grows more quickly (living standards
  can go up faster)
• Global competition and cheap imports keep a lid
  on prices (inflation less likely to derail
  economic growth)
• Open economy spurs innovation (with fresh ideas
  from abroad)
• Export jobs often pay more than other jobs
• US has more access to foreign investment (keeps
  interest rates low)

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Pros and Cons of Globalization

• Cons (Minuses)
• Millions of Americans have lost jobs due to
  imports or production shifts abroad
• Most displaced workers find new jobs that pay
  less
• Workers face pay-cuts demands from employers
• Service and white-collar jobs are increasingly
  vulnerable
• US employees lose their comparative advantage
  when companies build advanced factories abroad

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Costs reduction through globalization

• Maquiladoras
• World Trade Organization (WTC)
• North American Free Trade Agreement (NAFTA)
• European Union (EU)

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Operational Effectiveness and Competitive
Advantage

• Operational effectiveness is the ability to
  perform similar operations activities better than
  competitors.
• It is very difficult for a company to compete
  successfully in the long run based just on
  operational effectiveness.
• A firm must also determine how operational
  effectiveness can be used to achieve a
  sustainable competitive advantage.
• An effective competitive strategy is critical.

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Strategies for Competitive Advantage

• Differentiation
• Cost leadership
• Quick response

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10 Strategic OM Decisions

• Goods service design
• Quality
• Process capacity design
• Location selection
• Layout design
• Human resource and job
  design
• Supply-chain
  management
• Inventory
• 
  Scheduling
• 
  Maintenance

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Stages in a Products Life Cycle

• Introduction- Sales begin, production and
  marketing are developing, profits are negative.
• Growth - sales grow dramatically, marketing
  efforts intensify, capacity is expanded, profits
  begin.
• Maturity - production focuses on high-volume,
  efficiency, low costs marketing focuses on
  competitive sales promotion profits are at peak.
• Decline - declining sales and profit product
  might be dropped or replaced.

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Stages in the Product Life Cycle