Learning Objectives
LO 2-1: List the properties of a mission statement and how corporate strategies are developed.
Mission statements include descriptions of a company’s goods and services, the processes employed, markets where it competes, potential customers, and the company’s distinctive competencies. Corporate strategies are developed using some combination of the competitive dimensions of cost, quality, and customer service. Cost benefits can be derived from economies of scale; quality takes on many forms such as reliability, performance, and warranties; customer service focuses on delivery speed, flexibility, product support, etc.
LO 2-2: Describe how companies create operations strategies for competitive advantage.
Companies create operations strategies for competitive advantage by first understanding what their core competencies are. Core competencies are the collective capabilities or skill sets a firm possesses that differentiate it from its competition. Using their core competencies as the foundation to build upon, companies assess their overall strategy (cost strategy, quality strategy, or customer service strategy), and align the 10 operations strategies to support the firm’s overall strategy. The 10 operations strategies a company tailors to it firm’s strategy are product design, process design, production control system, facility location, facility layout, purchasing, logistics, quality, inventory, and customer service.
LO 2-3: Explain the tradeoffs in operations strategies.
The 10 operations strategies a company tailors to it firm’s strategy are product design, process design, production control system, facility location, facility layout, purchasing, logistics, quality, inventory, and customer service. However, when a company tailors these 10 operations strategies to support a specific overall strategy (cost, quality, or customer service), the effectiveness of the operations strategy is constrained. For example, if a company aligns its logistics strategy to support an overall cost strategy, it will generally utilize centralized distribution centers and low-cost transportation modes. This impacts customer service in that an overall customer service strategy is more effective when decentralized distribution centers are used and delivering on time is a higher priority than cost saving.
LO 2-4: Discuss a number of operations performance measures and potential measurement problems.
Performance measures fall into five major categories: financial, productivity, quality, customer service, and ethics and sustainability. Financial measures can be influenced by macro-environmental conditions that a firm’s managers cannot control. Consequently, changes in cost or profit figures may not correctly indicate the company’s capabilities. Another example is customer service measures such as customer satisfaction scores and complaint resolution time. Working to drive complaint resolution time down can potentially cause customer satisfaction scores to decrease because customers may feel insufficient time was spent understanding their issues and/or explaining solutions or corrective actions.
LO 2-5: Demonstrate how corporate ethics and sustainability impact corporate and operations strategies
When firms work to demonstrate an ethical approach to purchasing by buying fair trade products, this often translates into it supporting their customer service strategy. Customers often view this activity as aligning with their values; thus, enhancing their positive opinion of the firm. When firms go green through their sustainability strategy, this action has the effect of enabling them to reduce costs through recycling, etc.; thereby, reducing operational costs and supporting their low-cost strategy.
Chapter Outline
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