Chap 2 Flashcards
Three levels of strategic planning process
corporate planning, strategic business unit planning, functional planning
Corporate strategic planning
Addresses the portfolio of businesses owned by a firm
broadest in scope and least constrained
decisions made limit the choices that can be made at a lower strategic planning level
corporate strategy
communicates the overall mission of the firm and identifies the types of businesses that the firm wants to be in (Long horizon)
Strategic business units
the semi-independent organization used to manage different products and market segments
business unit strategy
how the business unit competes
what choices form the business model the unit will pursue.
managers make choices regarding what customers and market segments are critical, what products to offer, and how to create advantages over the competitiors
Business models
The combination of the choices determining the customers an SBU will target, the value propositions it will offer, and the supply chain/operations management capabilities it will employ.
Razor and blades model
Gillette
give away the razor but make your money on the replacement blades
direct sales model
dell
ell computers directly to the end consume
Loyalty model
rewards customers for continuing to deal with the firm. This model has been widely implemented in the airline industry (through the frequent flier program) and in the retail trade (as in Best Buy’s “Reward Zone” program)
what are business unit strategy an business model shaped by
the corporate strategy, specific requirements of the SBU products and markets, by the SBU operating capabilities
SWOT analysis
Strength, weakness, opportunity, threat
helps managers match strategies with strengths and opportunities while reducing risks associated with weakness and threats
functional strategy
Determines how the function will support the overall business unit strategy.
what functional strategy must address
What specifically should we do to support the corporate and SBU strategies?
What are the critical resources that we have to manage carefully if we are to achieve the corporate/SBU objectives?
What metrics should we have in place to ensure we are making progress on these plans?
What capabilities found in our function should be considered or recognized by the two higher stages of strategy?
How should we coordinate our activities with those of the other functional areas within the firm to reduce friction and to enhance the ability of the firm/SBU to attain its overall objectives?
aspects of functional strategy
most detailed
most constrained
must operate within a set of decisions made in the corporate and SBU strategic plans
an operations strategy id defined by choices made in what primary areas
key customers
value proposition
capabilities
key customers
customers or customer segments receiving priority because they are highly important to the firm’s current or future success.
value proposition
all of the tangible and intangible “benefits” that customers can expect to obtain by using the products offered by the firm.
capabilities
operational activities that the firm can perform well; these define the types of problems and solutions that operations can address proficiently.
environment
the conditions (competition, regulations, and tech) that influence the ways managers develop and operations strategy
customers
parties that use or consume the products of operations management processes
why does a firm have to identify key customers
A customer is not necessarily the end user. For example, a store manager or purchasing agent who buys products for resale is a kind of customer.
Almost all firms deal with multiple customers having varied desires and needs that change over time
how a firm determines a key customer
many reasons include:
Largest current or future sales of the firm
one with the highest prestige
three categories of product-specific traits
order winner
order qualifiers
order losers
order winners
cause customers to choose a product over a competitor’s offering; for example, better performance or lower price. These are traits on which the operations management system must excel
order qualifiers
traits such as availability, price, or conformance quality that must meet a certain level in order for the product to even be considered by customers. The firm must perform acceptably on these traits (the products must meet certain threshold values of performance), usually at least as well as competitors’ offerings.
order losers
Poor performance on these product traits can cause the loss of either current or future business. For example, when an online retailer fails to deliver an order in a timely manner, a customer might cancel the order and refuse to place orders in the future.
what product specific traits form the basis for customers expectations
order winners and qualifies
what product specific traits result from customers actual experience
order losers
how does a business gain key customers
by offering a compelling value proposition
features of a value proposition
attractive to customers and different from competitors’ offerings.
For example, Walmart’s value proposition has been to offer everyday low prices on a wide variety of products.
five characteristics of a well designed value proposition
- It offers a combination of product features that customers find attractive and are willing to pay for.
- It differentiates the firm from its competition in a way that is difficult to imitate.
- It satisfies the financial and strategic objectives of the business.
- It can be reliably delivered given the operational capabilities of the business and its supporting supply chain.
- It is consistent with the firm’s social and core values
Product-related priorities address…
the customer’s problem to be “solved” and are communicated in terms of the quality, timeliness, and cost of the product and service “solution.
types of quality priorities
Performance (superior attributes)
Features (unique attributes)
Conformance (no defects)
Reliability (long time to failure)
Durability (long useful life)
Aesthetics (appeal)
Service/support (ancillaries/intangibles)
Perceived quality (image)
types of timeliness priorities
Reliability (on-time)
Speed (lead time)
Availability (e.g., always in-stock)
types of cost priorities
Purchase (price)
Transaction (acquisition costs)
Maintenance/repair
Operating (cost of consumables)
Salvage/disposal
Quality
fitness for consumption by the customer who bought it
An assessment of how well the customer’s expectations are met
timeliness
the degree to which the product is delivered or available when the customer wants it
lead time
the amount of time that passes between the beginning and end of a set of activities
two types of lead time
time to market
order to deliver lead time
Time to market
total time that a firm takes to conceive, design, test, produce, and deliver a new or revised product for the marketplace
order to delivery lead time
starts the moment that the customer places an order for a product, includes the time required to place and fulfill an order, and ends at the moment that the customer takes delivery of the product
Cost
process related competitive priorities
innovation
flexibility
risk management
sustainability
innovation
radical and incremental changes in processes and products
types of innovation
product innovation,
process innovation,
customer innovation,
business model innovation,
supply chain innovation.
two types of innovation related priorities
support product innovation
drive process innovation
flexibility
operation’s ability to respond efficiently to changes in products, processes (including supply chain relationships), and competitive environments
types of flexibility
short-term,
operational flexibilities ( labor flexibility)
longer-term,
strategic flexibilities ( introduce new products quickly)
risk management
managers try to build processes that anticipate and deal with problems resulting from natural events (earthquakes), social factors (strikes), geo-political issues (a change in governmental political policy affecting operations), economic issues (the bankruptcy of a critical supplier), or technological issues (finding a major flaw in software).
sustainability
triple bottom line
An approach to corporate performance measurement that focuses on a company’s total impact measured in terms of profit, people (social responsibility), and the planet (environmental responsibility).
three measures of profit and loss with the triple bottom line
Profit—monetary results of operations.
People—social impacts of operations.
Planet—environmental impacts of operations.
ESG (Environmental, Social, and Governance)
responsible investing
capabilities
unique and superior operational abilities that stem from the routines, skills, and processes that the business develops.
Usually, abilities to deliver superior performance come from investments and developmental efforts in one or more of the following areas:
Processes
Planning systems
Performance measurement
Technology
People and culture
Supply chain relationships
processes
specialized routines, procedures, and performance measurement systems that guide operational activities.
planning systems
access and development of sources of information, and use of proprietary decision support systems and processes.
performance measurement
to communicate in meaningful terms what everyone has to do to realize the value proposition
technology
proprietary usage of hardware or software that enables the firm to do things differently and/or better than competitors.
people and culture
skills, associated training programs, and cultural norms for the company that produce better motivation and performance. The impact of culture must be recognized at both a corporate and at a national level
supply chain relationships
unique and exclusive relationships with customers and suppliers that are unmatched by competitors.
