Chapter 2(test book)

Why does an organizations need to measures performance?

Performance measurement for evaluation: A clear reason to measure performance is to understand how
effectively the organization is achieving its goals. While this might be a legal obligation for most groups, it
would be quite uninterested to not care about its own performance.

Performance measurement for control: If a group has a plan for what it wants to do, it must have thought
about how to do it. This means it should keep an eye on how well the plan is going, and that's why it's
important to measure how things are moving forward and how well they are being done.

Performance measurement for resource allocation: Performance measurement can help managers to
make budget allocations. When resources are being allocated between parts of an operation, or between
projects, they may be allocated based on performance. This could be done either to reward better-than-
expected performance, or as an attempt to rectify poor performance.

Performance measurement for internal accountability – Performance targets or goals are frequently set
as a motivator for individual managers, or parts of an organization. The measurement of progress toward
the targets provides essential feedback, and focuses efforts on reaching the targets.

Performance measurement for external accountability – Private companies have external shareholders,
public bodies have political leaders or legislators, charities have stakeholders, and all organizations have
groups to whom they are accountable. Performance measures are needed to reveal how external
stakeholders should view an organization’s efforts.

Performance measurement for learning and improvement: If there's no proper way to measure
performance, it's hard to know which strategies are successful. If we don't know what's effective and
what's not, we can't learn. And if we can't learn, getting better is just luck. Many experts say that measuring
performance isn't the main goal. It should be used by managers to make things better.

Illustrate Hayes and Wheelwright’s four-stage model of operations contribution?

Stage 1: Internal neutrality: This is the very poorest level of contribution by the operations function The
operations function is focused on meeting basic internal requirements, such as cost, quality, and
delivery. There is little focus on using operations to create a competitive advantage. Its vision is to
be ‘internally neutral’, a position it attempts to achieve not by anything positive but by avoiding the bigger
mistakes.

Stage 2: External neutrality – The operations function begins to benchmark its performance against
competitors. There is still no focus on using operations to create a competitive advantage, but the
operations function is starting to see the importance of being at least as good as its competitors.
Its vision is to become ‘up to speed’ or ‘externally neutral’ with similar businesses in its industry by
adopting ‘best practice’ ideas and norms of performance from others.
Stage 3: Internally supportive – Stage 3 operations have probably reached the ‘first division’ in their
market. They may not be better than their competitors on every aspect of operations performance, but
they are broadly up with the best. The operations function is aligned with the overall business
strategy. Operations is used to support the business strategy by providing capabilities such as
flexibility, quality, and cost-effectiveness. The operation is trying to be ‘internally supportive’ by
providing a credible operations strategy.

Stage 4: Externally supportive –A Stage 4 company is one where the vision for the operations function is
to provide the foundation for competitive success. Operations looks to the long term. It forecasts likely
changes in markets and supply, and, over time, it develops the operations-based capabilities that will be
required to compete in future market conditions. The operations function is becoming central to strategy
making. The operations function is a key driver of the business strategy. Operations is used to
create a competitive advantage by providing capabilities that competitors cannot match.
Essentially, they are trying to be ‘one step ahead’ of competitors in the way that they create products and
services and organise their operations – what the model terms being ‘externally supportive’.

How is operations performance judged at a societal level?

Corporate social responsibility: CSR, which stands for Corporate Social Responsibility, is all about how a
business looks at the effects it has on the economy, society, and the environment. It's like a company
thinking about the good and not-so-good things it does while running its operations. The main idea is to
make the good stuff as big as possible and the not-so-good stuff as small as possible.

CSR goes beyond just doing the minimum legal stuff. It's when a company does extra things on its own to
make things better for everyone. This helps the company do well in competition, but also makes the world
a better place.

One important thing in CSR is listening to and helping the people who care about the company, like its
workers, the people it buys things from, and the community around it. This also includes thinking about
how to keep the planet healthy. Doing this helps the company be successful for a really long time.

So, CSR means a company trying to be good for business and good for everyone else too.

Triple bottom line : One common term that tries to capture the idea of a broader approach to assessing
an organisation’s performance is the ‘triple bottom line’4 (TBL, or 3BL), also known as ‘people, plant and
profit’.

1. People: Some ways that operations can impact the social bottom line performance include the
following:
 ● customer safety from products and services;

● employment impact of an operation’s location;

● employment implications of outsourcing;

● repetitive or alienating work;

● staff safety and workplace stress;

● non-exploitation of developing country suppliers.

2. planet: Some ways that operations can impact the environmental bottom line performance include the
following:

● recyclability of materials, energy consumption, waste material generation;

● reducing transport-related energy;

● noise pollution, fume and emission pollution;

● obsolescence and wastage;

● environmental impact of process failures;

● recovery to minimize impact of failures

3. profit: Some ways that operations can impact the financial bottom line performance include the
following:

● cost of producing products and services;

● revenue from the effects of quality, speed, dependability, and flexibility;

● effectiveness of investment in operations resources;

● risk and resilience of supply;

● building capabilities for the future.

How is operations performance judged at a strategic level?

At the strategic level, operations measures tend to be aggregated from, and strongly influenced by, the
operational measures. These aggregated measures are cost, revenue, the use of capital, risk and the
operations ability to build capabilities.
Operation affects costs: it might seem really obvious, but all the things operations managers do regularly
(and all the stuff talked about in this book) have an impact on how much it costs to make things or provide
services. It's pretty clear that how well an operation gets the things it needs and turns them into what it
sells decides how much its products or services will cost. And for a lot of operations managers, this is the
big thing they care about when they check how well they're doing. Actually, there probably aren't many,
or maybe even none, organizations that don't care about how much they spend.

Operations affects revenue – Yet cost is not necessarily always the most important strategic objective for
operations managers. Their activities also can have a huge effect on revenue. High quality error-free
products and services, delivered fast and on time, where the operation has the flexibility to adapt to
customers’ needs, are likely to command a higher price and sell more than those with lower levels of
quality, delivery and flexibility. And operations managers are directly responsible for issues such as quality,
speed of delivery, dependability and flexibility.

Operations affects the required level of investment – How an operation manages the transforming
resources that are necessary to produce the required type and quantity of its products and services will
also have a strategic affect. If, for example, an operation increases its efficiency so that it can produce (say)
10 per cent more output, then it will not need to spend investment (sometimes called capital employed)
to produce 10 per cent more output. Producing more output with the same resources (or sometimes
producing the same output with fewer resources) affects the required level of investment.

Operations affects the risk of operational failure – Operational failure refers to situations where an
organization's processes, systems, or activities fail to deliver the expected outcomes, leading to
disruptions, financial losses, damage to reputation, and potential harm to employees or
customers. Well-designed and well-run operations should be less likely to fail. That is, they are more likely
to operate at a predictable and acceptable rate without either letting customers down or incurring excess
costs. And if they ever do suffer failures, well-run operations should be able to recover faster and with less
disruption (this is called resilience).

Operations management affects of learning – Operations managers have a unique opportunity to learn
from their experience of operating their processes in order to understand more about those processes.
This accumulation of process knowledge can build into the skills, knowledge and experience that allows
the business to improve over time. But more than that, it can build into what are known as the ‘capabilities’
that allow the business to innovate in the future.
How is operations performance judged at an operational level?
Because operations strategy is always concerned with addressing customers’ needs, at the operational
level the focus is primarily on the five generic performance objectives of quality, speed, dependability,
flexibility and cost.

Quality: Many definitions of quality refer to the ‘specification’ of a product or service. Quality can also
mean appropriate specification, meaning that the products and services are ‘fit for purpose’; they do what
they are supposed to do. ‘Fit-forpurpose’ quality includes two concepts that are far more usefully treated
separately. One is the level of the product or services specification; the other is whether the operation
achieves conformance to that specification. Specification quality is also a multidimensional issue.
Conformance quality is more a concern of the operation itself. It refers to the operation’s ability to produce
goods and services to their defined specification reliably and consistently.

Speed: At its most basic level, speed indicates the time between the beginning of an operations process
and its end. It is an elapsed time. This may relate to externally obvious events; for example, from the time
when the customer requests a product or service to the time when the customer receives it. Or, it may be
used internally in the operation; for example, the time between when material enters an operation and
when it leaves fully processed. As far as operations strategy is concerned, we are usually interested in the
former. Part of this elapsed time may be the actual time to ‘produce the product or service’ (the ‘core’
processing time). It may also include the time to clarify a customer’s exact needs (e.g. designing a product
or service), the ‘queuing’ times before operations resources become available and, after the core
processing, the time to deliver, transport and/or install the product or service.

Dependability: The term ‘dependability’ is here used to mean keeping delivery promises – honouring
the delivery time given to the customer. It is the other half of total delivery performance, along with
delivery speed. The two performance objectives are often linked in some way. dependability is a
straightforward concept:

Dependability = due delivery time - actual delivery time.

Flexibility: The word ‘flexibility’ means two different things. One dictionary definition has flexibility
meaning the ‘ability to be bent’. It is a useful concept, which translates into operational terms as the ability
to adopt different states – take up different positions or do different things. So, one operation is more
flexible than another if it can do more things – exhibit a wide range of abilities.

considering the types of flexibility that would contribute to its competitiveness. For example:

● product or service flexibility – the ability to introduce and produce novel products or services or to
modify existing ones;

● mix flexibility – the ability to change the variety of products or services being produced by the operation
within a given time period;

● volume flexibility – the ability to change the level of the operation’s aggregated output;

● delivery flexibility – the ability to change planned or assumed delivery dates.

Cost: Cost is here treated last, not because it is the least important performance objective, but because it
is the most important. To companies that compete directly on price, cost clearly will be their major
performance objective. The lower the cost of producing their products and services, the lower can be the
price to their customers. Yet, even companies that compete on things other than price will be interested
in keeping their costs low.

Does the relative importance of performance objectives vary over

time?
Yes, usually. Markets change, and the capabilities of operations resources develop over time. Therefore,
not only does operations strategy change, the relative importance of its performance objectives will
change.

1. Changes in the firm’s markets – the product/service life cycle influence on performance

Introduction stage: When a product or service is first introduced, it is likely to offer something new in
terms of its design or performance. Few competitors will offer the same product or service and, because
the needs of customers are not perfectly understood, the design of the product or service could frequently
change. Given the market uncertainty, the operations management of the company needs to develop the
flexibility to cope with these changes and the quality to maintain product/service performance.

Growth stage As the volume of products or services grows, competitors start to develop their own
products and services. In the growing market, standardised designs emerge. Standardisation is helpful in
that it allows the operation to supply the rapidly growing market. Keeping up with demand could prove to
be the main operations preoccupation. Rapid and dependable response to demand will help to keep
demand buoyant, while ensuring that the company keeps its share of the market as competition starts to
increase. Also, increasing competition means that quality levels must be maintained.

Maturity stage Eventually, demand starts to level off. Some early competitors will have left the market and
a few larger companies will probably dominate the industry. The designs of the products or services will
be standardised and competition will probably emphasise price or value for money, although individual
companies might try to prevent this by attempting to differentiate themselves in some way. So, operations
will be expected to reduce costs in order to maintain profits or to allow price cutting, or both. Because of
this, cost and productivity issues, together with dependable supply, are likely to be the operation’s main
concerns.

Decline stage After time, sales will decline, and competitors will start dropping out of the market. To the
companies left there might be a residual market, but if capacity in the industry lags demand, the market
will continue to be dominated by price competition. Operations objectives will therefore still be dominated
by cost.

2. Changes in the firm’s resource base

At other times the focus for change may be within the resources and processes of the operation itself.
New technologies may require a fundamental rethink of how operations resources can be used to provide
competitive advantage. Internet-based technologies, for example, provided opportunities for many retail
operations to shift, or enhance, market positioning.

Do operations performance objectives trade-off against each

other?
Yes, operations performance objectives often trade-off against each other. This is
because there is no single objective that can be maximized without affecting the others.
For example, increasing the speed of production may lead to a decrease in quality, and
increasing flexibility may lead to an increase in cost.

The following are the five main operations performance objectives:

• Quality: This refers to the degree to which a product or service meets or exceeds
customer expectations.
• Speed: This refers to the time it takes to produce or deliver a product or service.
• Dependability: This refers to the ability to meet customer demand on time and in
full.
• Flexibility: This refers to the ability to adapt to changes in demand or production
requirements.
• Cost: This refers to the resources used to produce or deliver a product or service.

The relative importance of each objective will vary depending on the specific
organization and its customers. For example, a company that produces high-end
products may place a higher emphasis on quality than a company that produces low-
cost products.

When setting operations performance objectives, it is important to consider the trade-

offs between the different objectives. For example, a company may need to decide
whether to focus on increasing quality or reducing cost. There is no right or wrong
answer, and the best decision will vary depending on the specific situation.

Here are some examples of trade-offs between operations performance objectives:

• Quality vs. cost: Increasing quality often leads to an increase in cost. This is
because it may require using higher-quality materials or more skilled workers.
• Speed vs. dependability: Increasing speed often leads to a decrease in
dependability. This is because it may be more difficult to meet customer demand
on time if production is rushed.
 • Flexibility vs. cost: Increasing flexibility often leads to an increase in cost. This is
because it may require having more equipment or workers on hand to handle
unexpected changes in demand.

The best way to manage trade-offs between operations performance objectives is to

understand the specific situation and make informed decisions based on the
organization's goals and priorities.

What are the advantages and disadvantages of focused operations?

Focused operations is a strategy in which a company focuses its resources on a specific market
segment or product line. This can be done to gain a competitive advantage by becoming an expert
in a particular area or to reduce costs by focusing on a smaller number of products or customers.
Advantages of focused operations:
1. Clarity of performance objectives – Clearly targeted markets imply at least some degree of
discrimination between market segments. This, in turn, makes easier the task of prioritising those
few performance objectives that are important for that market. This allows operations managers
to be set relatively unambiguous and non-conflicting objectives to pursue in their day-to-day
management of resources.
2. Developing appropriate resources – A narrow set of focused resources allows those resources to
be developed specifically to meet the relatively narrow set of performance objectives required by
the market. Process technologies, skills and infrastructural resources can all be organised to trade-
off unimportant aspects of performance for those valued by the target market.
3. Enhanced learning and improvement – A combination of clear objectives, together with
resources organised to meet those objectives, can enhance an operation’s ability to manage its
learning and improvement of its processes. Certainly, the opposite holds true. Broad and/or
confused objectives, together with complex resource structures, make it difficult to build process
knowledge, learn how to extend the capabilities of processes or thereby improve their
performance.

Disadvantage of focused operations:

1. Limited growth: A focused operations strategy can limit a company's growth
potential. This is because the company is only able to grow by expanding its
market share in the niche market that it is focused on.

2. Significant shifts in the marketplace – Although less common than ‘scare stories’ often suggest, a
dramatic shift in the overall competitive environment can undermine the effectiveness of a focus
strategy.
3. Few economies of scale: In a business, focusing often means taking things apart that used
to be together. This helps to make those things better for the specific group of people
they're meant for. But because they're not part of a big package anymore, they might not
be as efficient in terms of saving money as they used to be.
4. Structural vulnerability – Combine the two risks above and any focused set of resources may
be structurally vulnerable. Relatively minor changes in market requirements may destroy the
benefits of being close to a market while, at the same time, there are few economies of scale to
protect their viability
 Chapter 1( global reference book)
(Basic Concepts of Global Operations Strategy)

what is manufacturing strategy and explain four

stages of manufacturing strategy?

Manufacturing strategy is a long-term plan that outlines how a company will produce its
products or services. It takes into account the company's overall business strategy, the
specific needs of its customers, and the competitive landscape.

The four stages of manufacturing strategy are:

1. Internally neutral: In this stage, the manufacturing function is not a major source
of competitive advantage or disadvantage. The company is focused on making
sure that its manufacturing operations are efficient and effective, but it is not
using them to differentiate itself from its competitors.
2. Externally neutral: In this stage, the company is starting to use its
manufacturing operations to compete on a more strategic level. It may be
investing in new technologies or processes to improve its efficiency or flexibility.
3. Internally supportive: In this stage, the manufacturing function is playing a key
role in supporting the company's overall business strategy. The company is using
its manufacturing operations to achieve its goals in areas such as cost, quality,
delivery, and flexibility.
4. Externally supportive: In this stage, the manufacturing function is a key source
of competitive advantage for the company. The company is using its
manufacturing operations to differentiate itself from its competitors and achieve a
sustainable competitive advantage.

The specific manufacturing strategies that a company adopts will vary depending on its
industry, its products, and its customers. However, all manufacturing strategies should
be aligned with the company's overall business strategy and should be designed to help
the company achieve its goals.
write the distinction between product and service following four
aspects?

here are the four aspects of the distinction between products and services, following
inseparability and simultaneity, heterogeneity, intangibility, and perishability:

• Inseparability and simultaneity: Products are produced and then consumed.

Services are produced and consumed simultaneously. This means that the
service provider and the customer must interact in order for the service to be
delivered. For example, when you get a haircut, the hair stylist must be there to
cut your hair. You cannot get a haircut without the hair stylist.
• Heterogeneity: Products are relatively homogeneous, meaning they are all the
same. Services are heterogeneous, meaning they vary from one provider to
another. This is because services are produced and delivered by people, and
people are different. For example, two haircuts from different hair stylists may be
different.
• Intangibility: Products are tangible, meaning they can be seen, touched, and
felt. Services are intangible, meaning they cannot be seen, touched, and felt.
This makes it difficult for customers to evaluate services before they buy them.
For example, you cannot try out a haircut before you buy it.
• Perishability: Products can be stored for later use. Services cannot be stored for
later use. This is because services are produced and consumed simultaneously.
For example, you cannot buy a haircut and save it for later.

In addition to these four aspects, there are other ways to distinguish between products
and services. For example, products are typically sold, while services are typically
delivered. Products are also typically paid for in advance, while services are typically
paid for after they are delivered.

The distinction between products and services is important for businesses to

understand because it affects how they market, sell, and deliver their offerings. For
example, businesses that sell products need to focus on creating a strong brand and
ensuring that their products are available in the right places. Businesses that deliver
services need to focus on building relationships with their customers and ensuring that
their services are delivered in a timely and efficient manner.
write three types of services categories by lovelock and
yip?
here are three types of service categories:

• People-processing services: customers are integrated with production

processes. These services involve the physical or mental transformation of people.
Examples of people-processing services include education, health care, and
tourism.
• Possession-processing services: This type refers to customer involvement with
the production process without directly following production, via tangible actions to
a service object to improve the value. These services involve the physical
transformation of possessions. Examples of possession-processing services
include transportation, repair, and waste disposal.
• Information-processing services: It refers to creating value by collecting,
processing and transferring information. These services involve the transformation
of information. Examples of information-processing services include banking,
insurance, and consulting.

Explain four elements of service packages?

1. Supporting facility: The supporting facility refers to the physical environment in which the
service is delivered and where customers interact with service providers. This element includes
the tangible aspects of the service environment that contribute to the overall customer
experience. This consists of physical resources that support the service; for example, a building for a
restaurant, a swimming pool, a warehouse for public storage.

2. Facilitating goods: Facilitating goods are the tangible items that accompany the service and
enhance its delivery or consumption. While the core service is intangible, facilitating goods
are physical products that assist in the service process. These goods can make the service
more effective, efficient, or convenient. These are goods consumed or used by customers; for
example, towels and shampoo in a hotel.

3. Explicit service: Explicit services are the core benefits or features that customers explicitly
seek when they purchase a service. These are the primary reasons why customers engage with
the service provider. Explicit services are the primary value proposition offered to customers.
These are benefits quickly noticed by customers and are the intrinsic or essential features of a service:
for example, the accommodation and feeding of customers in a hotel, and surgery in a hospital.
 4. Implicit services: Implicit services refer to the underlying features, qualities, or benefits that
are not explicitly stated but are expected by customers as part of the service experience. These
aspects may influence customer perceptions and overall satisfaction. These are benefits sensed
by customers vaguely – extrinsic features ancillary to service. Examples include the romantic
atmosphere in a bar.

write four competitive service strategy framework?

(An outcome/ experience competitive service strategy framework)

here are four competitive service strategy frameworks:

1. Customer outcome-oriented service strategy: This strategy focuses on

understanding the needs of customers and then designing services that meet
those needs. The goal is to create a positive customer experience that leads to
repeat business and positive word-of-mouth.
2. Customer experience-oriented service strategy: This strategy focuses on creating
a memorable and enjoyable customer experience. The goal is to make
customers feel valued and appreciated, and to encourage them to come back for
more.
3. Less competitive service strategy: This strategy focuses on avoiding competition
by targeting a niche market or by offering a unique service. The goal is to
differentiate the business from its competitors and to create a sustainable
competitive advantage.
4. Total competitive service strategy: This strategy combines the elements of the
other three strategies. The goal is to create a service that is both customer-
oriented and competitive.

Elaborate the four stages of service strategy development? Or

Write Roth and van der Velde competitive service strategy

framework?
1. Revolving door At this stage, just like a “revolving door”, operations make little value-added
contribution to service delivery. Relative degree of importance to customers is low and relative size
of competitive gap is small.

2. Minimum daily requirement In this strategy, the critical success factors are highly important for
customers but display small capability gaps among competitors. The corporation just maintains
parity with competitors.
 3. Gateway The gateway capabilities provide service differentiation to enhance the market
attractiveness of service. The term “gateway” is used to describe a strategy to attract new customers
to enter service systems. This is a strategy which is perceived by the majority as less important, but
can display large competitive gaps. Given appropriate implementation policies, this strategy can win
the competitive edge in the long term.

4. Golden handcuff “Golden handcuff” is used to describe a strategy to hold long-term customer
loyalty. In this strategy, the success factors are not only perceived to be important by customers, but
also create a large competitive gap.

What is operation strategy? Describe three capabilities of operation

strategy by Hyes and Upton?
Operation strategy refers to the set of plans and decisions that guide how an
organization's operational resources are utilized to achieve its overall business objectives.
t involves decisions based on multiple factors, including product management, supply
chain, inventory, forecasting, scheduling, quality, and facilities planning and
management.

The goal of an operations strategy is to align the organization's operations with its overall
business strategy. This means making decisions that will help the organization achieve
its long-term goals, such as increasing profits, improving customer service, or expanding
into new markets.

Hayes and Upton (1998) identify three operating capabilities which are helpful to understand
operations strategy.

• Process-based operating capacity This is a type of capacity to achieve operating advantage,

including low cost and high quality, during the process of transferring material or information to
a product or service.

• Coordination-based operating capacity This is a type of capacity to achieve operating

advantages, such as short lead times, product and service ranges, and customization, through
coordination excellence throughout the entire operating system.

• Organization-based operating capacity This is a type of capacity to introduce new technology,

design new products, and build new facilities faster than competitors.
What is global operations strategy? Describe global
operations strategy from three perspectives proposed by
Van mieghem?

A global strategy is a strategy that a company develops to

expand into the global market. The purpose of developing a
global strategy is to increase sales across the world. The term
"global strategy" includes standardization, and international
and multinational strategies. Developing a global strategy can
benefit your company in many ways, including making sales in
new markets, increasing your global brand awareness and more.

There are three perspectives proposed by van mieghem:

Competency-based global operations strategy: In this view, managers consider

competency in global competition in terms of cost, time, quality, and flexibility,
among other competencies. In a global environment, the competency is often
achieved through the competitive advantage based on comparative advantages
of countries (see Kogut, 1985a). First of all, flexibility competency is vital for the
multinational corporation, which is a network of activities located in different
countries, benefiting from the coordination of subsidiaries. Kogut and Kulatilaka
(1994) model this coordination as the operating flexibility to shift production
between two manufacturing plants located in different countries. The value of
operational flexibility is usually relative to exchange rate risks.

Second, in a global setting, quality problems in outsourcing are paid high

attention.

Third, via outsourcing manufacturing and service, a corporation can achieve cost
advantage with global operations.

Fourth, global operations impose higher requirements regarding time

competency. Finally, in a global setting, a company may pursue other
competencies like uniqueness, availability, and ubiquity.
Resource-based global operations strategy: Here managers mainly consider how to
develop a bundle of real assets or resources. Typical resource-based problems include
capacity size problems, capacity investment and expansion time problems, resource-type
problems, and resource location problems. Global capacity strategy is an important topic.

Process-based global operations strategy: Managers mainly configure the global

activity network or processes, including the supply process, technology management process,
demand and revenue management process, and innovation processes. First, global sourcing,
global supply chain, and global purchasing are important business processes. Second, risk
management and operational hedging is an active topic in process-based global operations
strategy. Finally, the innovation process plays a critical role in a global environment
what is international operations management? Write
difference between IOM and Global operations strategy?

IOM is a set of activities of an international organization seeking to transform kinds

of inputs into final good and services. International operations management refers
to the set of activities and strategies that organizations employ to manage their
operations across different countries and regions. There are two dimension of IMO
• Topic ( Location, Technology, capacity etc.)
• Scope ( Mono-country, Cross-country, Global Studies)
the differences between International Operations Management (IOM) and Global
Operations Strategy, focusing on the distinctions between internationalization and
globalization, as well as the differences between operations management and
operations strategy:

1. Internationalization and Globalization:

International Operations Management (IOM): This term refers to managing

operational activities in multiple countries or regions while recognizing and
adapting to the unique characteristics of each location. It involves dealing with
cross-border trade, supply chain complexities, regulatory variations, and cultural
differences.
Global Operations Strategy: This concept emphasizes creating a unified strategy
that leverages a global presence to achieve competitive advantage. It involves
decisions about where to position operations, how to coordinate activities across
regions, and how to innovate on a global scale. It looks at the organization as a
whole on the global stage.
2. Operations Management and Operations Strategy:

Operations Management: This is concerned with the day-to-day execution and

supervision of operational processes within an organization. It involves tasks like
production scheduling, inventory management, quality control, and resource
allocation. Operations management aims to ensure that processes run efficiently
and effectively to meet customer demands.
Operations Strategy: Operations strategy is a higher-level perspective that involves
making long-term decisions about how operational resources will be used to
support the organization's overall business strategy. It's about designing the
broader framework within which operations will operate, considering factors like
capacity planning, technology integration, and process improvement.

Describe the Basic Principles in Global Operations Strategy?

▪ Global Integration Principle
▪ Global Coordination Principle
▪ Global Trade-off principle
▪ Global Focus principle.

Global Integration Principle: In order to win competitive advantage

and achieve corporation’s goals integration of business strategy and
operation strategy is a must.
Global Coordination Principle: The complexity and difficulty of coordination
are associated with global strategy and organizational structure. Young and John
summarize five
strategies with an international organization structure:
• Volume expansion
• Resource Acquisition
• Reciprocity
• Integration
• Complex Global

Global Trade-off Principle: Five decision fields which manager may need to
make a trade-off among:
• Plant & equipment
• Production planning and control
• Labor and staffing
• Product Design and
• Operations management

Global Focus Principle: An unfocused strategy may make corporations

noncompetitive. The concept of focused manufacturing suggests that – a factory
that focuses on a narrow product mix for a particular market niche will outperform
the conventional plant, which attempts a broader mission.
The key characteristics of the focused factory are –
-Focused process technologies
-Focused market demand
-Focused product volume
-Focused quality levels
-Focused manufacturing tools

We identify the following different geographic focus strategies:

• Product/service focused strategy. Focus on a narrow range of products or service, but access to multiple
locations – even to the world.

• Location focused strategy. Focus on a narrow range of locations, but offer a bundle of products or service
packages

Product/service and location focused strategy. Focus on a narrow range of products or services in one or
few locations.

• Unfocused strategy. Offer a bundle of products or service worldwide.

Describe Young and John summarize five strategies with an

international organization structure?

Here Young and John summarize five strategies with an international

organization structure:
• Volume expansion
• Resource Acquisition
• Reciprocity
• Integration
• Complex Global
Volume Expansion: The coordination between product and outbound
logistic and order management coordination increases.
Resource Acquisition: To assure reliable availability of materials for use
in domestic manufacture the corporation maty build a foreign subsidiary.
Reciprocity: In this mode, the coordination between product and
inbound logistics and purchasing management coordination increases.
Integration: In this strategy operations are fully integrated. The
complexity and difficulty of coordination among demand and order
management, purchasing, manufacturing and logistics are high.
Complex Global: A complex interdependence consisting of collaborative
problem solving, resource sharing and information sharing.

Describe Basic Decisions in Global Operations Strategy?

There are two types of basic decision
➢ Structure decision
➢ Infrastructure decision

Structure decisions:
1. Vertical Integration: Vertical integration refers to the degree to which a
corporation controls its downstream suppliers and its upstream buyers.
Vertical integration is effective in achieving economies of scale. But it may
lead to higher internal coordination costs, weaker motivation for good
performance, and a rigid organizational structure.

2. Manufacturing Process: A corporation needs to make a decision

between high volumes of homogeneous product and low volumes of
differentiated product. A product-process matrix is suggested to examine
market-manufacturing congruence problem and to help manufacturing
process decisions.

3. Facility Design and Planning: Facility design and planning is a set of

strategic decisions involving irreversible and substantial investment.
➢ Facility Location Problem
➢ Facility Layout Problem
 4. Factory Capacity: It usually takes a long time to change the manufacturing
capacity or service capacity of a corporation.
➢ Capacity refers to both the quantity and variety of products or
services.
➢ There are three basic capacity strategies:
• Lead capacity strategy
• Lag capacity strategy
• Match capacity strategy

Infrastructure Decisions:
1. Quality Management: Quality as one of the major areas in which
corporation can seek a competitive advantage in manufacturing.
• Quality strategy is beyond control and management technologies like
statistical process control and DMAIC (design, measure, analysis,
improve, control).
• Some existing quality improvement methodologies are- quality
control, TQM (total quality management), Zero Defects, Six sigma.

2. Production and Inventory Planning: This is a huge decision set, and only a
part of decisions in production and inventory planning can impose long-run
strategic influence.
• Push Strategy vs Pull Strategy
• Centralization vs Decentralization of manufacturing or service

3. Workforce: Vital to formulate a global work force strategy.

• Aligning both business strategy and employees’ personal expectation.
 • Advantage of global operations rests on the potential opportunities to
utilize comparative advantages of human resources in different
locations.

Chapter 2 ( Reference book)

(Globalization of operation)
What is Globalization of a firm? Define the five approaches of
globalization?
Globalization of a firm refers to the process through which a company expands its operations,
presence, and influence on an international scale. This involves various strategies and activities
that allow the firm to operate in multiple countries and markets, transcending national
boundaries. Globalization enables companies to access new markets, customers, resources, and
opportunities, leading to increased growth, competitiveness, and potential for higher profits.
We present the following five approaches.
• Acquisition: A firm can enter market by acquiring an existing firm or a business unit. For
example, Lenovo entered the US market by acquiring the personal computer unit of IBM.
• Internal development: A firm can enter a market organically through internal development and
build wholly owned subsidiaries. For example, Microsoft built Microsoft Research Asia in Beijing.
• Joint venturing: A firm can enter a market by setting up a joint venture with another existing
firm.
• Licensing: A firm can enter a market through a licensing agreement with other existing firms.
Some global hotel chains and fast food chains will adopt this approach for going global.
 • Partnership (excluding joint ventures and licensing): A firm can enter a market through a long-
term supplier relationship. Huawei is selected as a preferred supplier and signs a global
framework agreement with Vodafone. Airlines go global by building huge global alliances such as
SkyTeam.

Define the globalization stages?

Globalization stages
Uppsala Globalization stages:
• No regular export activities.
• Export via agents.
• Establishment of foreign sales subsidiary.
• Foreign production and manufacturing units.
The product life cycle theory:
• New product. US firms are likely to be the first to develop new products with more flexibility in
the introduction stage.

• Maturing product. Firms try to achieve economies of scale through mass production with a degree
of product standardization, and expand products in other developed countries.

• Standardized product. Firms enter developing countries with standardized products.

What is globalized manufacturing? Describe key operational elements

of globalization?
Globalized Manufacturing:
The diminution of international trade regulations and free trade agreements
facilitates manufacturing. New communication and transportation technologies,
and decreasing tariffs and taxes stimulate the development of global
manufacturing. In the case of BMW Global Manufacturing. Globalized manufacturing is
the practice of sourcing raw materials, components, and labor from different countries to produce
a finished product. This can involve breaking down the production process into multiple stages
and performing each stage in a different location where it can be done most efficiently or cost-
effectively.

Key Operational Elements:

Several operational elements are important for the success of global
manufacturing.
Total landed cost: When making decision in manufacturing globalization, particularly a decision on
manufacturing locations, a firm should consider not only manufacturing cost, but total landed cost (TLC),
the total end-to-end costs from inputs to product outputs with customers. TLC incorporates all the costs
incurred in a supply chain to make the products available for customers, including manufacturing costs,
transportation, inventory costs, trade costs, insurance, duties, and taxes, among others. TLC enables
companies to capture both explicit and hidden costs associated with manufacturing relocation, revealing
the true cost of global manufacturing activities like sourcing. The low cost competency of global
manufacturing cannot be simply measured by manufacturing cost, but can by TLC.

Global quality control: Globalization of quality control is driven by global quality standard, and
standardized inputs have matured globalization processes.

Global production planning In global manufacturing, product planning is globalized. Different sources and
location-specific comparative advantages can determine manufacturing locations of different components
even for one product. Global production planning is complicated and will increase the difficulty of
manufacturing management. Efficient information and communications system can improve the
performance of global production planning.

Global technology innovation: Global manufacturing needs continual innovation to sustain its competitive
position in the future. While global manufacturing from developed countries to developing ones is
typically supported by advanced technologies, global manufacturing from developing countries to
developed ones may seek technological resources in global manufacturing.

Global workforces Globalization brings about the mobility of workers and job seekers across the world in
a volume unprecedented in history. Global workforce management comprises several areas such as
recruitment, selection, and formation processes, person-to-job assignation, pay systems and incentive
policies, and job performance evaluation, considering both competitive and comparative advantages. One
of the major challenges is to find the right skills in the labor forces and managers. Another important
challenge rests on the definition of that human resource policy that aligns a firm’s global operations,

Describe basic manufacturing globalization modes?

Classified along two dimensions -

1. Control Level
• Wholly Owned production units with the strongest control
• Joint Venturing Manufacturing Units
• Outsourcing with the least control on manufacturing activities
2. Motivations of International Production
• Resource Seeking: A primary motivation for global manufacturing of a home-country firm is
to gain access to certain resources in a foreign country, including natural resources (e.g., minerals
and raw materials) or human resources like inexpensive

• Market Seeking: A firm will adopt a market-seeking mode of global manufacturing when it
chooses to produce its goods near a target market to understand the customers’ needs and to
adapt and tailor the product to respond to local demand changes

• Efficiency Seeking: A growing mode for global manufacturing is efficiency seeking to

restructure a business’s existing investments for achieving an efficient allocation of international
economic activities. The mode takes advantage of different factor endowments, economic
policies, institutional arrangement, and demand patterns to obtain benefits in product and factor
prices, economics of scale, economics of scope, and risk controls.

• Asset Seeking: This mode is not just to seek cost and market benefits, but also to acquire
strategic assets including physical assets and strategic human resources to enhance their
ownership-specific advantages or weaken the advantages of competitors.

Describe the Globalization of service operations and explain

Key operational elements for Service Operations?
Globalization of service operations
Expanding and integrating service activities across national borders to capitalize on
global opportunities, gain efficiency, and deliver services to customers in different
countries or regions. It involves establishing a global presence, leveraging
economies of scale, accessing new markets, and coordinating service delivery on a
global scale.
Globalization Services:
1. Hotel services
 2. Tourism services
3. Travel services
4. Management consulting
5. Accounting
6. Offshoring hospitals
7. Project management
8. Quality evaluation & Audit
9. Risk analysis & management
10. IT services

Key operational elements for Service Operations

1. Customization Global service needs to respond to the customized demand of local regions in a global
reach. Global restaurants will change the menu to suit local tastes. Global hotel chains will change room
layout, room service, and foods to provide customized service.

(2) Cultural adaptation Service companies have to decide whether to adapt their initial service package to
the local culture. Disney Hong Kong incorporated Chinese cultural elements, speaking in Cantonese,
English, and Mandarin, and increased the Chinese New Year celebration show. Overseas service
organizations need to consider adapting to local culture when hiring local employees. With about 99.9 %
employees being local Chinese, KFC China adapted to local Chinese culture and tried to be a part of Chinese
society. Unlike Disney’s American theme parks, Disney Paris aimed more for permanent employees than
seasonal and temporary part-time employees.

(3) Information intensity Telecommunication technologies such as the Internet facilitate the diffusion of
information, and have helped with the globalization of services. With the development of new
telecommunication technologies, physical distance becomes less important and new service modes such
as foreign call centers became possible. Once information is digitized, it becomes instantaneously
accessible for customers all over the world. This stimulates the development of informant-intensive
services.

(4) Service unbundling Service can be viewed as a dichotomy between the front office to contact
customers and the back office to complete additional processing (Chase 1978), the dichotomy of which
increases the possibility of service globalization by relocating back office service. With advanced
communication systems, service companies can unbundle services and focus their operations strategy on
core services while outsourcing back office services to other sites.

(5) Labor intensity Labor intensity influences the globalization of service. Firms outsource laborintensive
service like information processing and routing software development to low-cost sites to reduce cost or
to labor-intensive locations to acquire trained talent
Describe six service globalization modes of four movement types?
identified six service globalization modes of four movement types.

(1) Movement of service • When the service market is characterized by a number of routine services or
relatively standard service, a firm will globalize its service through the movement of the service
organization to the customer’s countries by multisite expansion, based on the duplication of the key
success elements of the service worldwide. For example, Pizza Hut, Starbucks, and KFC build retail
chains throughout the world by means of multisite expansion.

• When service needs a high level of customization, a firm will globalize its service through the
movement of the service organization to the customer’s countries by either joint venturing or using
wholly owned subsidiaries to provide tailor-made service. The firm may change service organizations
and service packages to fit local tastes. For example, Huawei, a telecom equipment maker, builds joint
innovation centers for its large customers to provide a tailor-made technology consulting service.

• The third mode is through the movement of individual service staff or a service team to the
customer’s countries. A management-consulting firm may not establish a subsidiary in a country, but
may send a consultant team to provide service to a foreign firm. A firm of large-scale machine
equipment may send a technical expert to its customers to help with maintenance and repair.

(2) Movement of customers • The fourth mode is through the movement of customers to the place the
service is delivered. For example, in a “hub and spoke” airline system, the customers are attracted
from different regions to a hub, and then take a longdistance flight from a hub to another hub.
Disneyland (Paris and Orlando), Europa Park (Germany), Efteling (Netherlands), Macau Fisherman’s
Wharf (Macau), and other theme parks attract customers from foreign countries.
(3)No physical movement • The fifth mode is through cross-border communication between service
providers and consumers. A global service firm can divide its activities into front-desk and back-office
services, and then organize a global outsourcing strategy. For example, a firm can outsource the back-
office service like call centers to India, and consumers can obtain service by communication.
(4) (4) Movement of both customers and service • Some global service companies, instead of targeting
local customers, are trying to chase their clients overseas. For example, a French restaurant in China
focuses its offer on attracting French customers living as expatriates.
 Chapter 1 (test books)
An introduction to operations strategy
Why is operations excellence fundamental to strategic success?
‘Operations’ is the activity of managing the resources and processes that produce and deliver goods and
services. Strategic success refers to the achievement of an organization's long-term goals,
objectives, and desired outcomes through the effective implementation of its strategic plans and
initiatives. Operations excellence is fundamental to strategic success because it plays a crucial
role in achieving an organization's overall objectives and competitive advantage. Operations
excellence refers to the efficient and effective management of an organization's internal
processes, systems, and resources to deliver high-quality products or services to customers.

Operations managers are responsible for managing two interacting sets of issues:
• Resources – what type of materials, information, people (as customers or staff),
technology, buildings, and so on, are appropriate to best fulfil the organisation’s
objectives.
• Processes – how resources are organised to best create the required mix of products and
services.
Here's why it's essential for strategic success:

Cost Efficiency: Operations excellence focuses on optimizing processes, reducing waste, and
minimizing inefficiencies. This leads to lower operational costs, which can directly impact a
company's profitability. By streamlining operations, organizations can allocate resources more
effectively and maintain competitive pricing while still achieving healthy profit margins.

Quality and Consistency: Delivering high-quality products or services consistently is a

cornerstone of operations excellence. When customers can rely on consistent quality, it builds
trust and loyalty, enhancing the company's reputation and market positioning.
Customer Satisfaction: Effective operations ensure that customer demands are met in a timely
and satisfactory manner. This leads to improved customer experiences, which, in turn, can result
in repeat business, positive word-of-mouth referrals, and a larger customer base.

Innovation and Adaptation: Operations excellence doesn't just mean doing things the same way
forever. It involves continuous improvement, innovation, and the ability to adapt to changing
market conditions and customer needs. This agility allows organizations to stay relevant and
competitive in dynamic business environments.

Competitive Advantage: Organizations that excel in their operations can gain a significant
competitive advantage. When a company can produce goods or deliver services faster, with better
quality, or at a lower cost than its competitors, it stands out in the market and becomes the
preferred choice for customers.

Resource Allocation: Operations excellence helps optimize the allocation of resources such as
time, money, and manpower. This leads to better decision-making and strategic planning as
resources are directed toward initiatives that align with the organization's strategic goals.

Risk Management: Effective operations often involve robust risk management practices. By
identifying potential risks and implementing strategies to mitigate them, organizations can
minimize disruptions and ensure business continuity even during challenging times.

Employee Engagement and Productivity: Well-organized operations provide clarity to employees

about their roles and responsibilities. When employees understand their contributions to the
larger organizational goals, it enhances their engagement and motivation, leading to increased
productivity.

Sustainability: Operations excellence can encompass sustainable practices, including resource

conservation, waste reduction, and ethical considerations. These practices align with societal
expectations and can contribute positively to an organization's reputation.

Alignment with Strategy: A well-executed operations strategy is aligned with the overall business
strategy. Operations excellence ensures that the day-to-day activities of the organization directly
contribute to achieving strategic objectives, creating a cohesive and coordinated approach to
success.

Not all operations are the same(four vs)

1. Volume – A high volume of output means a high degree of repeatability, making a high
degree of specialisation both feasible and economic.
2. Variety – Producing a high variety of products and services must involve a wide range of
different activities, changing relatively frequently between each activity.
3. Variation – Processes are generally easier to manage when they only need to cope with
predictably constant demand.
4. Visibility – Process visibility is a slightly more difficult concept to envisage. It indicates how
much of the value added by the operation is ‘experienced’ directly by customers, or how
much it is ‘exposed’ to its customers.
Overall, operational excellence is a critical component of strategic success. By focusing on
operational excellence, organizations can improve their efficiency, productivity, quality,
customer satisfaction, agility, responsiveness, and risk management. This can help them to
achieve their strategic goals and objectives.

What is operations strategy and how is it different from operations

management?
Operations strategy refers to the overarching plan and set of decisions that guide how an
organization's operations will contribute to its overall business strategy and objectives.
Operations management, on the other hand, is the practical execution of the plans and strategies
formulated by operations strategy. There are different between operation strategy and operation
management.
Operations strategy is longer term. Operations management is largely concerned with short-to-medium
timescales, while operations strategy is concerned with more long-term issues.

● Operations strategy is concerned with a higher level of analysis. Operations management is largely
concerned with managing resources within and between smaller operations (departments, work units,
etc.) whereas operations strategy is more concerned with decisions affecting a wider set of the
organisation’s resources and the supply network of which they are a part.
 ● Operations strategy involves a greater level of aggregation. Operations management is concerned with
the details of how products and services are produced. Individual sets of resources are treated separately,
as the component parts of the operation. Operations strategy, on the other hand, brings together and
consolidates such details into broader issues.

● Operations strategy uses a higher level of abstraction. Operations management is concerned largely
with what is immediately recognisable and tangible. Operations strategy often deals with more abstract,
less directly observable, issues.
How should operations strategy reflect overall strategy (top-down)?
• An operations strategy must reflect the decisions taken at the top of the
organization, which set the overall strategic direction of the organization. This
is called a ‘top-down’ approach to operations strategy.
• So, if the organization is a large, diversified corporation, its corporate strategy
will consist of decisions about what types of business the group wants to be
in, in what parts of the world it wants to operate, what businesses to acquire,
and what to divest, how to allocate its cash between its various businesses,
and so on.
Correspondence and coherence
• However, developing any functional strategy from a business strategy is not
a straightforward task.
• There should be a clear, explicit, and logical connection between each
functional strategy and the business strategy in which they operate.
Moreover, a clear, explicit, and logical connection should also be between a
functional strategy and the decisions taken within the function.
• In other words, a clear correspondence between a business’s strategy and its
operations strategy should exist.
• Operations strategy must also be coherent, both with other functional
strategies and within itself.
• Coherence means that the choices made across or within functions should
not pull in different directions.
• All decisions should complement and reinforce others in the promotion of
the business’s and the operation’s objectives.
 • And, although coherence is clearly important, it often requires some strong
top-down direction, or at least a strong planning process, to make sure that
it happens.

How do the requirements of the market influence operations strategy

(outside-in)?
• Operations exist to serve markets. Indeed, a sensible starting point for any
operations strategy is to look to its markets and ask the simple but important
question, ‘How can operations help the organization to compete in its
marketplace?’
• Therefore, by choosing to inhabit a market position, the organization is, to
some extent, influencing how easy it is for the operations function to support
the market position.
 • This opens the possibility that, in some circumstances, it may be sensible to
shift the markets in which the organization is trying to compete in order to
reflect what its operation is good (or bad) at.
Performance objectives
• This is the stage that identifies performance objectives for the operation; that
is, the aspects of operations performance that satisfy market requirements
and therefore that the operation is expected to pursue.
• Here, we will use a set of five performance objectives that have meaning for
any type of operation:
1. quality;
2. speed;
3. dependability;
4. flexibility;
5. cost.
How can operations strategy learn from operational experience
(bottom-up)?
• The bottom-up perspective stresses how strategic ideas emerge over time
from actual experiences.
• Companies adopt strategies partly because of their ongoing experience,
sometimes with no high-level decision-making involved.
• The idea of strategy being shaped by experience over time is also called the
concept of emergent strategies.
• Shaping strategy from the bottom up requires an ability to learn from
experience and a philosophy of continual and incremental improvement.
• And, for businesses operating in unstable or unpredictable environments,
this can be particularly important.
• The other three perspectives of operations strategy can take time to detect
trends in how markets are moving.
• The bottom-up element is more ‘plugged in’ to everyday experience.
How can the intrinsic capabilities of an operation’s resources influence
operations strategy (inside-out)?
• The resources and processes within an operation are not simply passive
elements; they have an existence and a role that should be part of any
operations strategy. No surprise, then, that the long-term management of
resources and processes is often regarded as the underlying rationale for
operations strategy
• A useful starting point is to understand ‘what we have’ – that is, the totality
of the resources owned by, or available to, the operation. Next, one needs
to link the broad understanding of resources and processes with the specific
operations strategy decisions: ‘What actions we are going to take?’
• Over time, an operation may acquire distinctive capabilities, or
competencies, based on its resources and the accumulation of its
experiences.
• These capabilities may be embedded within a company’s intangible
resources and its operating ‘routines’. So, they concern both what the
operation has and what it does.
• Operations shape these capabilities (consciously or unconsciously) through
the way it makes a whole series of decisions over time.
• These decisions can be grouped under the headings of capacity, supply
network, process technology, and development and organization.
Describe the VRIO Framework?

• The most common (and useful) way of evaluating potential strategic

resources is what has become known as the VRIO framework.
• In this framework, the resources must be valuable (V), rare (R), imperfectly
inimitable (I), and the firm organized to capture the value of the resources
(O).
Using this framework, the four questions to ask about any potentially strategic
resource are:
1. Is the resource valuable? Is it possible to identify specific and definable
competitive value from the resources? Do they help to exploit opportunities in the
market, or defend against threats from competitors, and, if so, exactly how?
2. Is the resource rare? Do you have, or have access to, resources that your
competitor does not? Some theorists define the idea of ‘rarity’ as when a business
has a resource that is unequivocally unique, but for all practical purposes, a
resource is ‘rare’ if it is at least, in short supply and likely to remain so.
3. Is the resource costly to imitate? Do you have resources that competitors
cannot imitate, purchase or find a suitable alternative to, at a realistic cost or in a
realistic time frame? Note that ‘imitability’ may be either because competitors can
copy your resources and processes directly, or because they can find an
acceptable substitute for them.
4. Is the firm organized to capture the value of the resource? Do you have within
your business the systems, culture, capacity, and motivation to exploit any
capabilities embedded in your resources and processes? Even if a firm has
valuable, rare, and inimitable capabilities, it may not be able to exploit them. A
firm must have formal reporting and control mechanisms, leadership, and an
informal and cultural environment that allows strategic resources to develop.

• There are two important points to remember about the VRIO framework.
First, all these factors are time-dependent. A capability may be currently
valuable now, but competitors are unlikely to stand still. Neither are a rarity
and inimitability absolutes and, with time, can be undermined by
competitor activity. Even the ability to exploit capabilities can erode if
operations leadership is lacking.
• Second, although the conventional order in which to treat each of these
elements is as we have done here (VRIO framework), it maybe is best to
think of the ‘O’ of ‘organization’ to be a prerequisite. Without the ability to
exploit strategic resources, they are of little use.
 What is the difference between the ‘content’ and the ‘process’ of
operations strategy?
The ‘content’ of operations strategy is the building blocks from which any
operations strategy will be formed. This includes the definition attached to
individual performance objectives, together with a prioritisation of those
performance objectives. It also includes an understanding of the structure and
options available in the four decision areas of capacity, supply networks, process
technology and development, and organisation. Performance objectives and
decisions areas interact in a way that can be described by the operations strategy
matrix. When devising an operations strategy, it is important to ensure that, in
terms of the matrix, the strategy is comprehensive (all obvious aspects are at least
considered) and has the critical intersections identified.
The ‘process’ of operations strategy are the procedures that are, or can be, used
to formulate operations strategy. It determines how an operation pursues the
reconciliation between its market requirements and operations resources in
practice. The practical reality of putting operations strategies together and making
them happen in practice is complex, but, at a simple level, has four stages:
formulation, implementation, monitoring, and control. The success of effective
operations strategy process is also closely linked to the style and skills of the
leaders who do it.
Content of operations strategy Process of operations strategy

The specific decisions and actions that set The method that is used to make the specific
the operations role, objectives, and activities content decisions

Includes decisions about product design, Includes steps such as gathering data, analyzing
process design, capacity planning, inventory data, developing alternatives, evaluating
management, and quality control alternatives, and selecting a course of action

Is focused on the what of operations Is focused on the how of operations

Is typically more static than the process Is typically more dynamic than the content

How are operations strategy decisions made?

A behavioural view of operations strategy
• Operations strategy is sometimes seen as a technical issue. It is not of
course. Operations commentators have always recognised that ‘superior
performance is ultimately based on the people in an organization.
• The right management principles, systems, and procedures play an essential
role, but the capabilities that create a competitive advantage come from
people—their skill, discipline, motivation, ability to solve problems, and
their capacity for learning’.
• Capacity strategy: This is the process of determining how much production
capacity a company needs to meet its current and future demand. A behavioural
view of capacity strategy would consider the human factors involved in capacity
planning, such as employee motivation and morale.
• Purchasing and supply strategy: This is the process of acquiring the materials
and supplies a company needs to produce its products. A behavioural view of
purchasing and supply strategy would consider the human factors involved in
supplier relationships, such as trust and communication.
• Process technology strategy: This is the process of selecting and using the
best processes and technologies for a company's operations. A behavioral view
of process technology strategy would consider the human factors involved in
technology adoption, such as employee training and support.
• Improvement strategy: This is the process of identifying and implementing
improvements to a company's operations. A behavioral view of improvement
 strategy would consider the human factors involved in change management,
such as employee engagement and buy-in.
• Product and service development strategy: This is the process of creating
new products and services that meet customer needs. A behavioral view of
product and service development strategy would consider the human factors
involved in creativity and innovation, such as employee empowerment and
collaboration.

There are Three other useful approaches use operations strategy:

1. The operation strategy matrix:

The operations strategy matrix is a tool used to help organizations align their operations
strategy with their overall business strategy. This ‘operations strategy matrix’ describes
operations strategy as the intersection of a company’s performance objectives with its
decision areas. It brings together the two perspectives of market requirements and
operations resources to form the dimensions of a matrix.

• Market requirement reflects the level of customization and variety in the

products or services offered. A high market requirement would indicate a high
level of customization and variety, while a low market requirement would indicate
a focus on standardization and mass production.
• Operations resources reflects the organization's capabilities in terms of its
workforce, technology, and facilities. Organizations with strong operations
resources are better able to meet high market requirements, while organizations
with weak operations resources are better suited to meet low market
requirements.
2. The decision matrix:
• A decision matrix in operations strategy is a tool that can be used to help organizations
make decisions about their operations. The decision matrix is a method of modelling
relatively straightforward decisions under conditions of uncertainty in such a way as to
make explicit the options open to the decision-maker. The options and the things that are
uncertain can then be incorporated into the matrix. A simple example:
3. Operations strategy mapping:

• Operations strategy mapping is a procedure that attempts to clarify the

cause-effect relationships in a firm’s (or part of a firm’s) operations strategy.
• Based on the ‘strategy mapping’ approach, first popularised by Kaplan and
Norton, it is a set of cause-effect relationships that identify not only what
needs to be done to move the operations function forward, but also why it
should be done.
• As with many techniques of this type, the process of debating and drawing
the strategy map can be as valuable as the finished result.
• The map itself connects the four perspectives on operations strategy and
makes sure that the logic underlying a strategy is aligned. Looking at the
links between the four perspectives will pose the right questions and should
expose the contradictions and paradoxes that need to be overcome within
the operations strategy.
• The challenge is twofold. First, each perspective must be thoroughly
thought through to make sure that it is coherent. The second, and probably
more difficult, challenge is to make sense of how the four perspectives fit
together.
• More importantly, the diagram also shows how the various operations
development work streams should contribute to business and customer
objectives. That is what the arrows indicate. Each arrow is, in effect, an
assumption in this operation’s strategy. The bottom box represents what
the business is going to have to be better at if it is to succeed in
satisfactorily completing the work streams in the middle box, again with the
arrows indicating the main cause–effect relationships.