Operations

Management
Chapter 2
Operations Strategy in
a Global Environment
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
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Learning Objectives
When you complete this chapter you
should be able to:
1. Define mission and strategy
2. Identify and explain three strategic
approaches to competitive
advantage
3. Identify and define the 10 decisions
of operations management
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Learning Objectives
When you complete this chapter you
should be able to:
4. Identify five OM strategy insights
provided by PIMS research
5. Identify and explain four global
operations strategy options

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Global Strategies
Boeing sales and production are
worldwide
Benetton moves inventory to stores
around the world faster than its
competition by building flexibility into
design, production, and distribution
Sony purchases components from
suppliers in Thailand, Malaysia, and
around the world

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Global Strategies
Volvo considered a Swedish company
but it is controlled by an American
company, Ford. The current Volvo S40 is
built in Belgium and shares its platform
with the Mazda 3 built in Japan and the
Ford Focus built in Europe.
Haier A Chinese company, produces
compact refrigerators (it has one-third of
the US market) and wine cabinets (it has
half of the US market) in South Carolina
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Reasons to Globalize
Reasons to Globalize
Tangible 1. Reduce costs (labor, taxes, tariffs, etc.)
Reasons 2. Improve supply chain
3. Provide better goods and services
4. Understand markets
Intangible 5. Learn to improve operations
Reasons 6. Attract and retain global talent

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Reduce Costs
Foreign locations with lower wage
rates can lower direct and indirect
costs
Maquiladoras
World Trade Organization (WTO)
North American Free Trade
Agreement (NAFTA)
APEC, SEATO, MERCOSUR
European Union (EU)
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Improve the Supply Chain

Locating facilities closer to
unique resources
Auto design to California
Athletic shoe production to China
Perfume manufacturing in France

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Provide Better Goods

and Services
Objective and subjective
characteristics of goods and
services
On-time deliveries
Cultural variables
Improved customer service

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Understand Markets
Interacting with foreign customers
and suppliers can lead to new
opportunities
Cell phone
design from
Europe
Cell phone
fads from
Japan
Extend the product life cycle
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Learn to Improve Operations

Remain open to the free flow of
ideas
General Motors partnered with a
Japanese auto manufacturer to
learn
Equipment and layout have been
improved using Scandinavian
ergonomic competence

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Attract and Retain Global

Talent
Offer better employment
opportunities
Better growth opportunities and
insulation against unemployment
Relocate unneeded personnel to
more prosperous locations
Incentives for people who like to
travel
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Developing Missions and

Strategies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there

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Mission
Mission - where are
you going?
Organizations
purpose for being
Answers What do
we provide society?
Provides boundaries
and focus

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FedEx
FedEx is committed to our People-Service-Profit
philosophy. We will produce outstanding financial
returns by providing total reliable, competitively
superior, global air-ground transportation of high
priority goods and documents that require rapid,
time-certain delivery. Equally important, positive
control of each package will be maintained using
real time electronic tracking and tracing systems. A
complete record of each shipment and delivery will
be presented with our request for payment. We will
be helpful, courteous, and professional to each other
and the public. We will strive to have a completely
satisfied customer at the end of each transaction.
Figure 2.2
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Merck
The mission of Merck is to provide
society with superior products and
services - innovations and solutions
that improve the quality of life and
satisfy customer needs - to provide
employees with meaningful work and
advancement opportunities and
investors with a superior rate of return

Figure 2.2
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Hard Rock Cafe

Our Mission: To spread the spirit of Rock n
Roll by delivering an exceptional
entertainment and dining experience. We
are committed to being an important,
contributing member of our community and
offering the Hard Rock family a fun, healthy,
and nurturing work environment while
ensuring our long-term success.

Figure 2.2
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Arnold Palmer Hospital

Arnold Palmer Hospital is a healing
environment providing family-centered
care with compassion, comfort and
respect when it matters the most.

Figure 2.2
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Factors Affecting Mission

Philosophy
and Values
Profitability
and Growth

Environment
Mission
Customers

Public Image
Benefit to
Society

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Sample Missions
Sample Company Mission
To manufacture and service an innovative, growing, and
profitable worldwide microwave communications business
that exceeds our customers expectations.

Sample Operations Management Mission

To produce products consistent with the companys mission
as the worldwide low-cost manufacturer.

Figure 2.3
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Sample Missions
Sample OM Department Missions
Product design

To design and produce products and

services with outstanding quality and
inherent customer value.

Quality management

To attain the exceptional value that is

consistent with our company mission and
marketing objectives by close attention to
design, procurement, production, and field
service operations

Process design

To determine and design or produce the

production process and equipment that will
be compatible with low-cost product, high
quality, and good quality of work life at
economical cost.
Figure 2.3

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Sample Missions
Sample OM Department Missions
Location

To locate, design, and build efficient and

economical facilities that will yield high
value to the company, its employees, and the
community.

Layout design

To achieve, through skill, imagination, and

resourcefulness in layout and work methods,
production effectiveness and efficiency while
supporting a high quality of work life.

Human resources

To provide a good quality of work life, with

well-designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange
for outstanding individual contribution from
employees at all levels.
Figure 2.3

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Sample Missions
Sample OM Department Missions
Supply chain
management

To collaborate with suppliers to develop

innovative products from stable, effective,
and efficient sources of supply.

Inventory

To achieve low investment in inventory

consistent with high customer service levels
and high facility utilization.

Scheduling

To achieve high levels of throughput and

timely customer delivery through effective
scheduling.

Maintenance

To achieve high utilization of facilities and

equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.
Figure 2.3

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Strategic Process
Organizations
Mission

Functional
Area Missions

Marketing
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Operations

Finance/
Accounting
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Strategy
Action plan to
achieve mission
Functional areas
have strategies
Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
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Strategies for Competitive

Advantage
Differentiation better, or at least
different
Cost leadership cheaper
Response rapid response

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Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customers perception of
value
Safeskin gloves leading edge products
Walt Disney Magic Kingdom
experience differentiation
Hard Rock Cafe dining experience
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Competing on Cost
Provide the maximum value as
perceived by customer. Does not
imply low quality.
Southwest Airlines secondary
airports, no frills service, efficient
utilization of equipment
Wal-Mart small overheads, shrinkage,
distribution costs
Franz Colruyt no bags, low light, no
music, doors on freezers
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Competing on Response
Flexibility is matching market changes in
design innovation and volumes
Institutionalization at Hewlett-Packard

Reliability is meeting schedules

German machine industry

Timeliness is quickness
in design, production,
and delivery
Johnson Electric,
Bennigans, Motorola
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10 Strategic OM Decisions
1. Goods and
service design
2. Quality
3. Process and
capacity design
4. Location
selection
5. Layout design

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6. Human resources
and job design
7. Supply chain
management
8. Inventory
9. Scheduling
10. Maintenance

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Goods and Services and

the 10 OM Decisions
Operations
Decisions
Goods and
service
design

Goods
Services
Product is usually Product is not
tangible
tangible

Quality

Many objective
standards

Many subjective
standards

Process
and
capacity
design

Customers not
involved

Customer may be
directly involved
Capacity must
match demand
Table 2.1

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Goods and Services and

the 10 OM Decisions
Operations
Decisions
Location
selection

Goods
Near raw
materials and
labor

Services
Near customers

Layout
design

Production
efficiency

Enhances product
and production

Human
resources
and job
design

Technical skills,
consistent labor
standards, output
based wages

Interact with
customers, labor
standards vary
Table 2.1

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Goods and Services and

the 10 OM Decisions
Operations
Decisions
Supply
chain

Goods
Relationship
critical to final
product

Services
Important, but
may not be
critical

Inventory

Raw materials,
work-in-process,
and finished
goods may be
held

Cannot be stored

Scheduling

Level schedules
possible

Meet immediate
customer demand
Table 2.1

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Goods and Services and

the 10 OM Decisions
Operations
Decisions
Goods
Services
Maintenance Often preventive Often repair and
and takes place
takes place at
at production site customers site

Table 2.1
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Critical Success Factors and Core

Competencies
Critical success factors are those activities that are necessary
for a firm to achieve its goals.

Form a strategy

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