Structural Vs Infrastructural Decisions Business Essay
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Published: Mon, 5 Dec 2016
Defined as that part of management that is looking at all the processes activities as a whole on one hand and also on daily activities on the other, operations management spans over different areas like designing, monitoring, administrating, restructuring businesses blocks, resources and activities in such a way to create products and services that can meet market expectations. (Slack et. al.2012).
As mentioned in the literature, companies are developing operations strategies in order to align its different capabilities with the goal of developing competitive positions in the market and achieve a better business performance (Anderson et al. 1989)
As Deflorin (2010) mentions, an edge over the competitors can be achieved through an operations strategy. Defined as the essential process, enabling business to achieve its objective, operations strategy ensures that all the needed products and services are produces and delivered to its customers in the right time period.
A competitive and coherent strategy of operations management can be achieved by the management of any company when making a clear linkage between structural and infrastructural decisions (Boyer and McDermott 1999).
As a team leading a worldwide giant in ITC, Huawei’s management board has to continuously assess the strengths and weaknesses of company’s operations management. This report aims to assess the aforementioned topics and propose some improving alternatives for operations strategy enhancement.
Structural vs. Infrastructural Decisions
According to Diaz Garrido et al. (2007) and Idris et. Al. (2010), structural decisions are the ones that define the shape of the building blocks associated to a particular operation. They are directly related to the tangible aspects such as process technology for manufacturing, vertical integration, facilities like location and capacity and variety of product manufacturing. Adversely, infrastructural decision are affecting organizational culture, control systems, workforce, quality management and leadership.
Choosing one type of decision preponderantly over the other can lead to important discrepancies in the mid to long term competitiveness in the market. Huawei has to pay a special attention about the right balance between structural decisions who require important financial long term investments and infrastructural ones whose cumulative influences can seriously affect the overall strategy (Diaz Garrido et al. 2007).
One of the important structural decisions Huawei has to continuously consider is linked to its needed capacity to be aligned with their time of operation. Although, as an example, it increased the capacity of its Hungary logistic center with the scope of increasing its revenues (Reuters 2011), it seems that the company operates most of the time around the clock since many delivery delay complaints were coming from an internal recent survey among many customers (Huawei confidential information not disclosed due to confidentiality reasons). The managers should determine the optimum capacity level for the plant to cope with specific requests of scale and/or scope production and also to consider the best location of the production plants and new possible logistic centers, close to component suppliers, more important markets, etc (Diaz Garrido et al. 2007).
Vertical integration strategy (forward or backward) or outsourcing strategy is other structural decision Huawei has to carefully consider. Resource capabilities have to be assessed with a certain pace before considering which strategy to be chosen. Huawei did some backward integration when it decided to create its own chipset company HiSilicon or when acquiring an optical research company Ciphotonics with the ultimate goal to improve its products and reduce its dependency of other external suppliers (Merritt 2011, Ciphotonics 2012). This is proven to be a very good decision because telecommunications industry is perceived as a tightly coupled one where unpredictable changes can happen all the time and a higher control is required (Busconi et al. 2001). However, outsourcing activities are also important to be considered when there is a lack of resources dealing with business activities because it might help in dealing with increased competition (Leong 2008). Despite the fact that enough resources are existing, Huawei could benefit from dedicating itself more to its core values and externalize part of its adjacent business, like Human Resources and/or accounting since the value chain of the company is formed only by its core activities (Diaz Garrido et al. 2007)
Huawei’s processes and information technology tools supporting them is an important decision of the management because it contains a large number of IT equipment that has to be operated. The location, coordination and integration among all these equipment is a very important topic and it has to be carefully considered based on some other factors such specialized human resources, company’s facilities and scalable capacity. Avoiding considering these factors can lead to a decreased performance through less informed decision, lower speed of information transfer inside and outside the company, generating higher costs of operations and requiring supplementary working force (He and Chen 2008).
Infrastructure is essential for Huawei’s success in the long term period. Underestimating its importance can be seen as a major reason of not being able to keep a competitive position in the future. Huawei has to consider preponderantly the management practices, control systems and work force, as they are considered to be the most important infrastructural decisions (Diaz Garrido et al. 2007).
Speaking about management practices and work force, Muntean (2012) mentioned that these, together with cultural differences, are perceived as very important weak points that Huawei is facing nowadays. Long working hour requests, poor Chinese management style, high bureaucracy and weak communication can lead to an overall cost increase, lowering the productivity and slowing down the delivery of the product and solutions to the customers in the same time.
The company has to realize the fact that all the decision it takes will be embedded more or less in its new product capabilities, flexibility, dependability, responsiveness, quality and costs.
If at the beginning of its expansion in the foreign markets, Huawei built an impression of a company of very high flexibility, providing tailored solutions in a range of low prices (Nie et al. 2012), now, with the implementation of multiple procedures and restrictions, this strong point has been left behind, generating complaints from customers around the world (Huawei internal sources not disclosed due to confidentiality reasons). This can be perceived as a clear case of a top-down perspective implementation, without considering the customer requirements and therefore the bottom-up approach. The management of the company has to pay more attention to these aspects, assuring that the operations’ strategy can be shaped at a certain level by the operational reality (Slack et. al 2012)
Consistency between structural and infrastructural decisions has to be targeted by Huawei through capabilities evaluation, allowing a fast – on time – implementation. For doing this, the management of the Huawei has to show a high commitment level because implementing strategies according to a company’s capability can be more complicated than designing it. For implementing strategies, managers need to be sure that all the structural elements, technologies, quality leadership and other activities are in the right place, otherwise additional time will be needed for the implementation (Idris et. Al. 2010).
Time, individuals, location, groups (with different duties and roles who pulls the organization in different direction) that are involved in the decision making can influence these decisions. The management has to ensure that all the priorities are correctly and timely communicated everywhere and to all the involved parties and a strategic consensus has to be reached, avoiding an imbalance between structural and infrastructural decisions (Boyer and McDermott 1999; Leong 2008).
Huawei has also to pursue its strategic goal for the next years, the one of reaching a $100 billion revenues in the next 8-10 years. Zhao (2011) highlighted this together with the new segments from where the biggest part of the business can come, naming: cloud computing, managed services and enterprise sector. For achieving this, Huawei has to carefully consider which strategy is most suitable to deliver this diversification goal without losing its effectiveness. Making a careful selection between infrastructural and structural decisions, a new competitive operations strategy adapted to future needs has to be employed, one that has to consider also the fierce competition in the telecommunication market, as many other companies are already diversifying into other segments to enhance their competitiveness (Deflorin 2010). With all the challenges, achieving a wide diversification has a positive part also, because the company will face a reduced risk of being let out of business in case one or more markets fail.
A clear delimitation between useful and non useful products and services must also be foreseen by the company. Rarely required products should be forced to the end of their life cycle while more human resources, capabilities and capacities should be put in the products and services which are more successful and with bright perspective. Huawei’s management has to do a deep research regarding company’s strategic positioning in the context of a wider business perspective when making a strategic decision related to its portfolio (Anderson et al. 1989).
Ever changing market environment is influencing companies, forcing them sometimes to change their decisions in order to cope with the changes. To keep up with these changes, Huawei’s management has to be ready and show a willingness for operations strategies modifications. There is a high possibility of incompatibility between the policies, people and systems on one hand systems, facilities and technologies on the other hand when a company is incapable of controlling its business. The highlighted idea is that the company’s management has to be aware of a certain degree of variability between infrastructural and structural decisions which may not have a clear as well as delineated impact on dissimilar competitive dimensions (Deflorin 2010).
Because different decisions can influence some performances more and other less, the management has to consider and delimitate the decisions having a greater effect from the ones that do not by employing the right decisions between structural and infrastructural ones. Because the decisions with higher effect can affect the whole process of creating a strong operations strategy, companies should focus exclusively on the combinations bringing more benefits to it (Limsarun and Anurit 2011).
A company who achieve its success in one domain should always try to replicate its successful operations strategy in other domains, allowing it to reach a competitive edge over its competitors. Huawei already achieved an image of company delivering quality products at lower prices (Latham 2011; Fu and Fu 2012) but now it should focus in expanding its scope to the professional services domains. Despite the fact that in the last years Huawei managed to reach some managed service contracts, it seems this is done mostly due to requests of lower costs coming from operators, rather than quality needs (TelecomInsight 2012). This findings are also aligned with internal Huawei report of operator’s screening, highlighting that most of them are willing to purchase the products and solutions from us rather than our competitors while for the service deliveries is the other way around (Huawei internal sources not disclosed due to confidentiality reasons). Huawei has to enforce its integration of organizational structure, planning and control systems, human resource management and quality management since infrastructural elements are of a supporting influence to the flexibility of the service operations (Idris et. Al. 2010). Ultimately, improved utilization of resources can led to improved customer services, having as a final result a competitive position and increased profitability (Johansson and Olhager 2004).
Operational strategies enable companies to ensure high performances. However, strong operational strategies are only achieved or implemented when a company strikes a balance between its infrastructure and structural decisions. Failure to do this leads to a company overemphasizing on particular action while neglecting others. This can be disastrous as it may not be able to fully utilize its potential. The company may also not be able to succeed in the future as this creates an imbalance, for example, in allocation of resources. It can also lead to wastage. Therefore, Huawei needs to ensure a balance when dealing with its structural and infrastructure decisions.
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