2 The Global Environment and Operations Strategy Power

2 The Global Environment and Operations Strategy Power. Point presentation to accompany Heizer and Render Operations Management, 10 e, Global Edition Principles of Operations Management, 8 e, Global Edition Power. Point slides by Jeff Heyl © 2011 Pearson Education 2 -1

Reasons to Globalize Tangible 1. Reduce costs (labor, taxes, tariffs, etc. ) Reasons 2. Improve supply chain 3. Provide better goods and services 4. Understand markets Intangible 5. Learn to improve operations Reasons 6. Attract and retain global talent © 2011 Pearson Education 2 -2

Reduce Costs u Foreign locations with lower wage rates can lower direct and indirect costs u World Trade Organization (WTO) u North American Free Trade Agreement (NAFTA) u APEC, SEATO, MERCOSUR, CAFTA u European Union (EU) © 2011 Pearson Education 2 -3

Improve the Supply Chain u Locating facilities closer to unique resources u Auto design to California u Athletic shoe production to China u Perfume manufacturing in France © 2011 Pearson Education 2 -4

Understand Markets u Interacting with foreign customers and suppliers can lead to new opportunities u Cell phone design from Europe u Cell phone fads from Japan u Extend the product life cycle © 2011 Pearson Education 2 -5

Learn to Improve Operations u Remain open to the free flow of ideas u General Motors partnered with a Japanese auto manufacturer to learn new approaches to production and inventory control u Equipment and layout have been improved using Scandinavian ergonomic competence © 2011 Pearson Education 2 -6

Cultural and Ethical Issues u Cultures can be quite different u Attitudes can be quite different towards u Punctuality u Thievery u Lunch breaks u Bribery u Environment u Child labor u Intellectual property © 2011 Pearson Education 2 -7

Companies Want To Consider u National literacy rate u Work ethic u Rate of innovation u Tax rates u Rate of technology change u Inflation u Number of skilled workers u Political stability u Product liability laws u Availability of raw materials u Interest rates u Population u Export restrictions u Number of miles of highway u Variations in language u Phone system © 2011 Pearson Education 2 -8

Developing Missions and Strategies Mission statements tell an organization where it is going The Strategy tells the organization how to get there © 2011 Pearson Education 2 -9

Factors Affecting Mission Philosophy and Values Profitability and Growth Environment Mission Customers Public Image Benefit to Society © 2011 Pearson Education 2 - 10

Strategies for Competitive Advantage u Differentiation – better, or at least different u Cost leadership – cheaper u Response – rapid response © 2011 Pearson Education 2 - 11

OM’s Contribution to Strategy 10 Operations Decisions Product Quality Approach DIFFERENTIATION Innovative design … Broad product line … After-sales service … Experience … Process COST LEADERSHIP Low overhead … Location Layout Effective capacity use … Human resource Inventory management … Supply chain RESPONSE Flexibility … Inventory Scheduling Reliability … Quickness … Maintenance © 2011 Pearson Education Example Competitive Advantage Safeskin’s innovative gloves Fidelity Security’s mutual funds Caterpillar’s heavy equipment service Hard Rock Café’s dining experience Franz-Colruyt’s warehouse-type stores Differentiation (better) Southwest Airline’s aircraft utilization Wal Mart’s sophisticated distribution system Hewlett-Packard’s response to volatile world market Fed. Ex’s “absolutely, positively, on time” Pizza Hut’s 5 -minute guarantee at lunchtime Response (faster) Cost leadership (cheaper) Figure 2. 4 2 - 12

10 Strategic OM Decisions 1. Goods and service design 2. Quality 3. Process and capacity design 4. Location selection 5. Layout design © 2011 Pearson Education 6. Human resources and job design 7. Supply-chain management 8. Inventory 9. Scheduling 10. Maintenance 2 - 13

Managing Global Service Operations Requires a different perspective on: u Capacity planning u Location planning u Facilities design and layout u Scheduling © 2011 Pearson Education 2 - 14

Product Life Cycle Company Strategy/Issues Introduction Growth Maturity Decline Best period to increase market share Practical to change price or quality image Poor time to change image, price, or quality R&D engineering is critical Strengthen niche Competitive costs become critical Defend market position Drive-through Internet search engines i. Pods Xbox 360 Sales Cost control critical restaurants CD-ROMs LCD & plasma TVs Avatars Boeing 787 Twitter Analog TVs Figure 2. 5 © 2011 Pearson Education 2 - 15

Product Life Cycle OM Strategy/Issues Introduction Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality Growth Forecasting critical Maturity Standardization Fewer product Product and changes, more process minor changes reliability Optimum Competitive capacity product Increasing improvements stability of and options process Increase capacity Long production runs Shift toward product focus Product improvement and Enhance cost cutting distribution Decline Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity Figure 2. 5 © 2011 Pearson Education 2 - 16

SWOT Analysis Mission Internal Strengths External Opportunities Analysis Internal Weaknesses External Threats Strategy © 2011 Pearson Education 2 - 17

Strategy Development Process Analyze the Environment Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors. Determine the Corporate Mission State 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 volume flexibility, quality, quick delivery, dependability, aftersale service, broad product lines. Figure 2. 6 © 2011 Pearson Education 2 - 18

Strategy Development and Implementation u Identify key success factors u Build and staff the organization u Integrate OM with other activities The operations manager’s job is to implement an OM strategy, provide competitive advantage, and increase productivity © 2011 Pearson Education 2 - 19

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