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Chapter 2

This document discusses operations strategy and competitiveness. It defines key terms like mission, goals, strategies, and tactics. A mission statement answers "what business are we in?". Goals provide more detail on the mission and scope. Strategies are roadmaps to achieve goals, while tactics are specific methods and actions. The document provides an example of how mission, goals, strategies, and tactics relate for a student wanting a career. Operations strategy relates to products, processes, quality, and costs. It provides a long-term plan for using resources to support competitive strategy. Operations strategy must support business and corporate strategies.

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0% found this document useful (0 votes)
28 views15 pages

Chapter 2

This document discusses operations strategy and competitiveness. It defines key terms like mission, goals, strategies, and tactics. A mission statement answers "what business are we in?". Goals provide more detail on the mission and scope. Strategies are roadmaps to achieve goals, while tactics are specific methods and actions. The document provides an example of how mission, goals, strategies, and tactics relate for a student wanting a career. Operations strategy relates to products, processes, quality, and costs. It provides a long-term plan for using resources to support competitive strategy. Operations strategy must support business and corporate strategies.

Uploaded by

danielnebeyat7
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 15

CHAPTER TWO

OPERATIONS STRATEGY AND COMPETITIVENESS


Introduction
Strategies should be established in light of: (1) the threats and opportunities in the environment
and (2) the strengths and weaknesses of the organization. Ultimately, every strategy is an attempt
to answer the question, “How do we satisfy our customer?” within these constraints.
Mission, goals, strategies and tactics
 Mission is the reason for the existence of an organization. The mission statement should
answer the question “what business are we in?”
 A mission statement serves as the basis for organizational goals, which provide more detail
and describe the scope of the mission.
 Goals serve as a foundation for the development of organizational strategies. Goal is
something that somebody wants to achieve. This in turn, provides the basis for strategies
and tactics of the functional units of the organization.
 Strategies are roadmaps to achieve goals and provide focus for decision making.
 Tactics are the methods and actions used to accomplish strategies. They are more specific in
nature than strategies, and they provide guidance and direction for carrying out actual
operations, which need the most specific and detailed plans and decision-making in an
organization.
We define the organization’s mission as its purpose what it will contribute to society. Mission
statements provide boundaries and focus for organizations and the concept around which the
firm can rally. The mission states the rationale for the organization’s existence. Developing a
good strategy is difficult, but it is much easier if the mission has been well defined.
Strategy
New strategies often result from competitive threats. The new strategy must be made clear and
be understood by employees, and must be supported by operations capabilities in order to work.
Organizations can no longer compete on a single dimension such as low cost, high quality, or
delivery, but must provide all of these (and more!) simultaneously. Operations managers must
put in place a strategy to develop and maintain the operations capabilities to support these
competitive objectives. In essence, strategy is about the ‘how’ of an organization’s aims how it
will go from its current state to its intended future position. With the mission established,

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strategy and its implementation can begin. Strategy is an organization’s action plan to achieve
the mission. Each functional area has a strategy for achieving its mission and for helping the
organization reach the overall mission. These strategies exploit opportunities and strengths,
neutralize threats, and avoid weaknesses. Firms achieve missions in three conceptual ways: (1)
differentiation, (2) cost leadership, and (3) quick response. Operations managers translate these
strategic concepts into tangible tasks to be accomplished. Any one or combination of these three
strategic concepts can generate a system that has a unique advantage over competitors.
Strategies are plans for achieving goals. If you think of goals as destinations, then strategies are
the road maps for reaching the destinations. Strategies provide focus for decision-making.
Generally speaking, organizations have overall strategies called organization strategies, which
relate to the entire organization, and they also have functional strategies, which relate to each of
the functional areas of the organization. The functional strategies should support the overall
strategies of the organization, just as the organizational strategies should support the goals and
mission of the organization.
You might think of tactics as the “how to” part of the process (e.g., how to reach the destination,
following the strategy road map) and operations as the actual “doing” part of the process. It
should be apparent that the overall relationship that exists from the mission down the actual
operations is hierarchical in nature.
Example- Feven is a high school student in Mekelle City. She would like to have a career in
business, have a good job, and earn enough income to live comfortably.
A possible situation for achieving her goals might look something like this:
Mission: Live a good life.
Goal: Successful career, good income.
Strategy: Obtain a university education.
Tactics: Select a university and a major; decide how to finance university.
Operations: Register, buy books, takes courses, study.
 The organization strategy provides the overall direction for the organization. It is broad in
scope, covering the entire organization.
 Operation strategy is narrower in scope, deals primarily with the operations aspect of the
organization. Operations strategy relates to products, processes, methods, operating
resources, quality, cost, lead times, and scheduling. In order for operations strategy to be

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truly effective, it is important to link it to organization strategy; that is, the two should not
be formulated independently.
Operation strategy and Competitive Priorities
Operation strategy is basically a plan for using production resources to support long term
competitive strategy of the organization. Operations strategy is a vision for the operations
function that sets an overall direction for decision making. This vision should be integrated with
business strategy, and is reflected in a formal plan. The operations strategy should result in a
consistent pattern of decision making in operations and a competitive advantage for the
company.
The typical business firm usually considers three types of strategy: corporate, business, and
functional.
1. Corporate strategy describes a company’s overall direction in terms of its general attitude
toward growth and the management of its various businesses and product lines. Strategy is
formulated for organization as whole that deals with decisions related various business areas.
Corporate strategies typically fit within the three main categories of stability, growth, and
retrenchment or reduction of expenditure, economizing. At the highest or corporate level the
strategy provides very general long-range guidance for the whole organization, often expressed
as a statement of its mission
2. Business strategy usually occurs at the business unit or product level, and it emphasizes
improvement of the competitive position of a corporation’s products or services in the specific
industry or market segment served by that business unit. It may be for the organization or at the
strategic business unit level in larger diversified companies. It used to obtain customer base to
sell product at a profit. The business strategy defines how a particular business will compete. The
business finds its own basis of competition depending on particular market segments and
products that it decides to pursue. The business strategies are: low cost producer, product
differentiation, and market segmentation.
There the concern is with the products and services that should be offered in the market defined
at the corporate level. The role of each of the individual functional strategies, such as operations,
finance, and marketing, is to find ways to best support the business strategy. Just as the players
on a football team support the team’s strategy, the role of everyone in the company is to do his or
her job in a way that supports the business strategy. In today’s highly competitive, Internet

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based, and global marketplace, it is more important than ever for companies to have a clear plan
for achieving their goals.
3. Functional strategy is the approach taken by a functional area to achieve corporate and
business unit objectives and strategies by maximizing resource productivity. It includes three
types of strategies (i.e Marketing Strategy-it defines marketing plans to support the business
strategy, Finance Strategy-it develops financial plans to support the business strategy,
Operations Strategy- it develops a plan for the operations function to support the business
strategy). It is concerned with developing and nurturing a distinctive competence to provide a
company or business unit with a competitive advantage.
Business firms use all three types of strategy simultaneously. A hierarchy of strategy is a
grouping of strategy types by level in the organization. Hierarchy of strategy is a nesting of one
strategy within another so that they complement and support one another. Functional strategies
support business strategies, which, in turn, support the corporate strategy(ies).

Corporate strategy

Business strategy

Functional strategy

marketing strategy operations strategy Finance strategy

Figure the three types of strategy: corporate, business, and functional.


The role of operations strategy
Operations strategy is narrower in scope, dealing primarily with the operations aspect of the
organization. Operations strategy relates to products, processes, methods, operating resources,
quality, costs, lead times, and scheduling. The role of operations strategy is
 To provide a plan for the operations function so that it can make the best use of its
resources.
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 Specifies the policies and plans for using the organization’s resources to support its long-
term competitive strategy.
 To provide a long-range plan for the use of the company's resources in producing the
company's primary goods and services.
Remember that the operations function is responsible for managing the resources needed to
produce the company’s products or services. Operations strategy is the plan that specifies the
design and use of these resources to support the business strategy. This includes the location,
size, and type of facilities available; worker skills and talents required; use of technology, special
processes needed, special equipment; and quality control methods. It is the role of operations
strategy to provide an overall plan for the use of all these resources. The operations strategy must
be aligned with the company’s business strategy and enable the company to achieve its long-term
plan.
Operations Strategy in Manufacturing
The main objectives of manufacturing strategy development is to translate required competitive
dimensions (typically obtained from marketing) into specific performance requirements for
operations and to make the plans necessary to ensure that operations (and enterprise) capabilities
are sufficient to accomplish them . The steps for prioritizing these dimensions are as follows:
1. Segment the market according to the product group.
2. Identify the product requirements, and profit margins of each group.
3. Determine the order winners and order qualifiers
4. Convert order winners into specific performance requirements.
The process of achieving a satisfactory manufacturing segmentation that maintains focus is
often a matter of deciding which products or product groups fit together in the sense that they
have similar market performance characteristics or place similar demands on the manufacturing
system.
Operations Strategy in Services
As with manufacturing, service operations require a strategic approach. Metters, King-Metters,
Pullman and Walton describe the strategic planning process as a hierarchy consisting of strategic
positioning, service strategy, and tactical execution.
Strategic positioning involves first defining the firm's target market. In other words, what is the
set of customers the firm seek to serve? Next, the firm must determine its core competence or

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what will distinguish it from other service firms, i.e., cost leadership, differentiation, or focus.
At this point, the firm then must make decisions regarding its mission and high-level goals and
objectives.
At the service strategy level, the service firm must define its service concept, operating system
and service delivery system. The service strategy links the firm's strategic position with tactical
execution. The firm begins by determining its competitive priorities, and its order winners and
order qualifiers. Competitive priorities are the characteristics of the firm or things that it does
better than other service firms (e.g., low cost, quality, service, or flexibility). The firm's
competitive priority(s) must be both an order qualifier and an order winner. The order qualifier
is a characteristic that the service must possess in order to compete in the market. If the firm
lacks this then the consumer will not even consider purchasing the firm's service. The order
winner is the characteristic that will cause the consumer to purchase the firm's service over its
competitors. The service concept then is the set of competitive priorities that the target market
values.
The operating strategy describes how the firm's different functions (marketing, finance, and
operations) will support the service concept. If the firm's order winning competitive priority is
quality, what will operations do to ensure quality of the service and how will marketing promote
this characteristic?
The service delivery system defines the components of the system necessary to execute the
service concept. Examples of the needed variables are capacity requirements, quality
management systems, and management policies. Each of these should support the firm's
competitive priorities so that the firm is clearly distinct from its competitors.
Finally, the firm approaches tactical execution issues. Tactical execution involves the day-to-day
activities required to function and support the service strategy. Included are capacity
management, facility location, inventory management, facility layout, supplier selection,
operations scheduling, staffing, and productivity improvement. However, today multinational
corporations are locating services where they can access highly trained workers at reasonable
costs. Service organizations may choose one of three generic strategies:
1. Customer-oriented focus – providing a wide range of services to a limited range of
customers, using a customer-centered database and developing new offerings to existing
customers.

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2. Service-oriented focus – providing a focused, ‘limited menu’ of services to a wide range of
customers, usually through specialization in a narrow range of services.
3. Customer- and service-oriented focus on providing a limited range of services to a highly
targeted set of customers. Ensuring service quality is a key competitive objective for most
service organizations. Unlike manufacturing, customer contact in services means that both front-
line employees and customers influence the quality and perception of the service. Service
failures occur when the service is unavailable, too slow, or does not meet organizational or
customer standards. Many companies now offer service guarantees as a way of ensuring
customer satisfaction.
Strategies in pure service organization face some difficulties that are often less sever for
manufacturing firms. For example:
There are no inventories to stock pile against fluctuating demands.
Because services are often abstract, pricing policies may be at extreme variance from
costs, and rarely allow a fair compensation between firms.
Because services have high customer contact, the quality of the service is often based on
the perception of the customer.
Services are labor intensive limiting the use of equipment based strategies.
Location is important factor in service.
Personnel are a major part the service process. If they leave, the strategy may be undone.

Operations Competitiveness
Companies must be competitive to sell their goods and services in the marketplace.
Competitiveness: is how effectively an organization meets the needs and wants of customers
relative to others that offer similar products (goods and services).
It is an important factor in determining whether a company prospers, barely gets by, or fails.
Business organizations compete through some combination of price, delivery time, and product
or service differentiation.
Marketing influences competitiveness in several ways, including identifying consumer wants
and needs, pricing, and advertising and promotion.
1. 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.

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2. 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.
3. 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 product and service design, cost,
location, quality, response time, flexibility, inventory and supply chain management, and service.
Many of these are interrelated.
1. 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. Other key factors include innovation and the
time-to-market for new products and services.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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 mix of

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products or services offered by an organization. High flexibility can be a competitive
advantage in a changeable environment.
7. Inventory management can be a competitive advantage by effectively matching supplies of
goods with demand.
8. Supply chain management involves coordinating internal and external operations (buyers
and suppliers) to achieve timely and cost-effective delivery of goods throughout the system.
9. 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.
10. 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.
Competitive Priorities
The operations strategy relates the business strategy to the operations function. It focuses on
specific capabilities of the operation that give the company a competitive edge. These
capabilities are called competitive priorities. By excelling in one of these capabilities, a
company can become a winner in its market. It facilitates the operations strategy to enhance
competitive advantage of firm.
Operations managers must work closely with marketing in order to understand the competitive
situation in the company’s market before they can determine which competitive priorities are
important. There are four broad categories of competitive priorities:
1. Cost:- is a competitive priority focusing on low cost. Competing based on cost means offering
a product at a low price relative to the prices of competing products. The need for this type of
competition emerges from the business strategy. The role of the operations strategy is to develop

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a plan for the use of resources to support this type of competition. Let’s look at some specific
characteristics of the operations function we might find in a company competing on cost. To
develop this competitive priority, the operations function must focus primarily on cutting costs in
the system, such as costs of labor, materials, and facilities. Companies that compete based on
cost study their operations system carefully to eliminate all waste. They might offer extra
training to employees to maximize their productivity and minimize scrap. Also, they might
invest in automation in order to increase productivity. Generally, companies that compete based
on cost offer a narrow range of products and product features, allow for little customization, and
have an operations process that is designed to be as efficient as possible.
2. Quality: is a competitive priority focusing on product and service quality. Quality covers both
the quality of the product/service itself and the quality of the process that delivers the
product/service. Quality means the quality of the product or service as perceived by the
customer. Quality is the value of the product, its prestige, and its perceived usefulness. Quality
can be measured by the ‘cost of quality’ model were costs are categorized as either the cost of
achieving good quality (the cost of quality assurance) or the cost of poor quality products (the
costs of not conforming to specifications). The advantages of good quality on competitiveness
include increased dependability, reduced costs and improved customer service.
Many companies claim that quality is their top priority, and many customers say that they look
for quality in the products they buy. Yet quality has a subjective meaning; it depends on who is
defining it. For example, to one person quality could mean that the product lasts a long time,
such as a Volvo, a car known for its longevity. When companies focus on quality as a
competitive priority, they are focusing on the dimensions of quality that are considered important
by their customers. Quality as a competitive priority has two dimensions. The first is high
performance design. This means that the operations function will be designed to focus on
aspects of quality such as superior features, close tolerances, high durability, and excellent
customer service. The second dimension is product and service consistency, which measures
how often the product or service meets the exact design specifications. A company that competes
on this dimension needs to implement quality in every area of the organization. One of the first
aspects that need to be addressed is product design quality, which involves making sure the
product meets the requirements of the customer. A second aspect is process quality, which deals
with designing a process to produce error-free products. This includes focusing on equipment,

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workers, materials, and every other aspect of the operation to make sure it works the way it is
supposed to. Companies that compete based on quality have to address both of these issues: the
product must be designed to meet customer needs, and the process must produce the product
exactly as it is designed. To see why product and process quality are both important, let’s say
that your favorite fast-food restaurant has designed a new sandwich called the “Big Yuck.” The
restaurant could design a process that produces a perfect “Big Yuck” every single time. But if
customers find the “Big Yuck” unappealing, they will not buy it. The same would be true if the
restaurant designed a sandwich called the “Super Delicious” to meet the desires of its customers.
Even if the “Super Delicious” was exactly what the customers wanted, if the process did not
produce the sandwich the way it was designed, often making it soggy and cold instead,
customers would not buy it. Remember that the product needs to be designed to meet customer
wants and needs, and the process needs to be designed to produce the exact product that was
intended, consistently without error.
3. Time:- is a competitive priority focusing on speed and on-time delivery. Time or speed is one
of the most important competitive priorities today. The time delay or speed of operation can be
measured as the time between a customer request for a product/service and then receiving that
product/service.
Speed is an important factor to the customer in making a choice about which organization to use.
Companies in all industries are competing to deliver high-quality products in as short a time as
possible. Today’s customers don’t want to wait, and companies that can meet their need for fast
service are becoming leaders in their industries. Making time a competitive priority means
competing based on all time-related issues, such as rapid delivery and on-time delivery. Rapid
delivery refers to how quickly an order is received; on-time delivery refers to the number of times
deliveries are made on time. When time is a competitive priority, the job of the operations
function is to critically analyze the system and combine or eliminate processes in order to save
time. Often companies use technology to speed up processes, rely on a flexible workforce to
meet peak demand periods, and eliminate unnecessary steps in the production process.
4. Flexibility:- is a competitive priority focusing on offering a wide variety of products or
services. Flexibility is either the ability to make new products or the time that it takes to change
the volume. As a company’s environment changes rapidly, including customer needs and
expectations, the ability to readily accommodate these changes can be a winning strategy. This is

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flexibility. There are two dimensions of flexibility. One is the ability to offer a wide variety of
products or services and customize them to the unique needs of clients. This is called product
flexibility. A flexible system can quickly add new products that may be important to customers
or easily drop a product that is not doing well. Another aspect of flexibility is the ability to
rapidly increase or decrease the amount produced in order to accommodate changes in the
demand. This is called volume flexibility.
Companies that compete based on flexibility often cannot compete based on speed, because it
generally requires more time to produce a customized product. Also, flexible companies
typically do not compete based on cost, because it may take more resources to customize the
product. However, flexible companies often offer greater customer service and can meet unique
customer requirements. To carry out this strategy, flexible companies tend to have more general-
purpose equipment that can be used to make many different kinds of products. Also, workers in
flexible companies tend to have higher skill levels and can often perform many different tasks in
order to meet customer needs.
Why Not Focus on All Priorities?
You may be wondering why the operations function needs to give special focus to some
priorities and not all. Aren’t all the priorities important? The reason is that as more resources are
dedicated toward one priority, fewer resources are left for others. This is called a trade-off.
Trade-off is the need to focus more on one competitive priority than on others. For example,
XYZ restaurant might be known for making a “home-made” pizza with the freshest ingredients.
However, because of the ingredients they use, they may not be able to offer the pizza at the
lowest price. Also, since they are making each pizza individually, they may not be able to
produce pizzas very quickly. So they have had to make a trade-off.
It is important to know that any business must achieve a basic level of each of these priorities.
In XYZ pizza example, even though they are not competing based on price, they still cannot
offer the pizza at such a high price that customers would not want to pay for it. Also, even
though they are not competing based on time, they still have to produce the pizza within a
reasonable amount of time; otherwise, customers will not be willing to wait for it. To help them
decide which competitive priorities to focus on, we can distinguish between order winners and
order qualifiers. Order qualifiers are those characteristics that potential customers perceive as
minimum standards of acceptability for a product to be considered for purchase. Order

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qualifiers are competitive priorities that must be met for a company to qualify as a competitor
in the marketplace. However, that may not be sufficient to get a potential customer to purchase
from the organization. Order winners are those characteristics of an organization’s goods or
services that cause them to be perceived as better than the competition. Order winners are
competitive priorities that win orders in the marketplace. Characteristics such as price, delivery
reliability, delivery speed, and quality can be order qualifiers or order winners.
Consider a simple restaurant that makes and delivers pizzas. Order qualifiers might be low price
(say, less than $10.00) and quick delivery (say, under 15 minutes), because this is a standard that
has been set by competing pizza restaurants. The order winners may be “fresh ingredients” and
“home-made taste.” These characteristics may differentiate the restaurant from all the other pizza
restaurants. However, regardless of how good the pizza, the restaurant will not succeed if it does
not meet the minimum standard for order qualifiers. Knowing the order winners and order
qualifiers in a particular market is critical to focusing on the right competitive priorities.
It is important to understand that order winners and order qualifiers change over time. Often
when one company in a market is successfully competing using a particular order winner, other
companies follow suit over time. The result is that the order winner becomes an industry
standard or an order qualifier. To compete successfully, companies then have to change their
order winners to differentiate themselves. An excellent example of this occurred in the auto
industry. Prior to the 1970s, the order winning criterion in the American auto industry was price.
Then the Japanese automobile manufacturers entered the market competing on quality at a
reasonable price. The result was that quality became the new order winner and price becomes an
order qualifier, or an expectation. Then by the 1980s American manufacturers were able to raise
their level of quality to be competitive with the Japanese. Quality then became an order qualifier,
as everyone had the same quality standard.
Why Some Organizations Fail
Organizations fail, or perform poorly, for a variety of reasons. Being aware of those reasons 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.

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 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.
The key to successfully competing is to determine what customers want and then directing
efforts toward meeting (or even exceeding) customer expectations. Two basic issues must be
addressed. First: What do the customers want? (Which items on the preceding list of the ways
business organizations compete are important to customers?) Second: What is the best way to
satisfy those wants? Operations must work with marketing to obtain information on the relative
importance of the various items to each major customer or target market. Understanding
competitive issues can help managers develop successful strategies.
Operation Competitive Dimensions
Distinctive competencies- are those special attributes or abilities possessed by an organization
that give it a competitive edge.
The major competitive dimensions that form the competitive position of a company include:
1. Cost “make it cheap”
To successfully compete in niche markets, a firm must be the low cost producer, but even
doing this does not always guarantee profitability and success. It is more applicable when
customers are highly price sensitive, in commodity market.
2. Product quality and reliability ”make it good”
It deals with how customers perceive a product like safety, durability, reliability.
3. Delivery speed “make it fast”
It deals with how long it takes to provide customers with finished products. A company’s
ability to deliver more quickly than its competitors may be critical. Example, rapid delivery
Mc Donald restaurant, express mail.
4. Delivery reliability” delivered it when promised”

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It deals with how likely delivery is happening as expected. Relates to the ability of the firm to
supply the product or services on or before promised delivery due date. Example, express
mail.
5. Coping with changes in demand “change its volume”
The ability of the firm to respond to increases and decreases in demand.
There are two types of changes in demand
 Increase in demand: preferable than decrease in demand because, unit cost
decreases as output level increases due to economies of scale.
 Decrease in demand: challenging (difficult) because, it affects social welfare of
employees, laying off, early retirement, there will be idle resources, and the like.
6. Flexibility and new product introduction “change it”
It is how easily company can react to demand change. It focuses on fashion design. The
time required for the company to develop a new product and to convert its process to offer
the new product is very important. Flexibility is the ability of a company to offer a wide
variety of products to its customers. Flexibility is more applicable when the product life
cycle is short.
7. Other product specific criteria “support it”
Greater warranty, installation, after sale service, financing, maintenance

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