Operations Strategy There’s nothing here to take

Transcript:Operations Strategy There’s nothing here to take:
Operations Strategy There’s nothing here to take by storm; to strategy we must conform. Johann Wolfgang von Goethe (Faust,1808) Principle 1 (Value Maximization) The goal of strategy is to maximize the long run NPV of the organization. Competitive strategy (Business Unit Strategy). Relates a company to its environment. Strengths and weakness of the company (the system) to be related to opportunities and threatens in the environment Chooses an attractive competitive position  by offering a high customer value proposition. Competitive Strategy Competitive Strategy: Environmental Scanning (Opportunities and Threats) Competitor activities Complementor activities Changes in consumer needs and preferences Technological changes Economic trends (GNP, unemployment, inflation, interests, taxes, tariffs) Legal, political, and environmental issues Competitive Strategy: Competing Edges of the System (Strengths and Weaknesses) Human Resources (cheap labor, skilled labor, etc.) Technology, Facilities, and Equipment Financial Resources Customers Product and Services Suppliers (low material cost, reliable suppliers) Management Practices (low overhead) Customer Value Proposition: a set of benefits that the firm offers to customers. Customers purchase based on the value they derive from the product/service. This value is the greatest amount a customer is willing to pay (the reservation price). If this value > price, the customer enjoys positive net value (consumer surplus). Customers will buy the service/product that offers highest consumer surplus. Zara's main business is the design, manufacture, distribution and retailing of clothing. Differentiates itself from rivals  timely fashion for the masses. The customer value proposition  timely yet limited variety at modest cost and quality. Customer Value Proposition To execute its competitive strategy, an organization further defines a Financial strategy: Source of financial resources and use of funds (how invested). Marketing and sales strategy: how the market will be segmented and how the product will be positioned and promoted Operations strategy: Enabling the execution of the competitive strategy- how to best deliver the CVP. What Resources, what Processes, and what Competencies. Financial, Marketing, and Operations Strategy In 1993, Mercedes-Benz decided to build the first factory outside Germany, in Tuscaloosa, AL to produce the M-class (to cut tariff by 25%). A Consolidation Center opened near the plant to manage the parts/subassemblies from 65 suppliers. A distribution network to transport the vehicles to 135 countries. The firs car was sold in 97. Demand quickly surpassed all forecasts and the capacity of 65,000. The initial $300 million plant was expanded in 98-99 to 80,000 at a cost of $80 million;