Operations Strategy in

a Global Environment 2
PowerPoint presentation to accompany
Heizer and Render
Operations Management, Eleventh Edition
Principles of Operations Management, Ninth Edition

PowerPoint slides by Jeff Heyl

© 2014
© 2014
Pearson
Pearson
Education,
Education,
Inc.Inc. 2-1
 Learning Objectives
When you complete this chapter you
should be able to:

1. Define mission and strategy

2. Identify and explain three strategic
approaches to competitive advantage
3. Understand the significant key
success factors and core
competencies

© 2014 Pearson Education, Inc. 2-2

 Learning Objectives
When you complete this chapter you
should be able to:

4. Use factor rating to evaluate both

country and provider outsources
5. Identify and explain four global
operations strategy options

© 2014 Pearson Education, Inc. 2-3

© 2014 Pearson Education, Inc. 2-4
2-5

Examples of Global Strategies

▶ Boeing – both sales and production are
worldwide.
▶ Benetton – moves inventory to stores
around the world faster than its competitor
by building flexibility into design,
production, and distribution
▶ Sony – purchases components from
suppliers in Thailand, Malaysia, and
around the world
▶ GM is building four similar plants in
Argentina, Poland, China, and Thailand
PowerPoint presentation to accompany Heizer/Render – © 2004 by Prentice Hall, Inc., Upper Saddle
© 2014 Pearson Education, Inc. Principles of Operations Management, 5e, and Operations River, N.J. 07458
2-5
Management, 7e
PowerPoint
© 2004 by Prentice
presentation
Hall, Inc.,
to accompany
Upper Saddle
Heizer/Render
River, N.J.–07458
Principles of Operations Management, 5e, and Operations Management, 7e
2-6

Boeing Suppliers (777)

Firm Country Parts
Alenia Italy Wing flaps
AeroSpace Australia Rudder
Technologies
CASA Spain Ailerons
Fuji Japan Landing gear
doors, wing section
GEC Avionics United Kingdom Flight computers
Korean Air Korea Flap supports
Menasco Aerospace Canada Landing gears
Short Brothers Ireland Landing gear doors
Singapore Singapore Landing gear doors
Aerospace
© 2014 Pearson Education, Inc. 2-6
PowerPoint
© 2004 by Prentice
presentation
Hall, Inc.,
to accompany
Upper Saddle
Heizer/Render
River, N.J.–07458
Principles of Operations Management, 5e, and Operations Management, 7e
2-7

Some Multinational
Corporations
Company Home % Sales % Assets % Foreign
Country Outside Outside Workforce
Home Home
Country Country
Citicorp USA 34 46 NA
Colgate- USA 72 63 NA
Palmolive
Dow USA 60 50 NA
Chemical
Gillette USA 62 53 NA
Honda Japan 63 36 NA

IBM USA 57 47 51

© 2014 Pearson Education, Inc. 2-7

PowerPoint
© 2004 by Prentice
presentation
Hall, Inc.,
to accompany
Upper Saddle
Heizer/Render
River, N.J.–07458
Principles of Operations Management, 5e, and Operations Management, 7e
2-8

Some Multinational
Corporations
Company Home % Sales % Assets % Foreign
Country Outside Outside Workforce
Home Home
Country Country
ICI Britain 78 50 NA

Nestlé Switzerland 98 95 97

Philips Netherlands 94 85 82
Electronics
Siemens Germany 51 NA 38
Unilever Britain & 95 70 64
Netherlands

© 2014 Pearson Education, Inc. 2-8

 Reasons to Globalize

1. Improve the supply chain

2. Reduce costs (labor, taxes, tariffs, etc.)
3. Improve operations
4. Understand markets
5. Improve products
6. Attract and retain global talent

© 2014 Pearson Education, Inc. 2-9

 Reasons to Globalize
1. Improve the supply chain
Improved by locating facilities in
countries where unique resources
are available.
Ex:
World athletic shoe production has migrated form
South Korea to Guangzhouw, China. This location
takes advantage of the low cost labor and production
competence in city where 40,000 people wok making
shoes for the world.

Produk AQUA memindahkan pabriknya dari Bekasi ke

Pandaan, Jawa Timur sebagai upaya mendekatkan diri
ka bahan baku berupa air pegunungan dari air sumur
bor.
© 2014 Pearson Education, Inc. 2 - 10
 Reasons to Globalize
2. Reduce costs (labor, taxes, tariffs, etc.)
Many international operation seek
to reduce risks associated with
changing currency values
(exchange rates) and reduce their
cost.
Contoh:
Film Fred Flintstone dan beberapa kartun produksi
Disney, Marvel, Warner Bross dan Hanna Barbara
diproduksi di Filipina. Biaya Produksi film per 30 menit
episode hanya $130.000 dibandingkan di Korea
mencapai $160.000 dan US $500.000 Selain karena
biaya yang murah, talenta yang ada bisa memenuhi
standar.
© 2014 Pearson Education, Inc. 2 - 11
 Reasons to Globalize
3. Improved Operations.
Operations learn from better
understanding of management
innovations in different countries.
Another reasons to have
international operations is to
reduce response time to meet
customers changing product and
service requirements.
Contoh:
Perusahaan Jepang dengan sistem KANBAN
memberikan contoh untuk improved dalam hal inventori.
© 2014 Pearson Education, Inc. 2 - 12
 Reasons to Globalize
5. Improve Product.
Learning does not take place
in isolation. Firms serve
themselves and their
customers well they remain
open to the free flow of
ideas..
Contoh:
Perusahaan TOYOTA dan BMW melakukan
joint research untuk pengembangan produk
green cars.

© 2014 Pearson Education, Inc. 2 - 13

 Reasons to Globalize
6. Attract and retain global talent.

Global Organizations can

attract and retain better
employees by offering more
employment opportunities.
Contoh:
Perusahaan P&G dalam memasarkan produk
shamponya untuk muslimah markets dengan
menggunakan model lokal.

© 2014 Pearson Education, Inc. 2 - 14

 Developing Missions and
Strategies
Apakah VISI dahulu atau MISI, dan
APA PERBEDAANYA?
Mission statements tell an
organization where it is going.
Sebuah misi berbeda dengan visi, di mana misi
adalah penyebab dan visi adalah efek dari
penyebab tersebut. Sebuah misi merupakan
sesuatu yang harus dicapai, sedangkan visi
merupakan sesuatu yang harus dikejar untuk
mencapai apa yang dimaksud dalam misi
tersebut.[1]. BusinessDictionary.com dalam Wikipedia
© 2014 Pearson Education, Inc. 2 - 15
 Mission
► Mission - where is the organization
going?
► Organization’s purpose for being
► Answers ‘What do we contribute to
society?’
► Provides boundaries and focus

© 2014 Pearson Education, Inc. 2 - 16

 Factors Affecting Mission
Philosophy
and Values

Profitability and
Environment Growth

Mission

Customers Public Image

Benefit to
Society

© 2014 Pearson Education, Inc. 2 - 17

 Strategic Process
Organization’s
Mission

Functional Area
Missions

Finance/
Marketing Operations Accounting

© 2014 Pearson Education, Inc. 2 - 18

 Sample Missions

Sample Company Mission

To manufacture and service an innovative, growing, and
profitable worldwide microwave communications business
that exceeds our customers’ expectations.

Sample Operations Management Mission

To produce products consistent with the company’s mission

as the worldwide low-cost manufacturer.

Figure 2.3
© 2014 Pearson Education, Inc. 2 - 19
 Sample Missions
Sample OM Department Missions
Product design To design and produce products and
services with outstanding quality and
inherent customer value.
Quality management To attain the exceptional value that is
consistent with our company mission and
marketing objectives by close attention to
design, procurement, production, and field
service operations

Process design To determine, design, and produce the

production process and equipment that will
be compatible with low-cost product, high
quality, and good quality of work life at
economical cost.

Figure 2.3
© 2014 Pearson Education, Inc. 2 - 20
 Sample Missions
Sample OM Department Missions
Location To locate, design, and build efficient and
economical facilities that will yield high value
to the company, its employees, and the
community.
Layout design To achieve, through skill, imagination, and
resourcefulness in layout and work methods,
production effectiveness and efficiency while
supporting a high quality of work life.

Human resources To provide a good quality of work life, with

well-designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange
for outstanding individual contribution from
employees at all levels.

Figure 2.3
© 2014 Pearson Education, Inc. 2 - 21
 Sample Missions
Sample OM Department Missions
Supply-chain To collaborate with suppliers to develop
management innovative products from stable, effective,
and efficient sources of supply.
Inventory To achieve low investment in inventory
consistent with high customer service levels
and high facility utilization.
Scheduling To achieve high levels of throughput and
timely customer delivery through effective
scheduling.
Maintenance To achieve high utilization of facilities and
equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.

Figure 2.3
© 2014 Pearson Education, Inc. 2 - 22
 Developing Missions and
Strategies

The Strategy tells the organization

how to get there.

© 2014 Pearson Education, Inc. 2 - 23

 Strategy
► Action plan to achieve
mission
► Functional areas have
strategies
► Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses

© 2014 Pearson Education, Inc. 2 - 24

2-25

Preconditions -
To Implement a Strategy
One must understand:
▶ Strengths & weaknesses of competitors
and new entrants into the market
▶ Current and prospective environmental,
legal, and economic issues
▶ Resources available with the firm and
within the OM function
▶ Integration of OM strategy with company
strategy and with other functions.
▶ The notion of product life cycle (next
slide)
PowerPoint presentation to accompany Heizer/Render –
© 2014 Pearson Education, Inc.
Principles of Operations Management, 5e, and Operations
© 2004 by Prentice Hall, Inc., Upper Saddle
River, N.J. 07458
2 - 25
Management, 7e
2-26

Strategy Development
Process
ANALYZE THE ENVIRONMENT
Identify strength, weakness, opportunities and threats.
Understand the environement, cutomers, industry and competitors.

Determine the Coorporate Mision

Statte the reason for the firm’s existence and identify the value it wishes to
create.

FORM A STRATEGY
Build a competitive advantage, such as low price, design or vaolume
flexibility, quality, quick response, dependability

PowerPoint presentation to accompany Heizer/Render – © 2004 by Prentice Hall, Inc., Upper Saddle
© 2014 Pearson Education, Inc. Principles of Operations Management, 5e, and Operations River, N.J. 07458
2 - 26
Management, 7e
 SWOT ANALYSIS
INDUSTRY : FIVE FORCES PORTER
a.Threat new entrant
b.Bargaining power of supplier
c.Rivarly Among existing competitiors
d.Bargaining power of buyer
e.Competitive Rivarly

© 2014 Pearson Education, Inc. 2 - 27

 CONTOH FIVE FORCES PORTER
PADA INDUSTRI PENERBANGAN

© 2014 Pearson Education, Inc. 2 - 28

 Strategies for Competitive
Advantage

1. Differentiation – better, or at least

different
2. Cost leadership – cheaper
3. Response – more responsive

© 2014 Pearson Education, Inc. 2 - 29

 Competing on Differentiation
▶ DISKUSIKAN
► APA PERBEDAAN HP XIAOMI dengan
APPLE,dan keduanya tetap laku?

► APA PERBEDAAN AYLA dengan

CAMRYdan keduanya tetap laku?

© 2014 Pearson Education, Inc. 2 - 30

 Competing on Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything that
impacts customer’s perception of value
► Safeskin gloves – leading edge products
► Walt Disney Magic Kingdom – experience
differentiation
► Hard Rock Cafe – dining experience

© 2014 Pearson Education, Inc. 2 - 31

 Competing on Cost
Provide the maximum value as
perceived by customer. Does not
imply low quality.
► Southwest Airlines – secondary airports,
no frills service, efficient utilization of
equipment
► Walmart – small overhead, shrinkage,
and distribution costs
► Franz Colruyt – no bags, no bright lights,
no music, and doors on freezers
© 2014 Pearson Education, Inc. 2 - 32
 Competing on Response
▶ Flexibility is matching market changes in
design innovation and volumes
▶ A way of life at Hewlett-Packard
▶ Reliability is meeting schedules
▶ German machine industry
▶ Timeliness is quickness
in design, production,
and delivery
▶ Johnson Electric,
Pizza Hut, Motorola

© 2014 Pearson Education, Inc. 2 - 33

2-34

Stages in the Product Life

Cycle
Introduction
Growth rate

Growth

Maturity

Decline

PowerPoint presentation to accompany Heizer/Render – © 2004 by Prentice Hall, Inc., Upper Saddle
© 2014 Pearson Education, Inc. Principles of Operations Management, 5e, and Operations River, N.J. 07458
2 - 34
Management, 7e
2-35

Strategy and Issues During a

Product’s Life

PowerPoint presentation to accompany Heizer/Render – © 2004 by Prentice Hall, Inc., Upper Saddle
© 2014 Pearson Education, Inc. Principles of Operations Management, 5e, and Operations River, N.J. 07458
2 - 35
Management, 7e
 OM’s Contribution to Strategy
10 Operations Competitive
Decisions Strategy Example Advantage

Product DIFFERENTIATION:
Innovative design Safeskin’s innovative gloves
Broad product line Fidelity Security’s mutual funds
Quality After-sales service Caterpillar’s heavy equipment service
Experience Hard Rock Café’s dining experience
Process
COST LEADERSHIP:
Location Low overhead Franz-Colruyt’s warehouse-type
stores
Effective capacity Southwest Airline’s Differentiation
Layout use aircraft utilization
(better)
Human Inventory Walmart’s sophisticated
resource management distribution system
Response
Supply chain (faster)
RESPONSE:
Flexibility Hewlett-Packard’s response to volatile Cost
Inventory leadership
world market
Reliability FedEx’s “absolutely, positively, on time” (cheaper)
Scheduling Quickness Pizza Hut’s 5-minute guarantee
at lunchtime
Maintenance

Figure 2.4
© 2014 Pearson Education, Inc. 2 - 36
 Global Operations Strategy
Options High
Figure 2.9

International strategy
Cost Reduction

(eg, Harley-Davidson
U.S. Steel)
• Import/export or
license existing
product
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
© 2014 Pearson Education, Inc. 2 - 37
 Global Operations Strategy
Options High
Figure 2.9
Cost Reduction

International
strategy
(eg, Harley-Davidson
U.S. Steel)
• Import/export or
license existing
product

Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
© 2014 Pearson Education, Inc. 2 - 38
 Global Operations Strategy
Options High
Figure 2.9
Global strategy
(eg, Caterpillar
Texas
Instruments
Cost Reduction

Otis Elevator)

International
• Standardize product
strategy
(eg, Harley-Davidson
• Economies of scale
U.S. Steel)
• Import/export or
• Cross-cultural
license
product
existing

learning
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
© 2014 Pearson Education, Inc. 2 - 39
 Global Operations Strategy
Options High Global strategy
(eg, Caterpillar Figure 2.9
Texas Instruments
Otis Elevator)

• Standardize product
• Economies of scale
• Cross-cultural learning
Cost Reduction

International
strategy
(eg, Harley-Davidson
U.S. Steel)
• Import/export or
license existing
product

Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
© 2014 Pearson Education, Inc. 2 - 40
 Global Operations Strategy
Options High Global strategy
(eg, Caterpillar Figure 2.9
Multidomestic
Texas Instruments
Otis Elevator)
strategy
(eg, Heinz,
• Standardize product
• Economies of scale
McDonald’s
The
• Cross-cultural Body Shop
learning
Cost Reduction

Hard Rock Cafe)

• Use existing domestic
International
strategy
model globally
(eg, Harley-Davidson
• Franchise, joint
U.S. Steel)

ventures,
• Import/export or
license existing
subsidiaries
product

Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
© 2014 Pearson Education, Inc. 2 - 41
 Global Operations Strategy
Options High Global strategy
(eg, Caterpillar Figure 2.9
Texas Instruments
Otis Elevator)

• Standardize product
• Economies of scale
• Cross-cultural learning
Cost Reduction

International Multidomestic
strategy strategy
(eg, Harley-Davidson (eg, Heinz, McDonald’s
U.S. Steel) The Body Shop
Hard Rock Cafe)
• Import/export or • Use existing domestic
license existing model globally
product • Franchise, joint
ventures,
subsidiaries
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
© 2014 Pearson Education, Inc. 2 - 42
 Global Operations Strategy
Options High Global strategy
Figure 2.9
Transnational
(eg, Caterpillar
Texas Instruments
Otis Elevator) strategy
• (eg,
StandardizeCoca-Cola,
product Nestlé)
• Economies of scale
• Cross-cultural learning
• Move material,
Cost Reduction

people, ideas across

national
International
strategy
boundaries
Multidomestic
strategy
• Economies
(eg, Harley-Davidson
U.S. Steel)
of
The scale
(eg, Heinz, McDonald’s
Body Shop
• Cross-cultural
• Import/export or
Hard Rock Cafe)
• Use existing domestic
product learning
license existing model globally
• Franchise, joint
ventures,
subsidiaries
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
© 2014 Pearson Education, Inc. 2 - 43
 Global Operations Strategy
Options High Global strategy Transnational
(eg, Caterpillar strategy Figure 2.9
Texas Instruments (eg, Coca-Cola, Nestlé)
Otis Elevator) • Move material,
people, ideas across
• Standardize product national boundaries
• Economies of scale • Economies of scale
• Cross-cultural learning • Cross-cultural
Cost Reduction

learning

International Multidomestic
strategy strategy
(eg, Harley-Davidson (eg, Heinz, McDonald’s
U.S. Steel) The Body Shop
Hard Rock Cafe)
• Import/export or • Use existing domestic
license existing model globally
product • Franchise, joint
ventures,
subsidiaries
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
© 2014 Pearson Education, Inc. 2 - 44