Business Processes
Chapter 1
Operations Strategy and Management
• A Strategy is a plan to achieve an objective. The Plan specifies precisely what
managers must do in order to reach those corporate objectives.
• Often, the implicit objective of a business strategy is to deliver sustained superior, not
just average, performance relative to competition. To outperform one's rivals, one must
be, and remain, different from and better than them.
• Four Product Attributes: product cost, response time, variety, and quality.
• The Competitive Product Space is a representation of the firm's product portfolio as
measured along the four dimensions or product attributes - product cost, response time,
variety, and quality.
• Below is an example of how a firm can represent its product portfolio in the competitive
product space:
• Strategic Positioning defines those positions that the firm wants to occupy in its
competitive produce space. Hence, it identifies the product attributes that the firm wants
to provide to its customers.
• Operational Effectiveness means possessing process competencies that support the
given strategic position. Developing these process competencies requires designing
suitable business process/operating policies. "Operational Effectiveness includes but is
not limited to efficiency. It refers to any number of practices that allow a company to
better utilise its inputs by, for example, reducing defects in products or developing
products faster" (Porter, 1996).
• The Strategy Hierarchy:
1. Corporate Strategy defines businesses in which the corporation will participate and
specifies how key corporate resources will be acquired and allocated to each business.
2. Business Strategy defines the scope of each division or business unit in terms of the
attributes of the products that it will offer and the market segments that it will serve.
3. Functional Strategies define the purpose for marketing, operations, and finance - the
three main functions in most organisations.
4. Operations Strategy configures and develops business processes that best enable a
firm to produce and deliver the products specified by the business strategy.
Page 1
! of ! 16
, Business Processes
• To clarify the strategy hierarchy:
• The goal of a firm is to differentiate itself from competition by establishing competitive
priorities in terms of the four product attributes, business strategy entails a two-pronged
analysis:
1. Competitive analysis of the industry in which the business unit will compete.
2. Critical analysis of the unit's competitive skills and resources.
• The three main functions in most organisations:
1. Marketing - identifies and targets customers that the business unit wants to serve, the
products that it must supply in order to meet customer needs, and the competition that it
will face in the market place.
2. Operations - designs, plans, and manages processes through which the business unit
supplies customers with desired products.
3. Finance - acquires and allocates the resources needed to operate a unit's business
processes.
• The strategy hierarchy reflects a top-down approach to strategy formulation: once the
firm's business strategy has defined its position in the competitive space (as defined by
price, time, variety, and quality), its business processes are then designed and managed
to attain and maintain that position.
• Cost Efficiency is achieving a desired level of outputs with a minmal level of inputs and
resources.
• A business process that is effective for one company may be a poor choice for another
company pursuing a different strategy in the same industry.
Page 2
! of ! 16
Chapter 1
Operations Strategy and Management
• A Strategy is a plan to achieve an objective. The Plan specifies precisely what
managers must do in order to reach those corporate objectives.
• Often, the implicit objective of a business strategy is to deliver sustained superior, not
just average, performance relative to competition. To outperform one's rivals, one must
be, and remain, different from and better than them.
• Four Product Attributes: product cost, response time, variety, and quality.
• The Competitive Product Space is a representation of the firm's product portfolio as
measured along the four dimensions or product attributes - product cost, response time,
variety, and quality.
• Below is an example of how a firm can represent its product portfolio in the competitive
product space:
• Strategic Positioning defines those positions that the firm wants to occupy in its
competitive produce space. Hence, it identifies the product attributes that the firm wants
to provide to its customers.
• Operational Effectiveness means possessing process competencies that support the
given strategic position. Developing these process competencies requires designing
suitable business process/operating policies. "Operational Effectiveness includes but is
not limited to efficiency. It refers to any number of practices that allow a company to
better utilise its inputs by, for example, reducing defects in products or developing
products faster" (Porter, 1996).
• The Strategy Hierarchy:
1. Corporate Strategy defines businesses in which the corporation will participate and
specifies how key corporate resources will be acquired and allocated to each business.
2. Business Strategy defines the scope of each division or business unit in terms of the
attributes of the products that it will offer and the market segments that it will serve.
3. Functional Strategies define the purpose for marketing, operations, and finance - the
three main functions in most organisations.
4. Operations Strategy configures and develops business processes that best enable a
firm to produce and deliver the products specified by the business strategy.
Page 1
! of ! 16
, Business Processes
• To clarify the strategy hierarchy:
• The goal of a firm is to differentiate itself from competition by establishing competitive
priorities in terms of the four product attributes, business strategy entails a two-pronged
analysis:
1. Competitive analysis of the industry in which the business unit will compete.
2. Critical analysis of the unit's competitive skills and resources.
• The three main functions in most organisations:
1. Marketing - identifies and targets customers that the business unit wants to serve, the
products that it must supply in order to meet customer needs, and the competition that it
will face in the market place.
2. Operations - designs, plans, and manages processes through which the business unit
supplies customers with desired products.
3. Finance - acquires and allocates the resources needed to operate a unit's business
processes.
• The strategy hierarchy reflects a top-down approach to strategy formulation: once the
firm's business strategy has defined its position in the competitive space (as defined by
price, time, variety, and quality), its business processes are then designed and managed
to attain and maintain that position.
• Cost Efficiency is achieving a desired level of outputs with a minmal level of inputs and
resources.
• A business process that is effective for one company may be a poor choice for another
company pursuing a different strategy in the same industry.
Page 2
! of ! 16
