Operations Strategy and Competitiveness (Assignment # 2) : Price

Operations Strategy and Competitiveness
(Assignment # 2)
 Explain each of the key purchasing criteria.
Price – Firms need to understand how much the customer will pay for an item. If
products are seen to be very similar to one another, the customer will choose based on
price.
Quality – Many customers are willing to spend more in order to obtain a product with
specific characteristics or brand reputation. Not only are we considering a product with a
great design, but also, one that is long lasting and defect free.
Variety – There is a part of the market that value the opportunity to choose from a wide
variety of products. They look for options to change the style, color, dimensions or
technical characteristics.
Timeliness – Some customers care greatly about how long it will take to obtain the
product or service. For companies’ in the transportation business, this will be a key
necessity in order to gain new customers. This can also be related to the capability of the
company to deliver at the time that they had promised.
 Differentiate between order qualifiers and order winners.
Order qualifiers are those characteristics that are “the nonnegotiable

requirements” of the customer. Unless these characteristics are part of the product or
service package, the customer will look elsewhere. However, order qualifiers for a car
may include and minimum safety features, and air conditioning. An order winner is the
characteristic that wins the order. Often it may be a new technical feature that is
desirable. It could be a great warranty package or service agreement, or a better price.
 Explain the four competitive priorities and common strategies firms use to achieve
these priorities.
The competitive priorities are the ways in which the Operations Management
function focuses on the characteristics of cost, quality, flexibility and speed. The firm’s
customers will determine which of the competitive priorities are emphasized.
Cost – Firms whose customers prioritize price will be very interested in having
processes that enable them to keep their costs low. These companies are typically paying
close attention to identifying and eliminating waste within their operations. By reducing
defects, they will reduce costs. These firms will closely monitor and seek to improve their
productivity. Factors such as resource utilization and efficiency will be important.
Quality – Firms whose customers prioritize quality focus on creating both

excellent product and process design. Marketing and Engineering collaborate to design
products that meet customers’ requirements. Manufacturing must ensure that the process
is able to produce the products defect-free. It is only by having excellent design quality
and excellent process quality that the organization can ensure that customers will have
their expectations satisfied.
Flexibility – Firms whose customers prioritize variety must prioritize the ability
to change rapidly. Firms who value flexibility usually do so by carefully choosing
equipment that is general-purpose and able to perform multiple functions. They will often
strive to keep a small amount of spare capacity in case it is needed. Multi-skilled
employees who are able to work in various areas of the firm or operate multiple types of
technology are valued. These firms want to ensure that they can get new products to
market quickly and transition from making one product to another quickly. Keeping
machine set-ups fast is a critical way to do this. They also strive to be able to abruptly
modify the volume of their output in case the need or opportunity arises.
Delivery (reliability and speed) – Firms whose customers prioritize speed of

product/service delivery must be very efficient and quick at providing their products and
services. McDonald’s and Amazon are examples of this.
Firm’s
Strategy
Cost Minimizing product costs and waste, maximizing productivity
Quality Designing superior, durable products, minimizing defects

Adaptability in product design and output, utilizing general-purpose machinery
Flexibility and multi-skilled workers
Delivery Maintaining reliable and speedy delivery services
 Describe the term ‘core competency.’
Core competencies are the resources and capabilities that comprise the strategic
advantages of a business. A modern management theory argues that a business must
define, cultivate, and exploit its core competencies in order to succeed against the
competition. Core competency is a management theory that originated in a 1990 Harvard
Business Review article, “The Core Competence of the Corporation.” Core competencies
are the defining characteristics that make a business or an individual stand out from the
competition. Identifying and exploiting core competencies are as important for a new
business making its mark as for an established company trying to stay competitive. A
company’s people, physical assets, patents, brand equity, and capital all can make a
contribution to a company’s core competencies.
 Describe the three levels of strategy.
Corporate strategy refers to the overarching strategy of the diversified firm. Such

a corporate strategy answers the questions of “in which businesses should we compete?”
and “how does being in these businesses create synergy and/or add to the competitive
advantage of the corporation as a whole?”
Business strategy refers to the aggregated strategies of a single business firm or a

strategic business unit (SBU) in a diversified corporation. According to Michael Porter, a
firm must formulate a business strategy that incorporates either cost leadership,
differentiation or focus in order to achieve a sustainable competitive advantage and long-
term success in its chosen arenas or industries.
Functional strategies include marketing strategies, new product development

strategies, human resource strategies, financial strategies, legal strategies, supply-chain
strategies, and information technology management strategies. The emphasis is on short-
and medium-term plans and is limited to the domain of each department’s functional
responsibility. Each functional department attempts to do its part in meeting overall
corporate objectives, and hence to some extent their strategies are derived from broader
corporate strategies.
 Describe the six categories of operations strategy categories.
Positioning the Production System
Positioning the production system in manufacturing, means, selecting the type of

product design, type of production processing system and the type of finished goods
inventory policy for each major product line the business plan. Two basic types of
product design are custom and standardized, custom products are designed according to
the needs of individual customers, whereas, standardized products are produce models,
either continuously or in very large batches to meet the stable demand for longer period.
Focus of Factories and Service Facilities
An important element of operations strategy is a plan for each production facility

to be specialized in some way .Specialization of a production facility allows it to excel at
achieving a particular set of objectives .According to Wickham Skinner, A factory that
focuses on a narrow product mix for a particular market niche will outperform the
conventional plant, which attempts a broader mission?. This is because its equipment ,
supporting systems and procedures can concentrate on a limited task for one set of
customers, its costs and especially its overheads are likely to be lower than those of the
conventional plant .The key point is that, it is generally desirable for factories and service
facilities to be specialized in some way , so that , they will not be vulnerable to smaller or
more specialized competitors , that can provide customers with a better set of lower
costs , faster product or service delivery, on-time delivery, high product and service
quality , and flexibility .
Product/Service Design and Development
After the product is designed and developed it goes through various stages such as
introduction, growth, maturity and decline. During the development of new products such
activities like operations, marketing, and engineering functions are considered
The product design has a tremendous impact on product quality, production cost,
numbers of suppliers and levels of inventories.
Technology Selection and Process Development
An essential part of operations strategy is the determination of how products will

be produced. This involves deciding and planning every detail of production processes
and facilities. Combining high-technology equipment like robots, automated warehouse,
with conventional equipment and devising overall production schemes are the challenges
faced by operations manager today.
Allocation of Resources to Strategic Alternatives
Most companies have limited resources available for the production. Cash and
Capital funds, capacity, workers, engineering talent, machines, materials, and other
resources are available in varying degrees to each firm .These resources must be allocated
in ways that maximize the achievement of the objectives of operations.
Facility Planning, Capacity, Location and Layout
The long range capacity to produce the products /services for a firm is a part of
setting operations strategy .Capital is required for production capacity. The decisions
involved. Regarding the acquisition of land and production equipment, specialized
production technologies to be develop, and location of new factories have long lasting
effects and are subject to heavy risk.

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What are the four competitive priorities that firms focus on according to the passage?

What are the four competitive priorities that firms focus on according to the passage?

What are the six categories of operations strategy described in the passage?

What are the six categories of operations strategy described in the passage?

Operations Strategy and Competitiveness

 Explain each of the key purchasing criteria.

 Differentiate between order qualifiers and order winners.

Order qualifiers are those characteristics that are “the nonnegotiable

Quality – Firms whose customers prioritize quality focus on creating both

Delivery (reliability and speed) – Firms whose customers prioritize speed of

Quality Designing superior, durable products, minimizing defects

 Describe the term ‘core competency.’

 Describe the three levels of strategy.

Corporate strategy refers to the overarching strategy of the diversified firm. Such

Business strategy refers to the aggregated strategies of a single business firm or a

Functional strategies include marketing strategies, new product development

 Describe the six categories of operations strategy categories.

Positioning the Production System

Positioning the production system in manufacturing, means, selecting the type of

Focus of Factories and Service Facilities

An important element of operations strategy is a plan for each production facility

Product/Service Design and Development

Technology Selection and Process Development

An essential part of operations strategy is the determination of how products will

Allocation of Resources to Strategic Alternatives

Facility Planning, Capacity, Location and Layout

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