Operations
Management
Operations Strategy in a
Global Environment
Alan D. Smith
© 2006
Prentice
Hall, Inc. Hall, Inc.
©
2006
Prentice
2–1
Outline
 Global Company Profile: Boeing
 A Global View of Operations
 Cultural and Ethical Issues
 Developing Missions And Strategies
 Mission
 Strategy
© 2006 Prentice Hall, Inc.
2–2
Outline – Continued
 Achieving Competitive Advantage
Through Operations
 Competing On Differentiation
 Competing On Cost
 Competing On Response
 Ten Strategic OM Decisions
© 2006 Prentice Hall, Inc.
2–3
Outline – Continued
 Issues In Operations Strategy
 Research
 Preconditions
 Dynamics
 Strategy Development And
Implementation
 Identify Critical Success Factors
 Build and Staff the Organization
 Integrate OM with Other Activities
© 2006 Prentice Hall, Inc.
2–4
Outline – Continued
 Global Operations Strategy
Options
 International Strategy
 Multidomestic Strategy
 Global Strategy
 Transnational Strategy
© 2006 Prentice Hall, Inc.
2–5
Learning Objectives
When you complete this chapter, you
should be able to:
Identify or Define:
 Mission
 Strategy
 Ten decisions of OM
 Multinational corporation
© 2006 Prentice Hall, Inc.
2–6
Learning Objectives
When you complete this chapter, you
should be able to:
Describe or Explain:
 Specific approaches used by OM
to achieve strategies
 Differentiation
 Low cost
 Response
© 2006 Prentice Hall, Inc.
2–7
Learning Objectives
When you complete this chapter, you
should be able to:
Describe or Explain:
 Four global operations strategies
 Why global issues are important
© 2006 Prentice Hall, Inc.
2–8
Global Strategies
 Boeing – sales and production are
worldwide
 Benetton – moves inventory to stores
around the world faster than its
competition by building flexibility into
design, production, and distribution
 Sony – purchases components from
suppliers in Thailand, Malaysia, and
around the world
© 2006 Prentice Hall, Inc.
2–9
Global Strategies
 Volvo – considered a Swedish company
but it is controlled by an American
company, Ford. The current Volvo S40 is
built in Belgium and shares its platform
with the Mazda 3 built in Japan and the
Ford Focus built in Europe.
 Haier – A Chinese company, produces
compact refrigerators (it has one-third of
the US market) and wine cabinets (it has
half of the US market) in South Carolina
© 2006 Prentice Hall, Inc.
2 – 10
Some Multinational
Corporations
Home
Country
% Sales
Outside
Home
Country
% Assets
Outside
Home
Country
% Foreign
Workforce
Citicorp
USA
34
46
NA
ColgatePalmolive
USA
72
63
NA
Dow
Chemical
USA
60
50
NA
Gillette
USA
62
53
NA
Honda
Japan
63
36
NA
USA
57
47
51
Company
IBM
© 2006 Prentice Hall, Inc.
2 – 11
Some Multinational
Corporations
Home
Country
% Sales
Outside
Home
Country
% Assets
Outside
Home
Country
% Foreign
Workforce
Britain
78
50
NA
Switzerland
98
95
97
Philips
Netherlands
Electronics
94
85
82
Siemens
Germany
51
NA
38
Unilever
Britain &
Netherlands
95
70
64
Company
ICI
Nestle
© 2006 Prentice Hall, Inc.
2 – 12
Boeing Suppliers (787)
Firm
Dassault
Country
France
Messier-Bugatti
Thales
France
France
Diehl
FR-HiTemp
Germany
UK
Smiths Aerospace
UK
© 2006 Prentice Hall, Inc.
Component
Design and
PLM software
Landing gear
Electrical power
conversion system
and integrated
standby flight display
Interior lighting
Fuel pumps
and valves
Central computer
system
2 – 13
Boeing Suppliers (787)
Firm
BAE SYSTEMS
Alenia Aeronautics
Country
UK
Italy
Toray Industries
Japan
Fuji Heavy
Industries
Kawasaki Heavy
Industries
Japan
© 2006 Prentice Hall, Inc.
Japan
Component
Electronics
Upper center
fuselage &
horizontal stabilizer
Carbon fiber for
wing and tail units
Center wing box
Forward fuselage,
fixed section of wing,
landing gear well
2 – 14
Boeing Suppliers (787)
Firm
Teijin Seiki
Mitsubishi Heavy
Industries
Chengdu Aircraft
Group
Hafei Aviation
© 2006 Prentice Hall, Inc.
Country
Japan
Japan
Component
Hydraulic actuators
Wing box
China
Rudder
China
Parts
2 – 15
$20,000 Pontiac LeMans
• About $6,000 heads to South Korea for auto’s
assembly
• $3,500 goes to Japan for engines, axles, and
electronics
• $1,500 goes to Germany for design
• $800 goes to Taiwan, Singapore, and Japan for smaller
parts
• $500 heads to England for marketing
• $100 goes to Ireland for information technology
• the rest @ $7,600, goes to GM and its US bankers,
insurance agents, and attorneys.
3-14
© 2006 Prentice Hall, Inc.
2 – 16
Reasons to Globalize
Reasons to Globalize
Tangible  Reduce costs (labor, taxes, tariffs, etc.)
Reasons  Improve supply chain
 Provide better goods and services
 Understand markets
Intangible  Learn to improve operations
Reasons  Attract and retain global talent
Figure 2.1
© 2006 Prentice Hall, Inc.
2 – 17
Reduce Costs
 Foreign locations with lower wage
rates can lower direct and indirect
costs
 Maquiladoras
 World Trade Organization (WTC)
 North American Free Trade
Agreement (NAFTA)
 APEC, SEATO, MERCOSUR
 European Union (EU)
© 2006 Prentice Hall, Inc.
2 – 18
Improve the Supply Chain
 Locating facilities closer to
unique resources
 Auto design to California
 Athletic shoe production to China
 Perfume manufacturing in France
© 2006 Prentice Hall, Inc.
2 – 19
Provide Better Goods
and Services
 Objective and subjective
characteristics of goods and
services
 On-time deliveries
 Cultural variables
 Improved customer service
© 2006 Prentice Hall, Inc.
2 – 20
Understand Markets
 Interacting with foreign customer
and suppliers can lead to new
opportunities
 Cell phone design from Europe
 Cell phone fads from Japan
 Extend the product life cycle
© 2006 Prentice Hall, Inc.
2 – 21
Learn to Improve Operations
 Remain open to the free flow of
ideas
 General Motors partnered with a
Japanese auto manufacturer to
learn
 Scandinavian design ideas have
been used to improve equipment
design and layout
© 2006 Prentice Hall, Inc.
2 – 22
Attract and Retain Global
Talent
 Offer better employment
opportunities
 Better growth opportunities and
insulation against unemployment
 Relocate unneeded personnel to
more prosperous locations
 Incentives for people who like to
travel
© 2006 Prentice Hall, Inc.
2 – 23
Cultural and Ethical Issues
 Cultures can be quite different
 Attitudes can be quite different
towards
 Punctuality
 Thievery
 Lunch breaks
 Bribery
 Environment
 Child labor
 Intellectual
property
© 2006 Prentice Hall, Inc.
2 – 24
You May Wish To Consider
 National literacy rate
 Work ethic
 Rate of innovation
 Tax rates
 Rate of technology
change
 Inflation
 Number of skilled
workers
 Political stability
 Product liability laws
 Availability of raw
materials
 Interest rates
 Population
 Export restrictions
 Number of miles of
highway
 Variations in language
 Phone system
© 2006 Prentice Hall, Inc.
2 – 25
Match Product & Parent
 Braun Household
Appliances
1. Volkswagen
 Firestone Tires
2. Bridgestone
 Godiva Chocolate
3. Campbell Soup
 Haagen-Dazs Ice
Cream
4. Ford Motor Company
 Jaguar Autos
 MGM Movies
 Lamborghini Autos
 Alpo Petfoods
© 2006 Prentice Hall, Inc.
5. Gillette
6. Nestlé
7. Pillsbury
8. Sony
2 – 26
Match Product & Parent
 Braun Household
Appliances
1. Volkswagen
 Firestone Tires
2. Bridgestone
 Godiva Chocolate
3. Campbell Soup
 Haagen-Dazs Ice
Cream
4. Ford Motor Company
 Jaguar Autos
 MGM Movies
 Lamborghini Autos
 Alpo Petfoods
© 2006 Prentice Hall, Inc.
5. Gillette
6. Nestlé
7. Pillsbury
8. Sony
2 – 27
Match Product & Country
 Braun Household
Appliances
 Firestone Tires
1. Great Britain
 Godiva Chocolate
2. Germany
 Haagen-Dazs Ice
Cream
 Jaguar Autos
 MGM Movies
3. Japan
4. United States
5. Switzerland
 Lamborghini Autos
 Alpo Petfoods
© 2006 Prentice Hall, Inc.
2 – 28
Match Product & Country
 Braun Household
Appliances
 Firestone Tires
1. Great Britain
 Godiva Chocolate
2. Germany
 Haagen-Dazs Ice
Cream
 Jaguar Autos
 MGM Movies
3. Japan
4. United States
5. Switzerland
 Lamborghini Autos
 Alpo Petfoods
© 2006 Prentice Hall, Inc.
2 – 29
Developing Missions and
Strategies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there
© 2006 Prentice Hall, Inc.
2 – 30
Mission
 Mission - where are
you going?
 Organization’s
purpose for being
 Answers ‘What do
we provide society?’
 Provides boundaries
and focus
© 2006 Prentice Hall, Inc.
2 – 31
FedEx
FedEx is committed to our People-Service-Profit
philosophy. We will produce outstanding financial
returns by providing total reliable, competitively
superior, global air-ground transportation of high
priority goods and documents that require rapid,
time-certain delivery. Equally important, positive
control of each package will be maintained using real
time electronic tracking and tracing systems. A
complete record of each shipment and delivery will
be presented with our request for payment. We will
be helpful, courteous, and professional to each other
and the public. We will strive to have a completely
satisfied customer at the end of each transaction.
Figure 2.2
© 2006 Prentice Hall, Inc.
2 – 32
Merck
The mission of Merck is to provide
society with superior products and
services - innovations and solutions
that improve the quality of life and
satisfy customer needs - to provide
employees with meaningful work and
advancement opportunities and
investors with a superior rate of return
Figure 2.2
© 2006 Prentice Hall, Inc.
2 – 33
Hard Rock Café
Our Mission: To spread the spirit of Rock ‘n’
Roll by delivering an exceptional
entertainment and dining experience. We
are committed to being an important,
contributing member of our community and
offering the Hard Rock family a fun, healthy,
and nurturing work environment while
ensuring our long-term success.
Figure 2.2
© 2006 Prentice Hall, Inc.
2 – 34
Arnold Palmer Hospital
Arnold Palmer Hospital is a healing
environment providing family-centered
care with compassion, comfort and
respect… when it matters the most.
Figure 2.2
© 2006 Prentice Hall, Inc.
2 – 35
Factors Affecting Mission
Philosophy
and Values
Profitability
and Growth
Environment
Mission
Customers
Public Image
Benefit to
Society
© 2006 Prentice Hall, Inc.
2 – 36
Strategic Process
Organization’s
Mission
Functional
Area Missions
Marketing
© 2006 Prentice Hall, Inc.
Operations
Finance/
Accounting
2 – 37
Strategy
 Action plan to
achieve mission
 Functional areas
have strategies
 Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
© 2006 Prentice Hall, Inc.
2 – 38
Strategies for Competitive
Advantage
 Differentiation – better, or at least
different
 Cost leadership – cheaper
 Quick response – more
responsive
© 2006 Prentice Hall, Inc.
2 – 39
Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customer’s perception of
value
 Safeskin gloves – leading edge products
 Walt Disney Magic Kingdom –
experience differentiation
 Hard Rock Cafe – theme experience
© 2006 Prentice Hall, Inc.
2 – 40
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
 Wal-Mart – small overheads, shrinkage,
distribution costs
 Franz Colruyt – no bags, low light, no
music, doors on freezers
© 2006 Prentice Hall, Inc.
2 – 41
Competing on Response
 Flexibility is matching market changes in
design innovation and volumes
 Institutionalization at Hewlett-Packard
 Reliability is meeting schedules
 German machine industry
 Timeliness is quickness in design,
production, and delivery
 Johnson Electric, Bennigan’s, Motorola
© 2006 Prentice Hall, Inc.
2 – 42
OM’s Contribution to Strategy
Operations
Decisions
Product
Quality
Process
Examples
Specific
Strategy Used
Competitive
Advantage
FLEXIBILITY
Sony’s constant innovation
of new products………………………………....Design
HP’s ability to follow
the printer market………………………………Volume
Southwest Airlines No-frills service……..…..LOW COST
Location
Layout
Human
resource
Supply-chain
Inventory
Scheduling
Maintenance
© 2006 Prentice Hall, Inc.
DELIVERY
Pizza Hut’s five-minute
guarantee at lunchtime…………………..…..……..Speed
Federal Express’s “absolutely,
positively on time”………………………..….Dependability
Differentiation
(Better)
Response
(Faster)
QUALITY
Motorola’s automotive products
ignition systems…………………………......Conformance
Motorola’s pagers………………………..….Performance
IBM’s after-sale service
on mainframe computers……....AFTER-SALE SERVICE
Fidelity Security’s broad
line of mutual funds………….BROAD PRODUCT LINE
Cost
leadership
(Cheaper)
Figure 2.4
2 – 43
10 Strategic OM Decisions
 Goods and service
design
 Human resource
and job design
 Quality
 Supply-chain
management
 Process and
capacity design
 Inventory
 Location selection
 Scheduling
 Layout design
 Maintenance
© 2006 Prentice Hall, Inc.
2 – 44
Goods and Services and
the 10 OM Decisions
Operations
Decisions
Goods and
service
design
Goods
Services
Product is usually Product is not
tangible
tangible
Quality
Many objective
standards
Many subjective
standards
Process
and
capacity
design
Customers not
involved
Customer may be
directly involved
Capacity must
match demand
Table 2.1
© 2006 Prentice Hall, Inc.
2 – 45
Goods and Services and
the 10 OM Decisions
Operations
Decisions
Location
selection
Goods
Near raw
materials and
labor
Services
Near customers
Layout
design
Production
efficiency
Enhances product
and production
Human
resources
and job
design
Technical skills,
Interact with
constant labor
customers, labor
standards, output standards vary
based wages
Table 2.1
© 2006 Prentice Hall, Inc.
2 – 46
Goods and Services and
the 10 OM Decisions
Operations
Decisions
Goods
SupplyRelationship
chain mgmt critical to final
product
Services
Important, but
may not be
critical
Inventory
Raw materials,
work-in-process,
and finished
goods may be
held
Cannot be stored
Scheduling
Level schedules
possible
Meet immediate
customer demand
Table 2.1
© 2006 Prentice Hall, Inc.
2 – 47
Goods and Services and
the 10 OM Decisions
Operations
Decisions
Goods
Services
Maintenance Often preventive Often “repair” and
and takes place
takes place at
at production site customer’s site
Table 2.1
© 2006 Prentice Hall, Inc.
2 – 48
Process Design
Variety of Products
High
Moderate
Process-focused
Mass Customization
JOB SHOPS
Customization at high
Volume
(Print shop, emergency
room, machine shop,
(Dell Computer’s PC)
fine dining
Repetitive (modular)
focus
ASSEMBLY LINE
(Cars, appliances,
TVs, fast-food
Product focused
restaurants)
CONTINUOUS
(steel, beer, paper,
bread, institutional
kitchen)
Low
Low
© 2006 Prentice Hall, Inc.
Moderate
Volume
High
2 – 49
Operations Strategies for
Two Drug Companies
Competitive
Advantage
Brand Name Drugs, Inc.
Generic Drug Corp.
Product Differentiation
Low Cost
Product
Heavy R&D; labs; focus
Selection and on development in a
Design
broad range of drug
categories
Quality
Low R&D; focus on
development of generic
drugs
Major priority, exceed
Meets regulatory
regulatory requirements requirements on a
country by country
basis
Table 2.2
© 2006 Prentice Hall, Inc.
2 – 50
Operations Strategies for
Two Drug Companies
Competitive
Advantage
Process
Location
Brand Name Drugs, Inc.
Generic Drug Corp.
Product Differentiation
Low Cost
Product and modular
process; long
production runs in
specialized facilities;
build capacity ahead of
demand
Still located in the city
where it was founded
Process focused;
general processes; job
shop approach, short
production runs; focus
on high utilization
Recently moved to lowtax, low-labor-cost
environment
Table 2.2
© 2006 Prentice Hall, Inc.
2 – 51
Operations Strategies for
Two Drug Companies
Competitive
Advantage
Brand Name Drugs, Inc.
Generic Drug Corp.
Product Differentiation
Low Cost
Scheduling
Centralized production
planning
Many short-run
products complicate
scheduling
Layout
Layout supports
automated productfocused production
Layout supports
process-focused job
shop practices
Table 2.2
© 2006 Prentice Hall, Inc.
2 – 52
Operations Strategies for
Two Drug Companies
Competitive
Advantage
Brand Name Drugs, Inc.
Generic Drug Corp.
Product Differentiation
Low Cost
Human
Resources
Hire the best;
nationwide searches
Very experienced top
executives; other
personnel paid below
industry average
Supply Chain
Long-term supplier
relationships
Tends to purchase
competitively to find
bargains
Table 2.2
© 2006 Prentice Hall, Inc.
2 – 53
Operations Strategies for
Two Drug Companies
Competitive
Advantage
Brand Name Drugs, Inc.
Generic Drug Corp.
Product Differentiation
Low Cost
Inventory
High finished goods
inventory to ensure all
demands are met
Maintenance
Highly trained staff;
extensive parts
inventory
Process focus drives up
work-in-process
inventory; finished
goods inventory tends
to be low
Highly trained staff to
meet changing demand
Table 2.2
© 2006 Prentice Hall, Inc.
2 – 54
Managing Global Service
Operations
Probably requires a different
perspective on:
 Capacity planning
 Location planning
 Facilities design and layout
 Scheduling
© 2006 Prentice Hall, Inc.
2 – 55
Characteristics of
High ROI Firms
 High quality product
 High capacity utilization
 High operating effectiveness
 Low investment intensity
 Low direct cost per unit
From the PIMS program of the Strategic Planning Institute
© 2006 Prentice Hall, Inc.
2 – 56
Strategic Options to Gain a
Competitive Advantage
28% - Operations Management
18% - Marketing/distribution
17% - Momentum/name recognition
16% - Quality/service
14% - Good management
4% - Financial resources
3% - Other
© 2006 Prentice Hall, Inc.
2 – 57
Elements of Operations
Management Strategy







Low-cost product
Product-line breadth
Technical superiority
Product characteristics/differentiation
Continuing product innovation
Low-price/high-value offerings
Efficient, flexible operations adaptable to
consumers
 Engineering research development
 Location
 Scheduling
© 2006 Prentice Hall, Inc.
2 – 58
Preconditions
One must understand:
 Strengths and weaknesses of competitors and
possible new entrants into the market
 Current and prospective environmental,
technological, legal, and economic issues
 The product life cycle
 Resources available within the firm and within
the OM function
 Integration of OM strategy with company’s
strategy and with other functional areas
© 2006 Prentice Hall, Inc.
2 – 59
Dynamics of
Strategic Change
 Changes within the organization




Personnel
Finance
Technology
Product life
 Changes in the environment
© 2006 Prentice Hall, Inc.
2 – 60
Product Life Cycle
Company Strategy/Issues
Introduction
Growth
Maturity
Best period to
increase market
share
Practical to change
price or quality
image
Poor time to
change image,
price, or quality
R&D engineering is
critical
Strengthen niche
Competitive costs
become critical
Defend market
position
CD-ROM
Internet
Sales
Decline
Cost control
critical
Fax machines
Drive-through
restaurants
Color printers
Flat-screen
monitors
DVD
3 1/2”
Floppy
disks
Figure 2.5
© 2006 Prentice Hall, Inc.
2 – 61
Product Life Cycle
OM Strategy/Issues
Introduction
Product design
and
development
critical
Frequent
product and
process design
changes
Growth
Forecasting
critical
Product and
process
reliability
Maturity
Standardization
Less rapid
product changes
– more minor
changes
Competitive
product
improvements
and options
Optimum
capacity
High production
costs
Shift toward
product focus
Long production
runs
Limited models
Enhance
distribution
Product
improvement
and cost cutting
Short production
runs
Attention to
quality
Increasing
stability of
Increase capacity process
Decline
Little product
differentiation
Cost
minimization
Overcapacity
in the
industry
Prune line to
eliminate
items not
returning
good margin
Reduce
capacity
Figure 2.5
© 2006 Prentice Hall, Inc.
2 – 62
Strategy Development and
Implementation
 Identify critical 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
© 2006 Prentice Hall, Inc.
2 – 63
Strategy Development Process
Environmental Analysis
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
Determine 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, aftersale service, broad product lines.
© 2006 Prentice Hall, Inc.
Figure 2.6
2 – 64
SWOT Analysis
Mission
Internal
Strengths
External
Opportunities
Analysis
Internal
Weaknesses
External
Threats
Strategy
© 2006 Prentice Hall, Inc.
2 – 65
Critical Success Factors
Marketing
Service
Distribution
Promotion
Channels of distribution
Product positioning
(image, functions)
Finance/Accounting
Production/Operations
Leverage
Cost of capital
Working capital
Receivables
Payables
Financial control
Lines of credit
Decisions
Sample Options
Chapter
Product
Quality
Process
Location
Layout
Human resource
Supply chain
Inventory
Schedule
Maintenance
Customized, or standardized
Define customer expectations and how to achieve them
Facility size, technology, capacity
Near supplier or near customer
Work cells or assembly line
Specialized or enriched jobs
Single or multiple suppliers
When to reorder, how much to keep on hand
Stable or fluctuating production rate
Repair as required or preventive maintenance
5
6, S6
7, S7
8
9
10, S10
11, S11
12, 14, 16
13, 15
17
Figure 2.7
© 2006 Prentice Hall, Inc.
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Activity Mapping
Courteous, but
Limited Passenger
Service
Lean,
Productive
Employees
Short Haul, Point-toPoint Routes, Often to
Secondary Airports
Competitive Advantage:
Low Cost
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2006 Prentice Hall, Inc.
2 – 67
Activity Mapping
Courteous, but
Limited Passenger
Service
Lean,
Productive
Employees
Short Haul, Point-toPoint Routes, Often to
Secondary Airports
Automated ticketing machines
Competitive
Advantage:
No seat assignments
Low Cost
No baggage transfers
High
Aircraft
Utilization
No meals (peanuts)
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2006 Prentice Hall, Inc.
2 – 68
Activity Mapping
Courteous, but
Limited Passenger
Service
No meals (peanuts)
Lean,
Lower gate costs at
Productive
secondary airports
Employees
Short Haul, Point-toPoint Routes, Often to
Secondary Airports
High number of flights
Competitive Advantage:
reduces employee
idleCost
time
Low
between flights
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2006 Prentice Hall, Inc.
2 – 69
Activity Mapping
Courteous,
but
High number
of flights
Limited Passenger
reduces employee
idle time
Service
between flights
Lean,
Saturate a city with flights,
Productive
lowering administrative
Employees
Short Haul, Point-toPoint Routes, Often to
Secondary Airports
costs (advertising, HR, etc.)
Competitive
Advantage:
per passenger
for that
city
Low Cost
Pilot training required on
Highonly one type of aircraft
Aircraft
Reduced maintenance
Utilization
Standardized
inventory required
because
Fleet of
Boeing
of only one type
ofAircraft
aircraft
737
Frequent,
Reliable
Schedules
Figure 2.8
© 2006 Prentice Hall, Inc.
2 – 70
Activity Mapping
Pilot training required on
Courteous,
butaircraft
onlyLimited
one
type
of
Passenger
Service
Reduced
maintenance
inventory required because
Lean,
Short Haul, Point-toProductive of only one type of aircraft
Point Routes, Often to
Employees
Secondary Airports
Excellent supplier relations
with Boeing
has aided
Competitive
Advantage:
financing
Low
Cost
High
Aircraft
Utilization
Standardized
Fleet of Boeing
737 Aircraft
Frequent,
Reliable
Schedules
Figure 2.8
© 2006 Prentice Hall, Inc.
2 – 71
Activity Mapping
Courteous, but
Limited
Passenger
Reduced
maintenance
Service
Lean,
Productive
Employees
Flexible
union
contracts
High
Aircraft
Utilization
inventory required because
of only one type of aircraft
Short Haul, Point-toPoint Routes, Often to
Flexible employeesSecondary
and
Airports
standard planes aid
Competitive Advantage:
scheduling
Low Cost
Maintenance personnel
trained only one type of
Frequent,
Reliable
aircraft
Schedules
Standardized
20-minute
gate turnarounds
Fleet of Boeing
737 Aircraft
Figure 2.8
© 2006 Prentice Hall, Inc.
2 – 72
Activity Mapping
Automated ticketing
Courteous,
but
machines
Limited Passenger
Service
Empowered
employees
Lean,
Productive
Employees
High employee
Short Haul, Point-toPoint Routes, Often to
compensation
Secondary Airports
Hire for attitude, then train
Competitive Advantage:
High
level of stock
Low
Cost
ownership
High
Aircraft
Utilization
High number of flightsFrequent,
Reliable
reduces employee idle time
Schedules
Standardized
Fleetbetween
of Boeing flights
737 Aircraft
Figure 2.8
© 2006 Prentice Hall, Inc.
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High
Four International
Operations
Strategies
International
Strategy
Cost Reduction Considerations
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation)
2 – 74
Four International
Operations Strategies
Cost Reduction Considerations
High
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation)
2 – 75
Four International
Global
Operations
Strategies
Strategy
High
Cost Reduction Considerations
 Standardized
product
 Economies of scale
 Cross-cultural
learning
Examples
 Import/export or
license existing
Texas Instruments
product
Examples Caterpillar
U.S. Steel
Otis Elevator
Harley Davidson
International Strategy
Low
Low
High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation)
2 – 76
Four International
Operations Strategies
High
Global Strategy
Cost Reduction Considerations
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation)
2 – 77
Four International
Multidomestic
Operations
Strategies
Strategy
High
 Use existing
 Standardizeddomestic
product
model
 Economies of scale
 Cross-cultural learning
globally
Examples
Franchise, joint
Texas 
Instruments
Caterpillar
Otis Elevatorventures,
subsidiaries
Cost Reduction Considerations
Global Strategy
International Strategy
Examples
Heinz
Examples McDonald’s
U.S. Steel
Harley Davidson
The Body Shop
Hard Rock Cafe
 Import/export or
license existing
product
Low
Low
High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation)
2 – 78
Four International
Operations Strategies
High
Global Strategy
Cost Reduction Considerations
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
International Strategy
 Import/export or
license existing
product
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
U.S. Steel
Harley Davidson
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
Low
Low
High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation)
2 – 79
Four International
Transnational
Operations
Strategies
Strategy
High
 Move material,
people, ideas
Examples
across national
Texas Instruments
Caterpillar boundaries
Otis Elevator
 Economies of scale
 Cross-cultural
International Strategy
Multidomestic Strategy
 Use existing
learning
 Import/export
or
domestic model globally
Global Strategy
Cost Reduction Considerations
 Standardized product
 Economies of scale
 Cross-cultural learning
license existing
product
Examples
Coca-Cola
Nestlé
Examples
U.S. Steel
Harley Davidson
Low
 Franchise, joint ventures,
subsidiaries
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
Low
High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation)
2 – 80
Four International
Operations Strategies
Cost Reduction Considerations
High
Global Strategy
Transnational Strategy
 Standardized product
 Economies of scale
 Cross-cultural learning
 Move material, people, ideas
across national boundaries
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
Examples
Coca-Cola
Nestlé
International Strategy
 Import/export or
license existing
product
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
U.S. Steel
Harley Davidson
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
Low
Low
High
Local Responsiveness Considerations
© 2006 Prentice Hall, Inc.
(Quick Response and/or Differentiation)
2 – 81
Ranking Corruption
Rank
1
2
5
7
9
11
12
15
16
17
17
24
35
64
71
© 2006 Prentice Hall, Inc.
Country
Finland
New Zealand
Singapore
Switzerland
Australia
United Kingdom
Canada
Germany
Hong Kong
Ireland
USA
Japan
Taiwan
Mexico
China
2004 CPI Score (out of 10)
9.7
Good
9.6
9.3
9.1
8.8
8.6
8.5
8.2
8.0
7.5
7.5
6.9
5.6
Not So
3.6
Good
3.4
2 – 82
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Operations Strategy in a Global Environment