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Strategy, as a way of action, becomes necessary in a situation when, for the direct achievement of the main goal, the available resources are not enough. The task of strategy is an efficient use of the available resources for the achievement of the main goal. Tactics is the tool to implement strategy, and is subordinated to the main goal of strategy.
Companies and organizations making products and delivering are it for profit or not for profit relies on a handful of processes to get their products manufactured properly and delivered on time. Each of the process acts as an operation for the company. To the company this is essential. That is why managers find operations management more appealing. We begin this section by looking at what operations actually are. Operations strategy is to provide an overall direction that serves the framework for carrying out all the organization's functions.
Organizations behave in the same manner. The company has an ultimate goal of delivering goods to a client, but the processes of designing, manufacturing, analyzing and then finally being delivered are the driving forces for the company's success. All these chunks of works processes that collectively define a bigger purpose, the operations for that particular organization. The more effective these processes or operations would be the more productive and profitable the business would be.
Goods, the ultimate by-product of a company, can be a product or a service. Take for instance, a car manufacturing company. For it, all operations would lead to the development and enhancement of a car, a product, something physical. But, to a therapist, the service he/she provides to their clients is the much needed result or required output.
"Operations strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall strategy, through the reconciliation of market requirements with operations resources."
An organization's operations function is concerned with getting things done; producing goods and/or services for customers. However, many people think that operations management is only concerned with short-term, day-to-day, tactical issues.
All business organizations are concerned with how they will survive and prosper in the future. A business strategy is often thought of as aplan or set of intentions that will set the long-term direction of the actions that are needed to ensure future organizational success. However, no matter how grand the plan, or how noble the intention, an organization's strategy can only become a meaningful reality, in practice, if it is operationally enacted. An organization's operations are strategically important precisely because most organizational activity comprises the day-to-day activities within the operations function. It is the myriad of daily actions of operations, when considered in their totality that constitute the organization's long-term strategic direction.
The relationship between an organization's strategy and its operations is a key determinant of its ability to achieve long-term success or even survival. Organizational success is only likely to result if short-term operations activities are consistent with long-term strategic intentions and make a contribution to competitive advantage.
The relationship between operations and the other business functions is similarly important. The objective of the operations function is to produce the goods and services required by customers whilst managing resources as efficiently as possible. This can lead to conflicts within an organization. Conflicts between the operations and the marketing functions are likely to centre on the desire of marketing to ensure that operations concentrate on satisfying customers. Whilst this may seem desirable, marketing will usually want operations to be able to meet customer needs under any circumstances. This is likely to lead to demands to produce greater volumes, more variety, higher quality, a faster response, and so on, all of which are likely to lead to less efficient operations. Conflicts between the operations and the accounting and finance functions, on the other hand, are likely to centre on the desire of accounting and finance to want operations to manage resources as efficiently as possible. This will tend to pull operations in exactly the opposite direction of that desired by marketing. Conflicts between operations and the human resource management function are likely to centre on issues of recruitment, selection, training, management and the reward of those employed within operations.
For example, operations managers may want to vary organization-wide policies in order to meet local needs; a move likely to be resisted by human resource managers. The operations function lies at the heart of any organization and interacts with all the other functions. As such, achieving agreement about what decision areas lie within the remit of operations, and what should be the basis of decision-making within operations is an essential part of ensuring the consistency of action over time necessary for a successful organizational strategy.
A business strategy is developed after taking into many factors and following some strategic decisions such as;
What business is the company in (mission?)
Analyzing and understanding the market (environmental scanning)
Identifying the companies strengths (core competencies)
Examples from Strategies:
Mission: Dell Computer- "to be the most successful computer company in the world"
Environmental Scanning: political trends, social trends, economic trends, market place trends, global trends
Core Competencies: strength of workers, modern facilities, market understanding, best technologies, financial know-how, logistics
Operations Strategy is a plan for the design and management of operations functions
Operation Strategy developed after the business strategy
Operations Strategy focuses on specific capabilities which give it a competitive edge - competitive priorities
Four Important Operations Questions: Will you compete on -
All of the above? Some? Tradeoffs?
Competing on Cost?
Offering product at a low price relative to competition
Typically high volume products
Often limit product range & offer little customization
May invest in automation to reduce unit costs
Can use lower skill labor
Probably use product focused layouts
Low cost does not mean low quality
Competing on Quality?
Quality is often subjective
Quality is defined differently depending on who is defining it
Two major quality dimensions include
High performance design:
Superior features, high durability, & excellent customer service
Product & service consistency:
Meets design specifications
Error free delivery
Quality needs to address
Product design quality - product/service meets requirements
Process quality - error free products
Competing on Time?
Time/speed one of most important competition priorities
First that can deliver often wins the race
Time related issues involve
Focused on shorter time between order placement and delivery
Deliver product exactly when needed every time
Competing on Flexibility?
Company environment changes rapidly
Company must accommodate change by being flexible
Easily switch production from one item to another
Easily customize product/service to meet specific requirements of a customer
Ability to ramp production up and down to match market demands
The Need for Trade-offs
Decisions must emphasis priorities that support business strategy
Decisions often required trade offs
Decisions must focus on order qualifiers and order winners
Which priorities are "Order Qualifiers"?
e.g. Must have excellent quality since everyone expects it
Which priorities are "Order Winners"?
e.g. Southwest Airlines competes on cost
McDonald's competes on consistency
FedEx competes on speed
Custom tailors compete on flexibility
Strategic Management may be understood as the process of formulating, implementing and evaluating business strategies to achieve organizational objectives. A more comprehensive definition of strategic management is "that set of managerial decisions and actions that determines the long-term performance of a corporation. It involves environmental scanning, strategy formulation, strategy implementation, evaluation and control."
The study of strategy management therefore emphasizes monitoring and evaluating environmental opportunities and threats in the light of a corporation's strengths and weaknesses.
Strategic management involves five steps:
Step 1: Select the corporate mission and major corporate goals.
A mission statement is description or declaration of why a company is in operation, which provide the framework within which strategies are formulated. A typical mission statement contains three components, a statement, its reason for existence; a statement of the key values or guidelines standards on which the operations takes place and a statement of major goals or objectives. Thus corporate strategy defines what business the company pursuing.
For Example, the Disney Corporation considers in the business of "making people happy", by including not only these parts but also production of cartoons' more production and a variety of entertainment related business around the world.
Step 2: Analyze the opportunities and threats or constraints that exist in the external environment. Also analyze the strengths and weakness that exists in internal environment.
The Environment of an organization comprises both external and internal factors. Environment needs to be scanned in order to determine trends and projections of factors that will affect fortunes of the organization. Scanning must focus on task environment. Not those elements outside task environment are ignored, but they receive less attention. Scanning helps identify threats and opportunities prevailing in the environment.
Step 3: Formulate strategies that will match the organization's strength and weakness with environment's threats and opportunities.
Strategies are formulated at four levels:
Business unit level and
Step 4: Implement the strategies.
Strategies formulated need to be implemented. Implementation of strategies is often, more difficult than their formulation. Although, implementation is the local step to formulation, the two differ in the following ways
Is primarily an intellectual process
Requires good intuitions and analytical skills
Requires co-ordination among a few individuals
Is positioning forces before action.
Is managing forces during the action.
Focuses on effectiveness.
Focuses on efficiency.
Is primarily an operational process
Requires special motivation and leadership skills.
Requires co-ordination among many persons.
Step 5: Evaluate and control activities to ensure that the organization's objectives are achieved.
The Strategic management process results in decision that can have significant and long-lasting consequences. Erroneous strategic decision can inflict severe penalties and can be exceedingly difficult, if not impossible, to reverse. Strategy evaluation, therefore, has great relevance. Strategy evaluation helps determine the extent to which the company's strategies are successful in attaining its objectives.
Strategic decisions are ones that are aimed at differentiating an organization from its competitors in a way that is sustainable in the future. This is different from decisions based on operational effectiveness which are aimed simply at doing existing activities better.
Decisions can only be de¬ned as strategy if they involve consciously doing something 'differently' from competitors and if that difference results in a sustainable advantage.
In game theory, normal form is a description of a game. Unlike extensive form, normal-form representations are not graphical per se, but rather represent the game by way of a matrix. While this approach can be of greater use in identifying strictly dominated strategies and Nash equilibrium, some information is lost as compared to extensive-form representations.
Game theory provides a formal language for describing conscious, goal-oriented, decision-making processes involving one or more players, where there is an interdependence of outcomes. This paper seeks to explore the potential of using game theory in strategic management. From the presented review of the current literature, the paper illustrates that the strength of game theory in strategic management lies in its ability to provide insights into competitive environments and strategies.
The normal-form representation of a game includes all perceptible and conceivable strategies, and their corresponding payoffs, of each player.
In static games of complete, perfect information, a normal-form representation of a game is a specification of players' strategy spaces and payoff functions. A strategy space for a player is the set of all strategies available to that player, where a strategy is a complete plan of action for every stage of the game, regardless of whether that stage actually arises in play. A payoff function for a player is a mapping from the cross-product of players' strategy spaces to that player's set of payoffs (normally the set of real numbers, where the number represents a cardinal or ordinal utility often cardinal in the normal-form representation) of a player, i.e. the payoff function of a player takes as its input a strategy profile (that is a specification of strategies for every player) and yields a representation of payoff as its output.