this class is concerned with operation strategy in a global environment now the class is a little long so therefore I advise you to have a break from time to time make your own notes stop the video rewind it when did forward when did backwards make sure you keep up with what's been said and as I said make your own notes so let's start and look at operation strategy in a global environment first of all let's look at the reasons to globalize well there are tangible reasons and if you like intangible reasons first of all to reduce costs labor taxes tariffs and so on so one drive to globalize may be based on costs and trying to find ways of reducing costs whilst entering another market it could be to improve the supply chain perhaps the company receives raw materials or components from overseas and perhaps the best way to deal with this trading relationship is to globalize to open a branch in another country or to form a closer relationship with a company in that country so supply chain issues merely to globalization it may be a desire to provide better goods and services the company may be concerned about the quality of its goods the quality of its products on the market and therefore which is to have more hands-on control more hands-on involvement with the production and distribution of the goods there are different types of globalization having said that I'm here suggesting that this would be a company opening a branch overseas or forming some sort of alliance with a company over scenes it could be simply importing the goods from an overseas supplier and perhaps preparing them for market domestically it's important to understand the markets and that may be a reason to globalize it may be a reason to for a company to become involved in global trading because it wants to understand the markets and understand the opportunities that are available elsewhere so it could be the case that it simply wants to understand the markets it could be that it wants to improve operations sometimes companies become involved with other companies simply because they want to learn the technology they want to learn the processes they want to understand how the work is conducted so there is an incentive on the part of companies to become involved internationally with each other so as to improve knowledge and improve understanding of processes technical processes managerial processes human relations and so on and it's learning and perhaps best described as learning by doing it could be to attract and retain global talent sometimes parts of the workforce may come from overseas from another country and they're thinking of going back to work in their own country or whatever and company may think it's it's worthwhile setting up a plant in that other country so as to keep its talented workforce a possibility so what we've got here is a range of reasons the white globalization may take place now developing missions and strategies well a mission statement tells an organization where it is going the mission statement is a very short statement which simply tells the reader what the organization is about what it's doing where it's going what are its ambitions are so it could be a short paragraph and that is simply the the mission statement the strategy tells the organization how to get there so the mission is talking about where it's going and the strategy is talking about how to get there now that's one interpretation you'll see in some books that the strategy also sets out the direction particularly strategic thinking and strategic planning these issues normally set out the route as well as the the way in which the company can can achieve its objectives but this particular view is that the mission statement shows where the company is going and the strategy tells the company how to get there it may be that we need to distinguish in this case between strategic planning and operational planning operational planning is more involved in how to get there how to make the product how to organize production how to organize the company and so on so organized sorry operations planning may be more appropriate in this case so there's a slight controversy over the meaning of those two terms I tend to see it as strategic planning incorporates the direction in which the company wants to move as well as the issues it's confronting and some indication of how it's going to deal with these so the strategic plan is quite an elaborate document indicating where the doctor where the company is going and the mission statement is really a summary of the the strategic plan but as I said some writers think a lot differently and some who are very well-known in managerial circles will tend to go the route we've got on the slide at the moment so let's stick with this for the morning and see where it takes us now start with the mission the mission well the focus and direction of the organization that's what the mission is it's what the organization is trying to do and where it wants to be in terms of its marketing product development investment plans and so on so it sets out where the organization is and where it wants to be it's the organization's purpose for being why does the organization exist well the reasons why it exists are really specified in the mission statement that's why the organization exists it answers what do we provide society what do we provide the customer what are the products how important are the products how important is the company what's the scale of the company how many people does it imply how does it perform visa vie other companies what are its ambitions where does it want to be and so on so it answers or it attempts to answer that sort of question it provides boundaries and focus for the businesses it specifies exactly what the business is doing it specifies the limitations of the business and it specifies the focus what is what's it concentrating on so it says where the boundaries are where where the the company starts and ends what sort of items does it produce where is it located what's the size of the business what are its objectives so the mission statement is as I said earlier normally am quite a brief statement perhaps a paragraph perhaps 50 80 100 words and it should specify clearly what the company is what it's doing the direction which it's moving and what its plans for the future are factors affecting the mission well we start with the mission and it should be very little surprised if we're looking at customers because businesses do look to customers its customers who buy the product and hence the company generates the revenue from the customers which enables it to continuing in existence so it's the customers and how the customers see the mission and how they're treated according to the mission statement what does the company think of the customers what's the company trying to do generally speaking companies will specify that they are trying to supply good value for money good quality product produced in an ethical fashion what's the environmental impact of the business how does it cope with the environment what are its philosophy and values what is it was it attempting to do is it attempting to make lots of profit and that's it or is it attempting to provide a quality product to customers and hope to exist in the market for a long period creating employment being a part of the community making profit but at the same time presenting itself in a way that makes it acceptable as a part of that society it's acceptable because of its values because of the way it runs because of the way it treats its workers and its customers it's careful about where it buys its raw materials and its components to make sure that there's no abuse within its own supply chain so what are its philosophy and values and what does it think about profitability and growth does it have ambitions to grow and if it does in what direction does it want to grow the existing product and does it want to expand overseas does it want to how does it want to grow and how does it generate the profitability to finance the growth what's the public image of the business how do people see the business do they see it as a good business a responsible business one that's careful with the environment careful with its workers careful with its image and out of all of these comes the benefits to society the benefits to having the company as a part of the society now sample missions well sample company mission could be to let's say something like to produce and deliver an innovative growing and profitable worldwide marketing business that exceeds our customers expectations so it doesn't say a lot if we think about it is it its innovative it's growing its profitable its worldwide it's a marketing business and it tries to meet customer expectations and exceed the customers expectations now a simple operations management mission is to produce products consistent with the company's mission as the worldwide low-cost manufacturer so you see we have the mission statement and then we have if you like operational mission statements we could have mission statements for different departments within the business all of these individual ones add up some up to the company mission statement sample operations management Department missions well product design to design and produce products and services with outstanding quality and inherent customer value so the operations management have this desire to create products and services without standing quality their commitment to quality is the focus of their mission statement they could also have quality management to attain the exceptional value that is consistent with our company's mission and marketing objectives by close attention to design procurement production and field service operations in other words it's a part of their mission it's a part of the operations management mission to supply good quality and to ensure this good quality management to enforce their desire to be seen as a supplier of quality products in the terms of the process design to determine design and produce the production process and equipment that will be compatible with low-cost product high quality and good quality of work life at economical cost presumably by economical cost it means low cost we can see here that the idea is that the operations and management department have got its own set of mission objectives and what these are doing are contributing to the overall mission statement of the organization so the operations management will have one but the HR department should have a mission statement as well and different departments within the company will have their own individual statements all contributing towards the the overview which is the the company or the organization's mission statement so we have their sample organization management department missions the location to locate design and build efficient and economical facilities that will yield high value to the company its employees and the community layout design to achieve through skill imagination and resourcefulness in layout and work methods production effectiveness and efficiency while supporting a high quality of work life human resources to provide a good quality of work life with well-designed safe rewarding jobs stable employment and equitable pay in exchange for outstanding individual contribution from employees at all levels so the operations management department have different different aspects to it as location layout design human resource product design process design and each one of these may have its own if you like mini mission statement and as I said earlier all of these were then contribute towards the overall mission statement of the organization so the various departments will have their mission statements and they may break down within the department as in the example we've got here the operations management department breaks down its missions into different headings location layout design human resources and so on product design process layout so on and so on so all of these contribute towards the company mission statement now you'll note something else here about the mission statement says they're at a very high level of generality there is no detail here these are aspirational to locate design and build efficient and economical facilities that will yield high value to the company its employees and the community very general statement there is no there are no benchmarks here there's no clear objective set it doesn't say it will build a facility of so many square meters and it doesn't say it's going to have location at several different areas and name the areas it's very generalized statements all of these statements are generalized as is the organization's mission statement a very generalized statement as well so sample operations management missions clean on chain supply management to collaborate with suppliers to develop innovative products from stable effective and efficient sources of supply so the operations management is just carrying on it's looking at everything it's doing and developing a mission statement for it but as I said the these statements are very general very non-committal almost there is no there's no data here there are no benchmarks that must be achieved there are no red flags being being established here there's nothing it's going to stop or worry or whether this is just what they are aiming to do it's very generalized in terms of inventory to achieve low investment in inventory consistent with high customer service levels and high facility utilization generalized but at the same time it's aspirational this with the one to do scheduling to achieve high levels of throughput and timely customer delivery through effective scheduling what effective scheduling is difficult to say it's not specified its generalized maintenance to achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment prompt repair does that mean immediate or within a week or prompt not quite sure but it really doesn't matter it's aspirational it's what they want to achieve prompt is prompt they know what it means it's the common sense prompt so the operations management have got lots of submissions of you like lots of minor missions all contributing to the operational departments overall mission which contributes towards the overall organizational mission and as I said earlier many times all of this is at a high level of generality our strategic processes while the organization's mission then there are the functional area missions so the organization is the overarching organization then the functional ones the operations management the HR the marketing and so on all these functional areas they'll have their missions and these are all it's a two-way process here the organization's mission drives the the functional area missions which drives the minor missions if you like the the smaller missions the marketing one the operations finance and accounting and so on but they're also it feeds back into the organization's missions and they specify what they can do the areas they're concerned with how they're going about their work and they're all want to supply excellent service so it goes back to the organization that the organization wants to be excellent as I said very generalized statements but at least they indicate what the various departments are taking responsibility for and they're specifying that they are committed to producing high-quality goods cheaply efficiently effectively and so on strategy well it's an action plan to achieve the mission so this is the action plan to achieve the mission as I said right at the very start different books different literature have slightly different takes on this I would see strategy as including the direction in which the business is traveling as where lands it's more detailed objectives and then it goes to the operational strategies to implement the changes required implement the processes that are required in order to achieve the organizational strategy and the mission I would see as a summary of the strategic plan but different writers take different routes as I said and this the emphasis here would be to look at the strategy as an action plan to achieve the mission so the mission is setting out where the business wants to be and the strategy plan is setting out how to achieve this it's the action plan functional areas have strategies as well so the functional areas can normally perform their functions in various ways so the most of a strategy as to which one to select strategies exploit opportunities and strengths the neutralize threats and avoid weaknesses so in terms of a SWOT the strategy is try to play up the opportunities and the strengths and play down the threats and the weaknesses so strategies for a competitive advantage well differentiation it's it's the optimum strategy in many respects is to try and make the product different to make the image of the business different to the competitors and if it makes the product different and the product is successful then in effect it has created a small monopoly for itself so it will enjoy the fruits of no competition because it has differentiated away from the rest then there is cost leadership what cost leadership is it means make the business the cheapest producer so that the the other companies who are in competition must follow of that company they can't upset if it cuts the price they can't compete it may drive them out of the market so cost leadership may be a strategy to deal with competitive advantage there are many companies let's say who are trying to compete in the same market if one of them is a very efficient producer produces cheaply then that company can dominate the others have a rapid response to changes in tastes changes in the market be able to respond quickly and efficiently to changes and in that way lead the other companies don't wait for the other companies to take the initiative when a change in fashion or a change in society occurs then try to configure the product in a way that meets the requirements of the change do it fast the faster it's done the the advantage of first first mover will have will accrue to the company the other companies who are slower to respond they will have to catch up competing on differentiation well uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customers perception of value so differentiation can be very crudely it can be physical you can the product could look different different texture different color different design different functionality it's still in competition with other companies who are making similar products but it could be different it could be made to be different and hence more attractive and it becomes almost a local small monopoly within that within that market because of its differentiation but it's also possible to differentiate a product through psychic means through psychological processes to make the the purchasers believe that this product is superior this product is better so it's possible to use two types of differentiation now competing on cost will provide the maximum value as perceived by the customer customers have an idea about what good value is and when they see a product and they think it's it's cheap but it's good quality that's value for money and customers like that delight to think they're getting good value for money they have scarce resources they have scarce amounts of money and they want to get the best they can for their limited resources competing on cost doesn't imply low quality it shouldn't do that it should mean that the company is projecting an image of efficiency in high productivity that's why it's low low price not low quality it's a reflection of the efficiency of the business competing on response well flexibility is matching market changes in design innovation and volumes it's it's important that the business keeps up to date keeps an eye on what's happening in society who are the trends in the fashions and what are the movements in society and trying to generate products which match the requirements of the society so the company should be flexible it should be able to change over its production from one item to another according to what the the society want what the fashions are and what they what they believe are required by the the customers in the society they should have reliability that's the same as meeting schedules reliability is meeting schedules it's its reliability is doing what is promised so when they they promise to bring out a new product on a certain day they should do that that means they're reliable when the sayin item will be for sale in a certain area a certain time it should be that's reliability so a reliability is meeting schedules timeliness is quickness in design production and delivery so timeliness is important it's important to be able to redesign a product or observe some movement or some fashion in society or some change in society observe it and then design a product fast efficiently to meet the requirements of the society and bring it to production fast and get it into the market in that way the company can be prime mover can be the first mover in the market and will gain the advantages from that they will be seen as an efficient company one who identified the requirements of the society and got a product out quickly organizational management's contribution to strategy well there's cost leadership as I said before trying to keep the product cheap in other words trying to produce more for the given set of resources that are available to the operations department try to get the response faster try to look at changes that are required and having the flexibility to change the product change the delivery change the logistics change whatever it is that's required and get it to market faster that's having a faster response rate and differentiate the product always look for ways in which the product can be varied it can be varied in terms of design texture size see how the product can be changed and so it develops a reputation the company develops a reputation for being an innovative company producing a good quality product with one which is has a freshness about it it's new it's differentiated organizations management contribution to strategy while the key operations decisions well the key operations decisions are very quickly looking at what the product is what is the product what's the process well the process is largely dependent on the product so the process the the process of buying the product in from overseas or buying the product in from suppliers domestically or making it in-house whatever the process is the complexity of the process will be dependent upon the complexity of the product where should all of this happen where should the company be located and why or how should the company be lay it out how should the company be designed what are the premises how should it be designed and what's the impact of the internet and advanced communication systems on layout does the company have to have a traditional layout or could it could it vary the layout because of the the better communication systems what are the human resources that are required what particular skills are required and what training programs are needed to bring about the the strategy to enable the strategy to to be effective what human relations what skills in the workforce and what relationships must the management have with the workforce what agreements must they have about training remuneration powers of work terms of employment and so on what's the supply chain who's gonna supply the raw materials the components the equipment who's going to make the deliveries at the end how is the product want to be taken to market how will it be delivered to the customer through warehouses through wholesalers through retailers how exactly will it go out will it be sold online what's the inventory policy should should it be JIT just produce as the orders come in or should it be produced to stock and what's the scheduling of production how should it be scheduled in a way that optimizes the use of the capital and the machines as well as the workers but how should they be scheduled and what's the maintenance policy how should the equipment in the buildings and everything be kept in good condition what's the the maintenance program within the operations field it may be useful to conduct a SWOT analysis on well just about everything there within the business it could be conducted at the operational level it could be conducted at the overall strategic level we normally think of swatters as applying in terms of competitor analysis and looking at the positioning of the business in total within the market but you could look at there as SWAT type analysis for virtually any process within the business so you could start with analysis and look at the internal strengths of the business let's say you're talking about the business or or one of the departments you could look at the internal strengths of the department or of the business so what are its strengths perhaps having skilled workforce having new machinery having better designed layout or good communications facilities what exactly are the strengths what are the weaknesses what what is it that the management have to spend a lot of time trying to fix and keep running what are the weaknesses of the business what are the opportunities within the the wider society even for say an operations department the external opportunities may be to acquire more skilled workers or it may have opportunities to talk to educational institutions for the supply of workers with particular vocational skills or it could be opportunities because new companies are coming into the area and there's better logistics and better communication systems as a consequence of general growth in the area there also are threats and the threats are external these could be from other companies who want to take part of the market share and who are perhaps copying working practices within the business so the mission statement can include all of these points it would have to be written in a way which makes it very bland and very presentable but it does address or it should address or exactly the the business is confronting in terms of the threats and the weaknesses what it's confronting but it should also look at the opportunities in this threads because these are positives and out of the analysis dears strategy arises now strategy development process well analyze the environment identify strengths weaknesses opportunities and threats understand the environment understand the customers the industry and the competitors so it's must start with an analysis of the environment the said the most general level this is what the company must do to start because the company must understand the environment in which it's going to operate then determine the corporate mission state the reason for the firm's existence and identify the value it wishes to create so having analyzed the environment then it's is the time to set out its mission what does it want to do where does it want to position itself what does it want to achieve what are its values and for our strategy build a competitive advantage such as low price good design volume flexibility quality quick delivery dependability after stay on service broad product lines so it's forming a strategy the strategy is to enable it to achieve its mission objectives and the mission objectives recognize the environment in which it operates so we have the three components that are essential in the derivation of a good mission statement now strategy development and implementation well identify key success factors that's important see what the company's doing well make a note of what it's doing well because these are key success factors they should be encouraged and should be treated with care just in case too much modification or too much effort to try and further improve them may actually damage them so they have to be treated with care but identify the key success factors make a note of these because these are important and it's important to build and staff the organization in other words build the organization in in a way that's logical look at the design of the organization the who's responsible for what look at the staff and try to match skills staff skills to particular tasks so there is a logic in the way the staff have been allocated integrate our operations management with other activities make sure that the departments don't become isolated and start working on their own they must be linked and there must be mechanisms to ensure good communications between them and they each understand the importance of the other so there's no empire-building there's no no no no psyche which suggests that one department is more important than the other department one department needs special treatment and so on it should be seen as one organization with various components so it should be quite understanding of each other's role now the successive success factors I should say the key success factors are support a core competence and implement strategy by identifying and executing the key success factors in the functional area so take the key success factors what is it the company is really good at because these really are the core competencies these are the essential benefits that the company can reap from having skills and having ideas and being innovative and implement a strategy implement implement a strategy that looks at the key success factors and the core competencies and builds on those and builds on them filtering it down to the functional areas so the functional areas understand their contribution and they also try to raise their standards to supplement what was identified as core competencies at the organizational level now let's take marketing finance accounting and production operations let's take these three just to to put some more detail into this discussion well in marketing we have service distribution promotion channels of distribution product positioning image and functions so these are the really the emphases of marketing there are others customer relations research knowing the the market understanding that the shifts in the market networking there are many others that we can add in here now with finance you have leverage you have the borrowing potential of the business you have the the cost of capital working capital what's received what's paying payables we have financial control lines of credit so out of these there has to be greater focus on achieving high levels of skill and performance within each one of these each one of these areas needs to be developed so the company is skilled at working out its working capital it it understands where its accounts are its receivables and payables it understands the importance of financial control and the same with marketing it's important that the marketing department understand the distribution channels understand the marketing mix understand the service provision understand the support that customers require and so on and out of developing these the core competencies are strengthened right throughout the organization with production operations we'll go to the next slide to look at it in more detail it's quite a lengthy one but the point I'm making here is that at the organizational level it's important that the stakeholders the owners of the business identify core competencies and understand their strengths before they even start the business because there's no point in starting it if they see the organization as weak they're going to see it as having strengths well then there are functional areas and each of the functional areas have tasks to achieve and each of the tasks must be developed highly developed so they also become in a sense of core competencies so now the organization's exhibiting strengths right from the base to the top and the overall mission statement of the organization is genuinely talking about core competencies and strengths it's genuinely talked about it because it does exist at the functional levels it's been developed at the functional levels so it permits the whole organization now let's look at the production operations side I'm just going to give a list of headings here and go through them very quickly and that will more or less complete this this class so key success factors production and operations well the product you have to decide if it's customized or standardized if it's customized it's more more expensive there's more involved more consultation with the customer standardized a fixed design and easy to produce in the sense that machines can be customized to make it and the workers will build up an expertise in making it as well they will learn by doing so we start with the the product quality define customer expectations on how to achieve them it's important to know what the customer expectations are it's important to collect information perhaps through focus groups through surveys through contact with customers at the point-of-sale getting customers for pinions and feeding it back in so that quality can be further enhanced the process look at the facility size the technology and the capacity look at the capacity of the business how much can it produce what size is the the current business look at the technology it uses can be improved is it worth improving it the location should be the product we produced near the customer or could it be produced far away if it's a service say an account service maybe it's possible to move it away from large population centers because it just need to be it doesn't need to shift large amounts of items to the customer they must be moved at the end is essentially information which can be easily sent or or delivered but some items might be very bulky very heavy may be quite a big volume and they should be located at production should be located near where sales take place to minimize on handling costs and transportation layout well work sells or assembly lines how is the the company organized how is production organized how are the machines laid out how the different departments laid out in terms of administration where's the Accounts Department relative to the computing department next - what - to marketing and where's procurement and so on so the layout might be important it depends on the product and it depends on the volume of work being conducted human resources are certainly important they need to be quite specialized they need to be able to perform the functions and the need to have enriched jobs so they don't get bored and want to leave this should be motivated at work and this should be well remunerated so this should be recognized for the contribution that are making the supply chain well single or multiple suppliers all sorts of issues have to be resolved is it worth going with a single supplier what if there's an issue with a single supplier and a single supplier becomes unreliable if there are multiple suppliers it's extra costs and perhaps the company's not able to negotiate good discounts because it's operating with so many suppliers inventory winter reorder how to keep keep it on hand so inventory policy overall companies don't like holding a lot of inventory it's it's a deadweight loss items in the stores are not earning a return for the business they're just sitting there so the problem is wintery order and the amounts to reorder excuse me clearly that will depend on the the quantities that are being produced schedule well is it possible to have a stable production rate so that the machines are running at a constant rate or do the fluctuate depending on the mound depending on other orders orders that have come in and switching over production to meet the other orders or so what sort of scheduling policy is there and maintenance well repair as required or preventive maintenance that's the policy they fix the machine when it's broken down or do you engage in preventive maintenance to stop it breaking down in the first place so these are the so-called key success factors in terms of production and operations now let's just finish off this class I said it's a long place but let's just finish it off by looking at four international operations strategies we have global strategy international strategy multi-domestic strategy and transitional strategy global standardized product international import or export so with a global one it's a standardized product one product cutting across the boundaries it's produced in one country and sold in a different country international strategy import or export a product the decisions here are to import export globalized it may mean having a presence in the other country multi-domestic strategy using existing domestic model globally so it looks at how the company is organized at the moment domestically within the within the country see how many plans it's got how its how it organizes distribution how it organizes production and then takes that model and applies it globally the transitional strategy move materials people and ideas across national boundaries sorry transnational I should say the transnational strategy move materials and people and ideas across national boundaries it gets over tariffs it gets over quotas it gets over problems of shipping and handling at ports and so on simply produce it in the other country and the what's being moved is essentially the ideas the experience of running the business in one country can then be moved to running the business in another country it'll confront different issues in different problems but perhaps the core problems will already have been encountered and solved before it moved so we have the the transnational strategy the multi domestic strategy taking existing production ideas and moving those to a different country moving the model to it to another country or other countries and so what we've got then is ways of dealing with international operations of course with global strategy we would expect economies of scale economies due to size we expect the company to be able to produce mass output and benefit from being able to produce on large volumes in the International Strategy well license an existing product that's usually a good tactic find a company who's got similar technology similar products to the one that's been set up overseas and try to arrange a licensing agreement so that company produces that come the the company's own product so they the licensing company produces the product for the company who wants to engage in international trade multi-domestic well franchise the models Lobley if the the product is successful domestically then franchise it see if it works in different markets and enable producers overseas to produce it and sell it and simply franchise them to do it the transnational strategy is to try to gain economies of scale as I said earlier with the global strategy there is cross-cultural learning it's important to work out how production takes place in different countries what's important to different people in different countries so this cross-cultural learning there's nothing really on the International Strategy that can be identified in terms of this but multi-domestic strategy well franchise that could be joint ventures and it could be subsidiaries so there are different forms of production that can take place and again on the transnational it's a question of cross-cultural learning trying to find out how to best produce the product given the fact that people work differently in different areas of the world and have different approaches to to work so we've covered a lot of ideas in this session as I said it right at the outset it's important that you go back to the beginning run the video slowly make your own notes think about it do some research pat out your notes and try to ensure that you have a good idea of the issues involved in looking at the mission for the organization the mission for the various departments how they're linked what's the relationship with strategic planning what is the operational planning objectives looking at the individual mission objectives of the various departments and moving on to the global discussion towards the end but that's all I'm going to deal with in this session so we want to leave it at that and say thank you for watching