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Gaining Competitive Advantage Through Operations


CHAPTER 2 Gaining Competitive Advantage Through Operations Learning Objectives Understand how business processes create competitive capabilities that enable ... – PowerPoint PPT presentation

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Title: Gaining Competitive Advantage Through Operations


Gaining Competitive Advantage Through Operations
Learning Objectives
  • Understand how business processes create
    competitive capabilities that enable
    organizations to satisfy customer requirements.
  • Describe some of the key business processes,
    including strategy development, product
    development, developing systems to produce
    services and goods, and order fulfillment.
  • Explain how operations management can maintain an
    organization's competitive edge through
    high-quality production, convenient delivery,
    effective customer service, and competitive cost.
  • Discuss why operations are strategically
  • List and define the steps necessary to link
    operations to corporate strategy.
  • Describe how operations managers are using
    information technology to increase productivity,
    improve quality, provide a safer environment, and
    reduce costs.
  • Discuss how computer and information technology
    affect operations.

General Topics In Chapter
  • Strategic Issues Achieving Competitive Advantage
    with Operations
  • Customer Requirements
  • Competitive Capabilities
  • Designing Business Processes That Build
    Competitive Capabilities
  • Strategy Development and Operations
  • The Role Of Computer And Information Technology
    In Operations
  • The Role of Computer and Information Technology
    in Manufacturing
  • The Role of Computer and Information Technology
    in Service Operations

Competitive Advantage
  • Capability which customers value which gives an
    organization an edge on its competition
  • Short delivery lead time
  • High product quality
  • Operations can be an important tool for
  • Improving profits
  • Increasing market share
  • Developing new markets

Model for Developing Competitive Advantage
Customer Requirements
  • Meeting specific needscustom blended paint
  • Quick responsewindow of opportunity
  • Product performance and featuresair bags in a
  • Product qualitydurable finish on a wooden table
  • Pricebetter value to customer
  • Serviceeasy way to order accessories

Competitive Capabilities
  • Flexibility
  • Productivity
  • Building Quality into Products
  • Time
  • E-Business
  • Flexibility
  • Productivity
  • Building Quality into Products
  • Time
  • E-Business

Operations for Competitive Advantage
Competitive Capability Leads to
  • Flexible operations
  • Productivity
  • Quality systems
  • Short response time from product design to
  • Rapid and inexpensive response to changing
    customer demand
  • Low cost services and goods
  • Meeting customer needs instead of engineerings
    definition of quality
  • Satisfying customers desire for instant

Using Flexibility to Gain a Competitive Advantage
  • Changeover and operating costs are reduced
  • Production costs are reduced because the system
    is more easily adapted to producing new and
    different products
  • Marketing can meet specific customer demands
  • Timely deliveries are possible because
    inexpensive and quick changes can be made from
    one product to another


output Productivity ---------
number of
units Labor Productivity ---------------------
labor hour
Achieving Productivity Improvements
  • Structure of operationsnumber, size, location
    and capacity of facilities
  • Equipment and methodselecting equipment and
    methods that fit the job
  • Individual jobs and activitiesfinding the most
    efficient way to do a job

for landscaping
or a
Results of Productivity Improvements
Productivity improvements free resources for
  • 1st Revolution farm labor declines from 95 to
    5 of labor force
  • 2nd Revolution improved manufacturing methods
    frees resources for service operations
  • 3rd Revolution computer and information
    technology creates smart automation systems to
    improve white collar productivity

Building Quality into Products
  • High Quality and Low Costs The Ideal
  • Moving toward the Ideal through Technology
  • Moving toward the Ideal through Better Management

High Quality and Low Costs Blending Quality
and Costs
  • Time-based competition is a strategy of seeking
    competitive advantage by quickening the tempo of
    critical organizational processes
  • The emphasis is on end-to-end time (i.e.,
    aggregate time) from the generation of new
    product concepts to the delivery of finished
    products, rather than the time to perform
    specific tasks or functions.

  • Two types of E-Business
  • Supply Chain Management
  • Customer Relationship Management

Two types of E-Business
  • business-to-business (B2B)
  • business-to-consumer (B2C)

Supply Chain Management
  • Supply chains encompass all activities associated
    with the flow and transfer of goods and services
    from raw material extraction through use by the
    organization that sells to the final consumer.
  • Supply chain management is the integration of
    these activities through improved supplier
    relationships to achieve a sustainable
    competitive advantage for all members in the
    supply chain.

Customer Relationship Management
  • Financial benefits
  • Social benefits
  • Structural ties

Designing Business Processes that Build
Competitive Capabilities
  • Strategy development
  • Product development
  • Developing systems to produce services and goods
  • Order fulfillment

Strategy Development
  • Strategy coordinates the various business
  • Strategy drives the organization towards its
    ultimate objective

Product Development
  • A teamwork oriented process
  • Develops a product concept
  • Generates a product design
  • Determines methods for producing the service or

Process for developing systems to produce
services and goods
  • Acquiring the resources (facility, equipment,
    etc.) which enable the organization to produce
    the product

Order Fulfillment Process
  • Order entry
  • Credit verification
  • Scheduling production
  • Distribution

Strategy Development and Operations
  • Linking Corporate Strategy to Operations
  • A Changing Global Environment Offers Greater

  • Linking Corporate Strategy to Operations
  • Operations can become a positive factor that
    contributes to organizational success.
  • To make this happen, facilities, equipment, and
    training should be viewed as a means to achieve
    organizational, rather than operational,

An Example
  • How are operations important to Midas?
  • Limited service permits special design of the
    equipment and the shop so that the employees can
    be more productive.
  • Limited service requires a limited inventory that
    allows convenient storage close to the point
    where materials are needed.
  • Multiple shops and limited service permit careful
    engineering of the necessary hand tools and the
    work procedures.
  • Because employees have few variations in service,
    they learn how to do these jobs more quickly.
  • Workers' skill levels and knowledge requirements
    focus on a limited area of service so they
    quickly become experts in a particular area.

An Example
  • How does Genoa Motors design operations to match
    its objectives?
  • The facility is adaptable to changing needs.
  • Genoa Motors has more tools than a specialist
    like Midas does because Genoa Motors does a
    greater variety of jobs.
  • There is some job specialization.
  • The workers' skill levels and pay rates are
    higher than workers at Midas.
  • A significant inventory of many different parts
    is maintained. These parts are physically
    separated from the repair stalls and controlled
    by specialists in parts.

An Example
How do organizations successfully link corporate
strategy and operating strategy?
  • Analyzing the competitive environment (external
    environmentthreats and opportunities)
  • Appraising the organization's skills and
    resources (internal environmentstrengths and
  • Formulating corporate strategy
  • Determining the implications of corporate
    strategy for operating strategy
  • Examining the limitations economics and
    technology place on operations
  • Designing systems for operations
  • Planning and managing operations

Steps of Linking Corporate Strategy to Operations
  • Analyzing the Competitive Environment
  • Appraising the Organization's Skills and
  • Formulating Corporate Strategy
  • Determining the Implications of Corporate
    Strategy for Operating Strategy
  • Examining the Limitations of Economics and
    Technology on Operations
  • Designing Systems for Operations
  • Planning and Managing Operations

A Changing Global Environment Offers Greater
  • European Community (EC)
  • NAFTA North American Free Trade Agreement

Role of Computers and Information Technology in
  • Expert Systems (ES)
  • Decision Support Systems (DSS)
  • Information Super Highway
  • Virtual Reality

The Role of Computer and Information Technology
in Manufacturing
  • Computer-based control systems can be combined
    with manufacturing technology to improve
    manufacturing operations.
  • The computer can assist in integrating these
    technologies into a lean and efficient factory
    capable of competing in world markets.

The Role of Computer and Information Technology
in Service Operations
  • Services do not have a physical dimension. The
    operations categorized as service operations are
    really services and goods operations.
  • In order to provide better and faster customer
    service, managers can use information systems
    that provide up-to-date and accurate information
    about availability of the service and how
    customers can acquire it.