KIG4067

M A N U FA C T U R I N G
S T R AT E G Y
D E V E LO P I N G A N O P E R AT I O N S S T R AT E GY
INTRODUCTION

 Companies invest in a wide range of functions and capabilities in order to

design, make and sell products at a profit

 Company’s functions must align to the market need

 Thus, appropriate to invest in process and infrastructure

 These are the two key investments and the company’s market must fit

 Reason – due to the invariable large and fixed nature of operations

process and infrastructure investment

– due to time to change and implement decisions

W H AT I S S T R AT E G Y ?

Greek word strategos - leading an army

Both military and business strategy can be described in similar way, including:
• Setting broad objectives that direct an enterprise towards its overall goal

• Planning the path (in general rather in specific terms) that will achieve these
goals

• Stressing long term rather short-term objectives

• Dealing with the total picture rather than stressing individual activities

• Being detached from, and above, the confusion and distractions of day-to-day
activities.
F U N C T I O N A L S T R AT E G I E S
WITHIN THE CONTEXT OF A
FIRM

Level of Strategy Distinctive tasks

Corporate Strategic activity at the corporate level concerns
the direction of the total business and address
issues such as where to invest and/or divest, and
priorities in term of sales revenue growth.

Implementation concerns the allocation of

investments funds
Corporate-level strategy
This concerns the market sectors in which a company,
as a whole, decided to compete, the degree of
importance it attaches to each sector in terms of future
revenue and profit growth and the priority given to
each sector in terms of investment and other allocations
of resources.
Level of Strategy Distinctive tasks
Business Unit Business unit comprise different parts of a total
business. For each business unit, strategic
direction concerns identifying the markets in
which it competes, agreeing where it intends
to grow (including new markets), the nature of
competition and the relevant competitive
criteria in its current and future markets, in
terms of maintaining and growing share.

Implementation concerns discussing and

agreeing how and where to invest, in term of
functional tasks and alternative approaches.
Business unit-level strategy

Companies often comprise several businesses and the

inherent diversity leads to the need for an increasing
level of independence between the parts that make up
the corporate whole.
Whole business unit strategies, therefore, concern
identifying the markets in which this part of the whole
business competes, dimensions of competition
involved and the competitive criteria to fulfill in order to
enable it to retain and grow market share.
Level of Strategy Distinctive tasks
Functional Each business unit will comprise a number of
functions such as research and developments,
sales and marketing, operations and
engineering that make up the total activities
within a business unit. The strategic role of
each function is to support those competitive
dimensions within a market for which it is
wholly or partially responsible. In this way, the
market comprises the agenda for functional
strategies and becomes the mechanism for
determining development and investment
priorities

Implement concerns consistently meeting the

competitive norms involved and selecting
from alternatives approaches to attain the
improvement goals laid down.
Functional-level strategy

Having determined the competitive factors within each

market in which a business competes, functions are
tasked with fulfilling these requirements.
Functional strategies, therefore, concern investing in
and developing the necessary capabilities to provide
those competitive factors in a business unit’s market for
which it is solely or jointly responsible.
 FUNCTIONAL EXECUTIVE
ROLES
1) Content of the operations management task:

The day-to-day or operational role:

involves managing and controlling the various aspects of the

operations functions effectively and efficiently

The strategic role

supporting competitive drivers e.g., quality conformance

2) Style – managing people

Internally

Externally
Functions’ contributions in gaining sales
Gaining the first Fulfilling the Securing the
sale order or second sale
contract
? ? ?
Functions’ contributions in gaining sales
Gaining the first Fulfilling the Securing the
sale order or second sale
contract
Sales and Operations Operations
marketing
BUSINESS UNIT STRATEGY

COMPOSITION OF THE BUSINESS UNIT

S T R AT E G Y- M A K I N G G RO U P
IDEAL BUSINESS UNIT
S T R AT E G Y- M A K I N G P R O C E S S
R E A L - L I F E B U S I N E S S S T R AT E G Y-
MAKING PROCESS
 3 TYPES OF BUSINESS UNIT
S T R AT E G Y

Market based

Companies proactively identify where market advantage could be

gained by outperforming the current norms on one or more relevant
market drivers and then allocating resources to this end.

Market-driven

Providing the competitive criteria in a market to the required levels e.g

shorter lead time, price

Market-driving

Proactively seeking ways to change the competitive norms – influence the

market
 Resource based

Proactive in seeking ways to change the competitive norms

for market advantage

To exploit the potential of existing internal resources and

capabilities and capabilities in order to outperform current
norms on one or more competitive drivers (as long inline
with customer need and they are willing to pay)

The market-driven and market-driving strategic mix

For most companies they used mix strategy

The Market-driven Strategy based on understanding
strategic current and future markets and
mix recognizing how the competitive
drivers are time –and market-specific.
Will differ depending on whether it
concerns maintaining share, growing
share or entering new markets

Market- Market- Proactive approach to identify where

driving based advantage can be gained by
outperforming current norms in one or
more drivers and then investing in
appropriate resources and capabilities

Resource- Exploit the potential of existing

based resources and capabilities to
outperform current norms on one or
more competitive drivers.
D E V E L O P I N G A N O P E R AT I O N S
S T R AT E G Y
• Companies require strategy not solely based on – marketing,
operations and any other function

• But one that embraces between markets and functions

• e.g link between market and operations – only then can have a
degree of fit between the proposed marketing strategy and
operations ability

• Relevant information explaining the company's operations

capabilities needs to be available within the business
LINKING BUSINESS OBJECTIVES
A N D F U N C T I O N A L S T R AT E G I E S
THROUGH MARKETS
Functional strategies concern investing and developing in ways
that support the needs of markets in terms of being both
market driven and market driving

5 phases to link them are:

Understand markets – ensuring both a market-driven and
market-driving approach while maintaining on ongoing,
rigorous review throughout this first critical step.
Translate these reviews into strategic tasks. e.g if price is
competitive driver, the task is to reduce costs
Check what is currently provided matches what is
required in market-driven scenario or the new level in a
market-driving scenario
Develop a strategy - to close the gap where the level
of provision falls short of the requirement or achieve the
new level of performance in a market-driving scenario
Implement the necessary investments and
development priorities
 FRAMEWORK
FOR LINKING CORPORATE
OBJECTIVES AND OPERATIONS AND MARKETING
STRATEGY DEVELOPMENT
1 2 3 Operations strategy
Corporate Marketing How do products
Process choice Infrastructure
Objectives strategy qualify and win
orders in the
marketplace?

Growth Product markets Price Choice of Function support

Survival and segments Quality alternative Operations
Range conformance processes planning and
Profit
Mix Delivery- speed – Trade-offs control systems
Return on embodied in the
investment Volumes reliability
process choice
Other financial Standardization Demand increases
Role of inventory in
measures versus Colour range the process
customization Product range configuration
Level of innovation Design Make or buy
Leader versus Brand name Capacity
follower
alternatives Technical support -Size
After-sales support -Timing
-Location
STEP 1
C O R P O R AT E O B J E C T I V E S

 Establishing the future objectives of a business as the first step in the

strategy development process.

 It provides the basis for establishing a clear, strategic direction for a

business and demonstrates both strategic awareness and strategic
willingness essential to corporate success.

 For each company, the objectives will be different in essence and

emphasis e.g can include employee and environmental policies
 STEP 2
M A R K E T I N G S T R AT E G Y
 To assess future markets in both known and potential customers,
products and competitors

 From this, sales forecast will be established that provide the basis for
calculating revenue and profits

 The outcome of the marketing plans will be measured against the

desired business objectives

 The marketing assumes that actual and sales forecasts will be the
same in terms of mix, order size, frequency and range of customer
needs.

 And that operations can meet these forecast by fulfilling what are
typical and unspecified range of different customers needs.
 THE INTERACTIVE LINK BETWEEN
CORPORATE OBJECTIVES AND MARKETING
STRATEGY
STEP 3
H OW D O P RO D U C T S Q UA L I F Y
AND WIN ORDERS IN THE
MARKETPLACE
 Operations’ strategic task is to meet the qualifiers (competitive
criteria that get and keep companies in the market but do not win
orders).

 Thus, it is responsible to provide, (better than the operations

functions of competitors), those criteria that enable the products to
win orders in the marketplace against competitors that have also
qualified.

 A company as a whole needs to agree on the markets and segments

within these markets in which it decides to compete.
 Marketing has an important but not the only view and should not be
allowed to dominate corporate strategy resolution.

 Marketing’s view will be part of this, but so the views of other

functions e.g the task of establishing the competitive criteria
involved and, in turn which are these are qualifiers or order winners.

 Then, the functional strategies need to invest and develop the

capabilities to provide those order winners and qualifiers.
 HOW DEFINING RELEVANT QUALIFIERS AND
ORDER-WINNERS LINKS CORPORATE OBJECTIVES
WITH MARKETING AND OPERATIONS STRATEGIES
STEP 4 PROCESS CHOICE

 Operations can choose from a number of alternative processes to

make particular products.

 The key to this choice is volume and associated order-winners.

 Each choice needs to reflects the current and future trade-offs

involved for the various products and customers.

 The issues embodied in these trade-offs are both extensive and

important.
 STEP 5 INFRASTRUCTURE

 Operations infrastructure consists of the non-process features within

production.

 Covers the procedures, systems, controls, compensation packages,

work structuring alternatives, organizational issues
 T H E A P P ROAC H TO
U N D E R S TA N D M A R K E T

1. Avoid general words and phrases

Each dimensions should be expressed on its own and a single definition
is needs to be associated with each word or phrase used e.g quality –
aspect of design vs quality conformance, delivery – on time vs speed

2. Long list denotes poor strategy process

3. Separate order-winner and qualifiers*

4. Weight order-winner and qualifiers**

Qualifiers*
These criteria get a product into a marketplace or onto a customer’s
shortlist and keep it there. They do not in themselves win orders but
provide the opportunity to compete.

Order-winners**
With qualifiers, you need to match customer’s requirements (as do
competitors), whereas with order-winners, you need to provide them at a
level better than your competitors.
Key points to remember about Qualifiers and Order-winners

Qualifiers are not less important than order-winners, they are

different. Both are important. We need to qualify and re-qualify at all
times to stay on customer’s shortlist. If you are not on the list, you
cannot compete.

Both are time and market specific. They will be different from market
to market and will change over time within a market.

The relevance and importance of both will typically be different to

retain market share, grow share in existing markets and enter new
markets.

The relative importance of both will change when moving from market
driven to market driving
 WEIGHTING ORDER-WINNERS
A N D Q UA L I F I E R S

**

Qualifiers – denoted by Q

Order losing sensitive qualifiers – denoted by QQ

Order losing sensitive will lead to rapid loss of business

Order-winners – the appropriate step here is to allocate 100 points

across all the order-winners within a market.
EXAMPLES
-see the supplementary material

 US graphic company

 European cable-making company

 European engineered sealing system company

 Note

- Market segmentation is a marketing strategy that involves dividing a

broad target market into subsets of consumers who have common
needs
T H E O U T P U T S O F O P E R AT I O N S
S T R AT E G Y
Some possible order-winners and Some typical areas for review and
qualifiers improvement
Price Reduce costs in all area particularly on materials
and overheads (70-90% of total cost)
Quality conformance Makes products to specification QA rather than
QC
Delivery reliability Assess on time delivery performance by
products and customers. Review current
approach to meeting orders.
Delivery speed Review the elements of the operations process
to reduce lead time in various steps of
operations processes
Product range Review the process capability and
skill base

Demand spikes Assess current capacity provision in

terms of the ability to rapidly
increase in line with known or
anticipated changes in demand.
e.g. short term capacity and
inventory holding alternatives

New product- time to market Identify the elements of lead times

for NPD processes e,g. apply
concurrent engineering approach
Meeting specific customer Assess current approaches to
needs identify how standard products can
be modified in line with specific
customer requirements and the
impact on costs , lead times, quality
conformance and the overall
schedule.