Operations management has become a significantly important discipline in management as it suggests the way capabilities and competencies are used to achieve the strategic direction of the firm. Drawing upon Slack (2004), operations management facilitates development of competitive advantage through the adoption of different generic strategies i.e. cost leadership and differentiation through its value adding components. This report has therefore been aimed at analysing the strategic link of operations management for Shoeshine PLC with the help of best practice examples, theories and frameworks that highlight different perspectives from both theory and practice.
Task 1: Strategic Objectives of Operations Management
The aim of this part of the report is to analyse the importance of strategic objectives in operations management and how they can be translated across different functions to achieve integrated direction. This section has been subdivided into different modules to achieve this task for Shoeshine PLC.
Part a: Strategic Objectives of GSK and Sainsbury's:
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In order to highlight the importance of strategic objectives in operations management for Shoeshine PLC, the researcher has used case studies of GlaxoSmithKline (GSK) and Sainsbury's.
GSK is one of the leading pharmaceutical and healthcare firms among the top 20 firms listed on FT Global 500 ratings, therefore suggesting the scale of its operations across the globe include active participation in more than 116 countries, while its market reach an estimated 125 countries (Datamonitor, 2009). The company has a global turnover of more than Â£21,660 million, which has been generated through the business direction of becoming "an undisputable leader in the pharmaceutical and consumer health industry" (GSK, 2009). The analysts have argued that the firm's core competency is its research and development (R&D) department that leads to the development, manufacturing and marketing of breakthrough products that are the "cash cows" for the firm. The analysis of the firm's competitive advantages has highlighted that its competitive scope is broad while degree of advantage is differentiation, which can therefore be illustrated onto Porter's Generic Strategies (1985) model as follows:
It should be argued that as core competency of the firm is its patents protected drugs, therefore it is in R&D operations this differentiation is induced to a high degree, which is facilitated by operations management through other functionalities. These lean and agile characteristics have been argued by Grabowski (2004) to become the core strategic operations management focus of R&D and other related functionalities. It is argued in the light of Hendry & Brown (2006) that company has reorganised its R&D operations into six small teams which are called Centres of Excellence and Drug Discoveries (CEDDs), which lead to lean and agile characteristics.
Sainsbury's on the other hand is a leading food retailer in the UK that has more than 727 medium and large stores across the UK, which have more than 15.5% share of the food retail market (Mintel, 2009). It can be argued that historically the company has remained focused on quality products and therefore on a quality / price continuum the company was high. However, the current discounted and turbulent business environment has led to the development of strategy, which is based on a focused differentiation and cost-leadership so that it can offer high quality products at low prices. This is the reason that current strategic direction of the firm is to compete on price with its rivals while maintaining its quality status, which can be illustrated onto Porter's Generic Strategies (1985) as follows:
In order to achieve this strategic direction similar focus was adopted in operations management, which can be seen from the implementation of new technology and stricter regimes for quality. Drawing upon Fisher (1997), it can be argued that there has been an overall improvement in profit margins from 1.4% in 2006 to 3% in 2008, despite the lowering of pricing by the firm and maintaining its quality. The company has also adopted different aspects of lean and agile operational management so that it can remain proactive to any changes in business environment, while keeping costs as its prime focus.
Part b: Shoeshine and Strategic Objectives:
The case studies of GSK and Sainsbury's have reflected the importance of strategic level objective development for the effectiveness of operations management and its directions. Drawing upon Handy (1994), it can be suggested that intellectual capital, key resources, competencies and capabilities of the firm should work towards an integrated vision and mission to have high degree of effectiveness. It can be argued that when different value adding functionalities are streamlined under single overall objective then its overall implications can lead to effective and efficient operations as there are very low degrees of conflicts between functions.
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It should therefore be highlighted that the decision of Shoeshine's board to change its slogan i.e. "Quality - the way forward for Shoeshine", which can therefore help the internal and external stakeholders of the firm to put their energies and resources towards this direction. The case study has highlighted that the only pressing issue faced by the firm is its perception of being a low quality producer, which is a disadvantage in a technology induced quality rivals in the field. It can be argued that in order for the firm to achieve this strategic direction, it needs to change and reorganise its operations and their facilitators. It has been argued by Slack (2004) that first and foremost step in achieving successful change management outcomes is to induce sense of urgency, which should be undertaken by developing common and shared goals in the firm. It should therefore be suggested that operations management of the firm should be reorganised in the light of its new slogan based in quality.
Part c: Strategic and Organisational Objectives:
It is recommended that company uses the strategically influenced operations management objectives, which should emphasise the importance of integrative reaction of internal resources of the firm so that there are minimum wasted energies due to duplication of tasks and lower than expected quality. Drawing upon Lynch (2003), it can be argued that focused and concise strategic objectives are at the heart of communicating the overall direction of the firm, which should be achieved by internal and external stakeholders of the firm and demanded by shareholders. The effect of having concise and clear operations objectives can be illustrated as follows:
In the light of this analysis, it can therefore be suggested that if Shoeshine manages to communicate the urgency of quality management among its employees and management effectively, then it would be able to develop resources and capabilities that are quality driven and customer focused. Drawing upon Simmons et al (2003), it can be suggested that value chain should be analysed by the firm periodically so that it can judge the diffusion of its quality based objectives within the value addition.
Task 2: Improving Organisational Performance:
The aim of this part of the report is analyse different strategies that can be used by Shoeshine PLC to achieve its strategic objectives based in quality in an effective and efficient way. The aim of inducing organisational performance at all levels has therefore been achieved by highlighting good practices of the chosen case studies i.e. GSK and Sainsbury's; by highlighting operational issues of Shoeshine; and developing change strategy.
Part a: Using Good Practice and Systems:
The case studies of GSK and Sainsbury's can be seen to have a number of key learning points of Shoeshine PLC, which include performance improvement at all levels. Drawing upon Slack (2002), it can be suggested that operational performance should be judged against three key dimensions i.e. Cost, Time and Quality, which have been illustrated as follows:
GSK has induced cost control structures within its operations by improving technologies and processes used by the research and development team. Drawing upon Datamonitor (2009), although company hs significant focus on differentiation, however improving output of R&D is also cist reducing mechanism. The company has more than 18 new chemical entities in pipeline to launch in near future due to these changes. Similarly Sainsbury's has been able to increase its margins from 1.6% to 3% in two years despite lowering its prices.
Quality, according to Slack (2002) is defined as degree of fitness for purpose of operations of the firm. Drawing upon case of GSK, it can be suggested that effective R&D is quality of efficient operations management, which has resulted from reorganisation and structural changes along with technology incorporation. In case of Sainsbury's, the quality levels can be judged from the expectations and perceptions of the customers. Drawing upon Mintel (2009), it can be suggested that Sainsbury's is perceived as high quality retailer with lower prices among its customers.
The time to market any product depends upon the agility of its operations, which has been the key preference for both GSK and Sainsbury's. It should be noted that development of smaller team based structure of the firm has led to the speedy development and marketing of products than before this operational change. Similarly, Sainsbury's is recognised in the industry as highly proactive towards any changes in external environment including consumer behaviour, which is undertaken by cross functional and strategic teams in the company.
Part b: Operational Problems of Shoeshine Plc:
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There have been a number of operational issues that can be seen from the case study and assumed in its context. These have been summarised using dimensions of effective operations management as follows:
The lead times have not mentioned, however it can be argued that using old equipment with legacy systems would have resulted in long lead times for the company.
This is the core issue faced by the firm, which is being used as a competitive advantage by its competitors. The company has outdated technology which has led to lower quality production, however it can also be argued that lower quality is also function of lower motivation of employees.
There is low degree of control exercised by the firm on its marketing and operations, therefore leading to low levels of dependability in its operations.
It can be assumed that the company has hierarchical structure and functions as it is being reactive to the changes in the environment and its own weaknesses.
The cost is also key concern for the company, which should be suggested to be raised due to the use of outdated technology and there is low levels of integration across its operations.
Part c & d: Developing and Implementing Change Systems and Procedures:
The following set of change systems and procedures can be recommended for Shoeshine PLC to achieve significantly positive results:
- Developing clear and concise strategic operations management objectives, which are based on SMART framework
- Development of effective communication systems, based in two way communication and feedback.
- Changing and improving the technology used by the firm to updated technology so that quality targets can be achieved
- Creation of "quality circles" i.e. small cross functional teams that can keep a look out for any quality improvement and gap within the operations of the company
- Outsourcing non-core activities so that competitive advantage of other firms can be induced into operations of Shoeshine, while lowering overall costs
- Datamonitor, (2009), Company profile - GSK, Datamonitor
- Fisher L. M. (1997) What is the right supply chain for your product?.Harvard Business Review, pp 105-116.
- GSK (2009), Annual Report - GSK, Official Report for the Year 2008/07
- Grabowski, H. (2004), "Are the Economics of Pharmaceutical Research and Development Changing? - Productivity, Patents and Political Pressures", Pharmacoeconomics, Vol. 22 No. 2, pp 15-24
- Handy, C. (1994), "The Age of Paradox", Harvard Press, Boston, 1994
- Hendry, C. & Brown, J. (2006), "Organizational Networking in UK Biotechnology Clusters", British Journal of Management, Mar2006, Vol. 17 Issue 1, p55-73
- Lynch, R. (2003), "Corporate Strategy", 3rd Ed, FT Prentice Hall
- Mintel (2009), Mintel Report - UK Food Retailing, Mintel Reports
- Porter, M. E. (1985), "Industry Structure and Competitive Strategy: Keys to Profitability", Financial Analysts Journal, Jul/Aug80, Vol. 36 Issue 4, p30-41, 12p
- Slack, N. (2002), "Operations strategy", Financial Times Prentice Hall, 2002
- Slack, N. (2004), "Operations management, 4th ed.", Financial Times Prentice Hall, 2004
- Simmons et al. (2003), "Performance Measurement Tools: EFQM Excellence Model", Measuring Business Excellence, Vol. 7, No. 1 2003, pp. 14-29