POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

In Partial Fulfillment of the requirements of the subject in

Operations Management

THE GLOBAL ENVIRONMENT AND OPERATIONS STRATEGY

Submitted by:

Andre Sebastian Aquino

Danica Lavado

Mary Joy Parel

Jamie Paulino

Hazenne Dea Saez

Alizandra Tamase

of

BSBAHRM 1-4N

Submitted to:

Ms. Mafel Javier

First Semester

A.Y. 2019-2020
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
THE GLOBAL ENVIRONMENT AND OPERATIONS STRATEGY

1. Achieving Competitive Advantage Through Operations

Companies must be competitive to sell their goods and services in the marketplace.
Competitiveness is how effectively an organization meets the wants and needs of customers
relative to others that offer similar goods or services.

Business organizations compete through some combination of their marketing and operations
functions. Marketing influences competitiveness in several ways, including the following:

 Identifying consumer wants and/or needs is a basic input in an organization’s decision-

making process, and central to competitiveness. The ideal is to achieve a perfect match
between those wants and needs and the organization’s goods and/or services
 Price and quality are key factors in consumer buying decisions. It is important to
understand the trade-off decision consumers make between price and quality.
 Advertising and promotion are ways organizations can inform potential customers
about features of their products or services and attract buyers.

Operations has a major influence on competitiveness through the following:

 Product and service design should reflect joint efforts of many areas of the firm to
achieve a match between financial resources, operations capabilities, supply chain
capabilities, and consumer wants and needs. Special characteristics or features of a
product or service can be a key factor in consumer buying decisions.
 Cost of an organization’s output is a key variable that affects pricing decisions and
profits. Cost-reduction efforts are generally ongoing in business organizations.
Productivity is an important determinant of cost. Organizations with higher productivity
rates than their competitors have a competitive cost advantage. A company may
outsource a portion of its operation to achieve lower costs, higher productivity, or better
quality.
 Location can be important in terms of cost and convenience for customers. Location
near inputs can result in lower input costs. Location near markets can result in lower
transportation costs and quicker delivery times. Convenient location is particularly
important in the retail sector.
 Quality refers to materials, workmanship, design, and service. Consumers judge quality
in terms of how well they think a product or service will satisfy its intended purpose.
Customers are generally willing to pay more for a product or service if they perceive
the product or service has a higher quality than that of a competitor.
 Quick response can be a competitive advantage. One way is quickly bringing new or
improved products or services to the market. Another is being able to quickly deliver
existing products and services to a customer after they are ordered, and still another is
quickly handling customer complaints.
 Flexibility is the ability to respond to changes. Changes might relate to alterations in
design features of a product or service, or to the volume demanded by customers, or the

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mix of products or services offered by an organization. High flexibility can be a
competitive advantage in a changeable environment.
 Inventory management can be a competitive advantage by effectively matching
supplies of goods with demand.
 Supply chain management involves coordinating internal and external operations
(buyers and suppliers) to achieve timely and cost-effective delivery of goods throughout
the system.
 Service might involve after-sale activities customers perceive as value-added, such as
delivery, setup, warranty work, and technical support. Or it might involve extra attention
while work is in progress, such as courtesy, keeping the customer informed, and
attention to details. Service quality can be a key differentiator; and it is one that is often
sustainable. Moreover, businesses rated highly by their customers for service quality
tend to be more profitable, and grow faster, than businesses that are not rated highly.
 Managers and workers are the people at the heart and soul of an organization, and if
they are competent and motivated, they can provide a distinct competitive edge by their
skills and the ideas they create. One often overlooked skill is answering the telephone.
How complaint calls or requests for information are handled can be a positive or a
negative. If a person answering is rude or not helpful, that can produce a negative image.
Conversely, if calls are handled promptly and cheerfully, that can produce a positive
image and, potentially, a competitive advantage.

2. Issues in Operations Strategy

Operations Strategy is a plan specifying how an organization will allocate resources in order
to support infrastructure and production. It is typically driven by the overall business strategy
of the organization and is designed to maximize the effectiveness of production and support
elements while minimizing costs.

WHY SOME ORGANIZATIONS FAIL

Organizations fail, or perform poorly, for a variety of reasons. Being aware of those rea-
sons can help managers avoid making similar mistakes. Among the chief reasons are the
following:

 Neglecting operations strategy.

 Failing to take advantage of strengths and opportunities, and/or failing to recognize
competitive threats.
 Putting too much emphasis on short-term financial performance at the expense of
research and development.
 Placing too much emphasis on product and service design and not enough on process
design and improvement.
 Neglecting investments in capital and human resources.
 Failing to establish good internal communications and cooperation among different
functional areas.
 Failing to consider customer wants and needs.

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Some alternative perspectives in establishing and implementing a strategy:

a. Resources View

A method that managers use to evaluate the resources at their disposal and manage
or alter them to achieve competitive advantage.

b. Value Chain Analysis

A way to identify those elements in the product/service chain that uniquely add
value.

c. Porter’s Five Forces Model

i. Immediate Rivals
ii. Potential Entrants
iii. Customers
iv. Suppliers
v. Substitute Products

3. Strategy Planning, Core Competencies, and Outsourcing

Strategic planning is an organizational management activity that is used to set priorities, focus
energy and resources, strengthen operations, ensure that employees and other stakeholders are
working toward common goals, establish agreement around intended outcomes/results, and
assess and adjust the organization's direction in response to a changing environment. It is a
disciplined effort that produces fundamental decisions and actions that shape and guide what
an organization is, who it serves, what it does, and why it does it, with a focus on the future.
Effective strategic planning articulates not only where an organization is going and the actions
needed to make progress, but also how it will know if it is successful.

Strategic plan is a document used to communicate with the organization the organizations
goals, the actions needed to achieve those goals and all of the other critical elements
developed during the planning exercise.

STRATEGIC PLANNING PROCESS

The application of the strategic planning in business is as a result of difficult managerial

decisions that comprise good and less desirable courses of action. The development and
execution of strategic plans is a well-thought-out plan performed in three critical steps:

A. Strategic Formulation

In the formulation of strategies, the business assesses its current situation by performing
an internal and external audit. Strategy formulation also involves identifying the
organization’s strengths and weaknesses, as well as opportunities and threats (SWOT

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Analysis). As a result, managers, get to decide which new markets they can venture or
abandon, how to allocate the required resources, and whether to expand its operations
through a joint venture or mergers.

Business strategies result in long-term effects on organizational success; only top

business executives understand their impact and are authorized to assign the resources
necessary for their implementation.

B. Strategy Implementation

After the strategy formulation, the company needs to establish short-term goals (usually
one-year goals), devise policies, and allocate resources for their execution. It is also
referred to as the action stage and is the most important phase of strategic planning. The
success of the implementation stage is determined by the firm’s ability to nurture an
environment and a culture that motivates employees to work. A manager’s interpersonal
skills are critical during this stage.

Effective strategy implementation also involves developing a functional organizational

structure, maximum utilization of information systems, and redirecting marketing
efforts.

C. Strategy Evaluation

Any savvy business person knows that success today does not guarantee success
tomorrow. As such, it is important for managers to evaluate the performance of various
strategies after the implementation phase. Strategy evaluation involves three crucial
activities: reviewing the internal and external factors affecting the implementation of
the strategies, measuring performance, and taking corrective steps.

All the three steps in strategic planning occur in three hierarchical levels: the corporate,
middle, and operational levels. Thus, it is imperative to foster communication and
interaction among the employees and managers in all the levels so as to help the firm to
operate as a functional team.

Core competencies differentiate an organization from its competition and create a company's
competitive advantage in the marketplace. Typically, a core competency refers to a company's
set of skills or experience in some activity, rather than physical or financial assets. An
organizational core competency is an organization's strategic strength.

Core competencies are unique systems and processes that make you operationally different and
superior to your competition. They build on your collective knowledge about how to coordinate
diverse skills, activities and technologies to create a competitive advantage. These complex
combinations may appear simple on the surface but have actually been honed to near perfection
over a long period of time. Your core competencies should make your company stand out from
the competition, should be difficult for competitors to imitate and should be applicable to a
wide range of business opportunities.

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WHY CORE COMPETENCIES MATTER

A great set of core competencies can drive your company’s competitive advantage in the
marketplace. Focusing on your core competencies creates unique, integrated systems that
reinforce your company’s systemic advantage - something your competitors can’t copy
quickly or easily. These core competencies are strongly engrained in your company. They
can be replicated across multiple strategic business units and cross geographic regions and
borders

HOW TO IDENTIFY YOUR CORE COMPETENCIES

To determine your company’s core competencies, consider these questions:

 What is the underlying skill, ability, knowledge, experience, technology or process that
enables your company to provide its unique set of products or services?
 What is it that your company is uniquely good at?
 What can you do better than others?

Next, you need to determine how you can use your company’s core competencies to develop
strategic products and services that have an intrinsic competitive advantage. High-
performing companies work on developing new core competencies and expanding their
existing ones to enter new and future markets.

Outsourcing is an agreement in which one company hires another company to be responsible

for a planned or existing activity that is or could be done internally, and sometimes involves
transferring employees and assets from one firm to another.

Outsourcing Benefits and Costs

The business case for outsourcing varies by situation, but the benefits of outsourcing often
include one or more of the following:

 Lower costs (due to economies of scale or lower labor rates)

 Increased efficiency
 Variable capacity
 Focus on strategy/core competencies
 access to skills or resources
 Increased flexibility to meet changing business and commercial conditions
 Accelerated time to market
 Lower ongoing investment in internal infrastructure
 Access to innovation, intellectual property, and thought leadership
 Possible cash influx resulting from transfer of assets to the new provider

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Some of the risks of outsourcing include:

 Slower turnaround time

 Lack of business or domain knowledge
 Language and cultural barriers
 Time zone differences
 Lack of control

4. Global Operations Strategy Options

Many operations strategies now require an international dimension.

An international business is a firm that engages in international trade or investment. A

multinational corporation (MNC) is a firm with extensive international business involvement.
It buys resources, create goods or services and sell goods or services in a variety of countries.

Operations managers of international and multinational firms approach global opportunities

with one of four operation strategies:

a. International Strategy
b. Multidomestic Strategy
c. Global Strategy
d. Transnational Strategy

The four strategies are related to two variables:

 Local responsiveness: the degree of differentiation among the strategies followed by a

certain company in every country in order to adapt the products to the local market.
 Cost reduction: the degree of cost advantage that the strategy gives to the company
over the industry rivals.

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The relation among these two variables and the four strategies is known in the following
matrix:

I. International Strategy

An international strategy uses exports and licenses to penetrate the global arena. It is the
least advantageous strategy, with little local responsiveness, as these companies sell the
same product in every country, and little low-cost advantage because they use their existing
production process at some distance from the new market. Thus, an international strategy
implies both low local responsiveness and cost reduction.

However, an international strategy is often the easiest one, as exports can require little
change in existing operations, and licensing agreements often leave much of the risk to the
licensee. In an international strategy markets are penetrated using exports and licenses.

II. Multidomestic Strategy

The multidomestic strategy has decentralized authority with substantial autonomy at each
business by creating subsidiaries, franchises or joint ventures with substantial
independence.

The advantage of this strategy is maximizing a competitive response for the local market;
however, this strategy has little or no cost advantage. It is a strategy in which operating
decisions are decentralized to each country to enhance local responsiveness.

III. Global Strategy

A global strategy has a high degree of centralization, with headquarters coordinating the
organization to seek out standardization and learning between plants, thus generating
economies of scale.

This strategy is appropriate when the strategy focus is cost reduction but has little to
recommend it when demand for local responsiveness is high. It is commonly used by
companies that produce customer hidden products. Thus, it is a strategy in which operating
decisions are centralized and headquarters coordinates the standardization and learning
between facilities.

IV. Transnational Strategy

A transnational strategy exploits the economies of scale and learning, as well as pressure
for responsiveness, by recognizing the core competence that does not reside in just the
home country but anywhere else in the organization.

Transnational describes a condition in which material, people, and ideas, cross national
boundaries. Transnational companies are thought of as “world companies” whose country
identity is not as important as its independent network of worldwide operations.

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Key activities in a transnational company are neither centralized in the parent company nor
decentralized so that each subsidiary can carry its own tasks on a local basis. Instead,
resources and activities are dispersed, but specialized, so as to be both efficient and flexible
in an interdependent network. Thus, a transnational strategy combines the benefits of
global-scale efficiencies with the benefits of local responsiveness.

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REFERENCES

 Competencies: How can our company determine its core competencies? (2018, December
15). Retrieved from SHRM : https://www.shrm.org/resourcesandtools/tools-and-
samples/hr-qa/pages/corecompetencies.aspx
 Galang, M. C. (2017, August 16). Top 10 Reasons to Outsource. Retrieved from Micro
Sourcing: https://www.microsourcing.com/blog/top-10-reasons-to-outsource.asp
 Kokemuller, N. (2012, December 24). Global Marketing vs. Multidomestic Marketing.
Retrieved from AzCentral: https://yourbusiness.azcentral.com/global-marketing-vs-
multidomestic-marketing-12934.html
 Operation Management Chapter 2. (2016, June 30). Retrieved from Slide Share:
https://www.slideshare.net/jhoy1221/operation-management-chapter-2
 Rodríguez-León, L. (2014, November 25). Global Operations Strategy Options. Retrieved
from Operation Management I. UPO 2014-2015:
https://omiupo1415.wordpress.com/2014/11/25/2-h-global-operations-strategy-options/
 Stevenson, W. J. (2011). Operations Management 11th Edition. Ohio, U.S.A: McGraw-
Hill/Irwin.
 "Oursourcing". Britannica.com.
 Ian McCarthy; Angela Anagnostou (2004). "The impact of outsourcing on the transaction
costs and boundaries of manufacturing". International Journal of Production Economics.
88 (1): 61–71. CiteSeerX 10.1.1.468.9139. doi:10.1016/s0925-5273(03)00183-x

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