Chapter 2

• Reasons to Globalize


  • Improve supply chain
  • Reduce costs
  • Improve operations
  • Understand markets
  • Improve products
  • Attract/retain global talent
• Mission statement


  Tells an organization where it is going
• Strategy


  Tells the organization how to get there
• Elements of strategy


  • Action plans to achieve the mission
  • Tactical approaches for achieving missions
  • Exploit opportunities/weaknesses
  • Neutralize/avoid threats/weaknesses
  • An action plan for outperforming its competitors/achieving superior market position
• How strategy is shaped


  Mission → Analysis (external opportunities/threats, internal strengths/weaknesses) → Strategy
• Strategic unity/alignment

  Enterprise → Functional areas → Departments ⇒ Team ⇒ Individual
• Differentiation strategy


  Provide better or at least different products/services that are unique and impact customer's perception of value
• Cost leadership strategy


  Provide the maximum value as perceived by the customer at the lowest cost
• Response strategy


  Provide flexibility to match market changes in design innovation and volumes, reliability to meet schedules, and timeliness in design, production, and delivery
• Operations manager's job

  Implement an OM strategy to provide competitive advantage & increase productivity aligned with corporate's competitive strategy
• Strategies for competitive advantage

  • Cost leadership: cheaper
  • Differentiation: better or at least different
  • Response: more responsive or flexible
• Key success factors by product life cycle stage


  • Introduction: increase market share, R&D engineering is critical
  • Growth: establish price/quality image, strengthen niche
  • Maturity: compete on costs/feature, defense market position
  • Decline: cost control critical/maximize profit
• Outsourcing


  Transferring activities that traditionally have been internal to external suppliers
• Outsourcing is accelerating due to increased technological expertise, more reliable/cheaper transportation, rapid development/ubiquity of global telecommunication network
• Theory of comparative advantage


  If an external provider can perform an activity more productively than the purchasing firm, then the external provider should do the work. The purchasing firm should focus on its core competencies.
• Advantages of outsourcing


  • Cost savings
  • Gaining outside expertise
  • Accessing outside technology
  • Improving operations/service
  • Maintaining a focus on core competencies
• Disadvantages of outsourcing


  • Increased logistics and inventory costs
  • Loss of control (quality, delivery, etc)
  • Potential creation of future competition
  • Negative impact on employees
  • Risks may not manifest themselves for years
• Insufficient analysis is the most common reason for outsourcing failure
• Methodical analytical approach to rating outsourcing providers

  Determine factor ratings, points & weights assigned for each factor
• Global Operations Strategy Options

  • Low cost reduction & low differentiation/response priority: International strategy
  • High cost reduction, low differentiation/response priority: Global strategy
  • Low cost reduction, high differentiation/response priority: Multi-domestic strategy
  • High cost reduction & high differentiation/response priority: Transnational strategy
• Competing on response

  • Flexibility is matching market changes in design innovation and volumes
  • Reliability is meeting schedules
  • Timeliness is quickness in design, production, and delivery
• Competing on differentiation

  • Uniqueness can go beyond the physical characteristics and service attributes to encompass everything that impacts customer's perception of value
• competing on cost

  • provide the maximum value as perceived by the customer
  • low cost does not imply low quality