University of Toledo BUAD 3020

1. Chapter 2
Strategy and Sustainability
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
• Compare how operations and supply chain
strategy relates to marketing and finance.
• Understand the competitive dimensions of
operations and supply chain strategy.
• Identify order winners and order qualifiers.
• Understand the concept of strategic fit.
• Describe how productivity is measured and
how it relates to operations and supply chain
processes.
• Explain how the financial markets evaluate a
firm’s operations and supply chain
performance.
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3. A Sustainable Strategy
• Shareholders: Those individuals or
companies that legally own one or
more shares of stock in the company
• Stakeholders: Those individuals or
organizations who are influenced,
either directly or indirectly, by the
actions of the firm
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4. Triple Bottom Line
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5. Triple Bottom Line Continued
• Social: pertains to fair and beneficial
business practices toward labor, the
community, and the region in which a
firm conducts is business
• Economic: the firm’s obligation to
compensate shareholders who provide
capital via competitive returns on
investment
• Environmental: the firm’s impact on
the environment
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6. What is Operations and Supply Strategy?
• Operations and supply strategy:
setting broad policies and plans for
using the recourses of a firm to best
support its long-term competitive
strategy
– Part of a planning process that coordinates
operational goals with those of the larger
organization
• Operations effectiveness relates to the
core business processes needed to run
the business
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7. Closed-Loop Strategy Process
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8. Closed-Loop Strategy Process Continued
• Activity 1 is performed at least yearly
and is where the overall strategy is
developed
• Activity 2 is where the overall strategy
is refined and updated as often as four
times a year
• Activity 3 is where operational plans
that relate to functional areas such as
marketing, manufacturing, and so on,
are coordinated
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9. Competitive Dimensions
• Price: make the product or deliver the service
cheap
• Quality: make a great product or deliver a
great service
• Delivery speed: make the product or deliver
the service quickly
• Delivery reliability: deliver it when promised
• Coping with changes in demand: change its
volume
• Flexibility and new product introduction
speed: change it
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10. Other Product-Specific Criteria
1. Technical liaison and support
2. Meeting a launch date
3. Supplier after-sale support
4. Environmental impact
5. Other dimensions
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11. Dealing with Trade-offs
• For example, if we reduce costs by
reducing product quality inspections,
we might reduce product quality
• For example, if we improve customer
service problem solving by cross-
training personnel to deal with a wider-
range of problems, they may become
less efficient at dealing with commonly
occurring problems
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12. Order Qualifiers and Winners
Defined
• Order qualifiers: the basic criteria that
permit the firms products to be
considered as candidates for purchase
by customers
• Order winners: the criteria that
differentiates the products and services
of one firm from another
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13. Strategic Fit: Fitting Operational Activities
to Strategy
• All the activities that make up a firm’s
operation relate to one another
• To be efficient, must minimize total cost
without compromising on customer
needs
• Activity-system maps show how a
company’s strategy is delivered
through a set of tailored activities
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14. Mapping Activity Systems at IKEA
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15. Productivity Measurement
• Productivity is a common measure of
how well an organization is using its
resources
– Fundamental to understanding operations-
related performance
• In its broadest sense productivity is
outputs divided by inputs
– To increase productivity, we want to make
this ratio as large as practical
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16. Productivity Measurement Continued
• Productivity is a relative measure
– Can be compared with similar operations
within its industry
– Can be compared over time
• Productivity may be expressed as:
1. Partial measures: output to one input
2. Multifactor measures: output to a group of
inputs
3. Total measures: output to all inputs
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17. Examples of Productivity Measures
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18. Partial Measures of Productivity
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19. How Does Wall Street Evaluate
Operations Performance?
• Comparing firms from an operations view is
important to investors
– Earnings growth is a function of profitability
– Profits can increase through higher sales or lower
costs
– Highly efficient firms shine during recession periods
• When evaluating large productivity, it is
important to look for unusual explanations
– Want to avoid one-time events
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20. Efficiency Measures Used by Wall Street
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