MD 021 - Management and Operations
Operations Strategy
Definitions of strategy and operations strategy
Levels of strategy: corporate, business, functions
Evaluating an operations strategy
Example: McDonald's
Definition of Strategy
Strategy is a deliberate search for a plan of action that will develop a business's distinctive competence and compound it.
Definition of Operations Strategy
An operations strategy consists of a sequence of decisions that, over time, enables a business unit to achieve a desired operations structure, infrastructure, and set of specific capabilities in support of the competitive priorities.
Order-Qualifiers and Order-Winners
Order-qualifiers are those criteria that a company must meet for a customer to even consider it as a possible supplier. Companies need only be as good as competitors.
Order-winners are those criteria that win the order. Companies need to be better than their competitors.
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Levels of Strategy
Components of the Operations Strategy
Structural decision categories: / CapacityFacilities
Vertical integration
Technology
Infrastructural decision categories: / Workforce
Organization
Information/control systems
Capabilities: / Unique to each firm
Competitive priorities: / Cost
Quality
High-performance design
Consistent quality
Time
Fast delivery time
On-time delivery
Development speed
Flexibility
Customization
Volume flexibility
Criteria for Evaluating an Operations Strategy
Consistency (internal and external)
Between the operations strategy and the overall business strategy
Between the operations strategy and the other functional strategies within the business
Among the decision categories that make up the operations strategy
Between the operations strategy and the business environment (resources available, competitive behavior, governmental restraints, etc.)
Contribution (to competitive advantage)
Making trade-offs explicit, enabling operations to set priorities that enhance the competitive advantage
Directing attention to opportunities that complement the business strategy
Promoting clarity regarding the operations strategy throughout the business unit so its potential can be fully realized
Providing the operations capabilities that will be required by the business in the future
Statement of
McDonald’s Operations Strategy
“To provide unmatched consistency in operations in support of high product quality. This must be accomplished with adequate speed, low cost, and process innovation to accommodate changes in consumer tastes.”
From the statement of McDonald’s operations strategy, it is clear that both consistent and high-performance quality are considered order winners, while speed, cost, and innovation are considered order qualifiers.
McDonald’s Operations Strategy
Dimension / StrategyCapacity / Growth as needed through additional stores - but capacity added carefully
Well-utilized - franchisee's well-being depends on it being used heavily
Facilities / Distributed facilities, each facility being very similar to the next, all focused around the same menu - although the uniformity is beginning to change
Process
Technology / High degree of process understanding, emphasis on "fool-proof" processes
A leader in the technology of fast-food delivery
Vertical
Integration / Partnership arrangement
Long-term relationship with suppliers to promote innovation and quality improvement
Workforce / Franchisees: well-trained, carefully selected, entrepreneurs
Operators: high-turnover, cheap
Organization / Guidelines provided by corporation, but franchisees push to locally optimize
Control
Systems / Centralized buying
Bulk contracts
"Push" system for basic supplies, "pull" system day-to-day in the restaurants
Evaluation of the operations strategy:
Internal and external consistency - Looking at the operations strategy along the seven dimensions, they all support the operations mission and the business strategy from the previous page.
Contribution to competitive advantage - Systemic strategy creates unmatched consistency in operations that has been difficult to imitate.
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