Chapter number 2 operation management book

Chapter number 2 operation management book

1. 2 - 1© 2014 Pearson Education

The Global
Environment and
Operations Strategy22
PowerPoint presentation to accompany
Heizer and Render
Operations Management, Global Edition, Eleventh Edition
Principles of Operations Management, Global Edition, Ninth Edition
PowerPoint slides by Jeff Heyl
© 2014 Pearson Education

2. 2 - 2© 2014 Pearson Education
OUTLINE
▶A Global View to Operations
▶Reasons to Globalize
▶Developing Missions and Strategies
▶Strategies for Competitive
Advantage
▶SWOT Analysis and Strategy
Development

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Growth of World Trade
Figure 2.1
60 –
55 –
50 –
45 –
40 –
35 –
30 –
25 –
20 –
15 –
10 –
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Year
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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

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Improve the Supply Chain
▶Locating facilities closer to unique
resources
▶Auto design to California
▶Athletic shoe production to China
▶Perfume manufacturing in France

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Reduce Costs
▶Foreign locations with lower wage rates
can lower direct and indirect costs
▶Trade agreements can lower tariffs
▶Maquiladoras
▶World Trade Organization (WTO)
▶North American Free Trade Agreement
(NAFTA)
▶APEC, SEATO, MERCOSUR, CAFTA
▶European Union (EU)

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Improve Operations
▶Understand differences between
how business is handled in other
countries
▶Japanese – inventory management
▶Scandinavians – ergonomics
▶International operations can
improve response time and
customer service

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Understand Markets
▶Interacting with foreign customers,
suppliers, competition can lead to
new opportunities
▶Cell phone
design moved
from Europe
to Japan
▶Extend the
product life
cycle

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Improve Products
▶Remain open to free flow of ideas
▶Toyota and BMW manage joint
research and development
▶Reduced risk, state-of-the-art design,
lower costs
▶Samsung and Bosch jointly produce
batteries

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Attract and Retain Global
Talent
▶Offer better employment
opportunities
▶Better growth opportunities and
insulation against unemployment
▶Relocate unneeded personnel to
more prosperous locations

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Cultural and Ethical Issues
▶Cultures can be quite different
▶Attitudes can be quite different
towards
►Punctuality
►Lunch breaks
►Environment
►Intellectual
property
►Thievery
►Bribery
►Child labor

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Key Issues of Globalization
▶National literacy rate
▶Rate of innovation
▶Rate of technology
change
▶Number of skilled
workers
▶Political stability
▶Product liability laws
▶Export restrictions
▶Variations in language
►Work ethic
►Tax rates
►Inflation
►Availability of raw
materials
►Interest rates
►Population
►Number of miles of
highway
►Phone system

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Ranking Corruption
Rank Country 2012 CPI Score (out of
100)
1 Demark, Finland, New Zealand 90
4 Sweden 88
5 Singapore 87
6 Switzerland 86
7 Australia, Norway 85
9 Canada, Netherlands 84
13Germany 79
14Hong Kong 77
17Japan, UK 74
19USA 73
37Taiwan 61
39Israel 60
45South Korea 56
80China 39
123Vietnam 31
133Russia 28
Least
Corrupt
Most
Corrupt

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Match Product & Parent
1.Volkswagen
2.Bridgestone
3.Campbell Soup
4.Tata Motors Limited
5.Proctor and Gamble
6.Nestlé
7.Pillsbury
8.Sony
►Braun Household
Appliances
►Firestone Tires
►Godiva Chocolate
►Haagen-Dazs Ice
Cream
►Jaguar Autos
►MGM Movies
►Lamborghini Autos
►Alpo Petfoods

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►Braun Household
Appliances
►Firestone Tires
►Godiva Chocolate
►Haagen-Dazs Ice
Cream
►Jaguar Autos
►MGM Movies
►Lamborghini Autos
►Alpo Petfoods
Match Product & Parent
1.Volkswagen
2.Bridgestone
3.Campbell Soup
4.Tata Motors Limited
5.Proctor and Gamble
6.Nestlé
7.Pillsbury
8.Sony

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Match Product & Country
1.Great Britain
2.Germany
3.Japan
4.United States
5.Switzerland
6.India
►Braun Household
Appliances
►Firestone Tires
►Godiva Chocolate
►Haagen-Dazs Ice
Cream
►Jaguar Autos
►MGM Movies
►Lamborghini Autos
►Alpo Petfoods

17. 2 - 17© 2014 Pearson Education
Match Product & Country
1.Great Britain
2.Germany
3.Japan
4.United States
5.Switzerland
6.India
►Braun Household
Appliances
►Firestone Tires
►Godiva Chocolate
►Haagen-Dazs Ice
Cream
►Jaguar Autos
►MGM Movies
►Lamborghini Autos
►Alpo Petfoods

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Developing Missions and
Strategies
Mission statements tell an
organization where it is going
The Strategy tells the organization
how to get there

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Mission
►Mission - where is the organization
going?
►Organization’s purpose for being
►Answers ‘What do we contribute to
society?’
►Provides boundaries and focus

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Strategic Process
Marketing Operations
Finance/
Accounting
Functional Area
Missions
Organization’s
Mission

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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

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

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Strategies for Competitive
Advantage
1.Differentiation – better, or at least
different
2.Cost leadership – cheaper
3.Response – more responsive

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

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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

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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

27. 2 - 27© 2014 Pearson Education
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Strategy Development Process
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, after-
sale service, broad product lines.
Analyze the Environment
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
Figure 2.6

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Strategy
Analysis
SWOT Analysis
Internal
Strengths
Internal
Weaknesses
External
Opportunities
External
Threats
Mission

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Nike SWOT Analysis
▶Strengths
- strong at research and development.
- Nike is a global brand.
▶Opportunities
- to develop new products such as sunglasses and jewellery.
▶Weaknesses
- The retail sector is very price sensitive.
▶Threats
- The market for sports shoes and garments is very
competitive. Consumers are shopping around for a better
deal.

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SWOT Analysis SWOT Analysis
▶SWOT AnalysisSWOT Analysis, which is , which is a key
tool in the strategic planning
process can also be applied to
personal career planning.

31. 2 - 31© 2014 Pearson Education
© 2011 Pearson Education, Inc. publishing as
Prentice Hall
Strategy Development and
Implementation
▶Identify key success factors
▶Build and staff the organization
▶Integrate OM with other activities
The operations manager’s job is to implement
an OM strategy, provide competitive
advantage, and increase productivity

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Strategy Development and Strategy Development and
ImplementationImplementation
▶Only by identifying Key Success
Factors(KSFs) and Core Competencies
can an organization achieve
sustainable competitive advantage.
▶One of the KSFs for McDonalds is
layout.
▶Core Competency for Honda is its gas-
powered engines.