Chapter 2.

Operations Strategy & Competitiveness

 Carefully read Southwest Airlines (pp.23-24)

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Operations Strategy & Competitive Dimensions
 Setting broad policies and plans to utilize the firm’s
resources optimally to support its longer term
competitive strategy.
TREK ops strategy & goals
 Consider Southwest Airlines, their competitive strategy is:
 Low-cost point-to-point service targeting price and convenience
sensitive consumers (travelers)
 In contrast, Continental Airlines is a full-service airline offering travel
from almost any point A to any point B via hub-and-spoke system
centered on major airports along with code sharing (partnership)
agreements with other full-service airlines.
 Offer first and/or business class services, coordinate schedules
within and with other airlines, transfer luggage, serve meals on
longer flights or even on flights that fly during dining hours (since
some passengers are expected to make connecting flights).
 Southwest does none of this but because of their operational
simplicity they can fly planes on the air longer, have 15 minutes of
turnarounds.

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Competitive Dimension
 Competitive Dimensions include:
 Cost or Price
 Make the Product or Deliver the Service Cheap
 Quality
 Make a Great Product and (not or) deliver a Great Service ( X vs
Mercedes)
 Delivery Speed
 Make the Product or Deliver the Service Quickly
 Delivery Reliability
 Deliver It When Promised
 Coping with Changes in Demand
 Change Its Volume
 Flexibility and New Product Introduction Speed
 Change It, more frequently then GM or Ford, who is this company?
 Other Product-Specific Criteria
 Support It

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 Trade-Offs
 Focus and trade-offs, can’t do it all at the same time
 Lexus can’t be made and sold for $25,000. T or F?
 A few examples:
 Generally low-cost strategy is not compatible with flexibility or speed of
delivery
Cost

Flexibility Delivery

Quality
 High quality and low cost tend to be incompatible
 Straddling occurs when a firm seeks to mimic a competitor’s position
while trying to maintain their original (successful) position.
 The case of Continental Airlines (CA) response Southwest Airlines (SW)
 CA “reacted” to Southwest.
 While maintaining its full-service position, sought to match SW on some routes
 Eliminated meals, 1st class service, lowered prices, increased frequency but
maintained other features because it remained as a full service airline for other routes
(transfer luggage, agent commissions, etc.)
 Lost millions, CEO got fired, returned to the former market.

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Order Qualifiers and Winners

 Order qualifiers are the basic criteria that permit the

 Order winners are the criteria that differentiate the

 Class examples:

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 Steps in Developing a Manufacturing Strategy
1. Segment the market according to the product group
2. Identify product requirements, demand patterns,
and profit margins of each group
3. Determine order qualifiers and winners for each
group
4. Convert order winners into specific performance
requirements

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Differing
Manufacturing
Requirements
Consider group 1

Consider group 2

Why buy?

Focus on?

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Service Strategy Capacity Capabilities
 Process-based
 Capabilities derived from activities that transform material
or information and provide advantages on dimensions of
cost and quality
 Systems-based
 Operating capabilities that are broad-based involving the
entire operating system and provide advantages of short lead
times and customize on demand
 Organization-based
 Organizational ability to master/implement (learn) new
technologies, faster new plant/product introductions
 These capabilities are more difficult to replicate thus provide
a strong operations-based competitive advantage

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 Productivity
 A common, seemingly simple but very complicated
measure
 How a country, region, industry, company, business
unit, department, ... uses its resources (relative to
others).
 Broadly defined as the ratio of OUTPUTS to INPUTS
 Total, partial, or multifactor measures:

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Productivity Example

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Some Partial Productivity Measures
 Business  Productivity Measure
 Restaurant  Meals per hour
 Retail Store  Sales per square foot (meter)
 Chicken Farm  Kilo of meat per Kg. of feed
 Utility Plant  Kilowatt per ton of coal
 Paper Mill  Tons of paper per cord of wood

 Case: Lasik Vision Corporation – pp. 47-48

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