operations management chapter 2 Exam Questions Graded A+!!!

operations strategy - ANS operations strategy, which is a set of competitive priorities coupled with supply chain structural and infrastructural design choices intended to create capabilities that support a set of value propositions targeted to address the needs of critical customers. Strategic decisions define the competitive objectives of an organization, establishing both the specific performance targets and the means by which the targets will be achieved. LEVELS OF STRATEGIC PLANNING see pg 27 - ANS Within most firms, planning processes take place at several different levels. Internally, there is a hierarchy of strategic plans consisting of (1) corporate planning, (2) strategic business unit (SBU) planning, and (3) functional planning. These three levels should be closely linked (as shown in Figure 2-1) so that they are mutually consistent and supportive. Strategic plans made at all levels need to take into account the business environment, including economic conditions, competitor actions, market opportunities, regulatory changes, and so on. A firm's culture also typically influences the objectives it sets and the decisions it makes in strategic planning. For example, one firm might be more aggressive or more risk averse than another firm. In this section, we examine the objectives and interactions of strategic planning at the three levels. The remainder of the chapter focuses on operations strategy, one of the areas of functional strategy development. corporate strategy - ANS corporate strategy Determines the overall mission of the firm and the types of businesses that the firm wants to be in. corporate strategic planning - ANS Corporate Strategic Planning Describe how operations strategy fits within a firm's overall strategic planning process. Many firms are involved in more than one business. For example, General Electric operates more than 20 diverse businesses, from aircraft engines to financial services. Corporate strategic planning addresses the portfolio of businesses owned by a firm. Of the three levels of strategic planning, corporate strategic planning is broadest in scope and the least constrained. Decisions made at this level limit the choices that can be made at lower strategic planning levels. Essentially, a corporate strategy communicates the overall mission of the firm, and identifies the types of businesses that the firm wants to be in. For a large, multidivisional firm, key decisions in corporate strategy address what businesses to acquire and what businesses to divest. Corporate strategy typically covers a long time horizon, setting the overall values, direction, and goals of the firm as a whole. It also establishes how business performance will be measured and how risks will be managed business unit , strategic planning SBU strategic business unit Business model - ANS strategic business unit The semi-independent organizations used to manage different product and market segments. business unit strategy Determines how a strategic business unit will compete. business model The combination of the choices determining the customers an SBU will target, the value propositions it will offer, and the supply chain/operations business unit , strategic planning continued - ANS Because products and markets differ across business divisions, a separate management team (usually headed by a president or vice president) is usually needed to run each of these semi-independent organizations, or strategic business units (SBUs). An SBU can be organized along product, market, or geographic dimensions. Business unit strategy essentially deals with the question, "How should our business unit compete?" To answer this question managers make choices regarding what customers and market segments they will deem critical, what products to offer, and specifically how they will create advantages over the business unit's competitors. These choices collectively form the business model that the unit will pursue. There are numerous types of business models • . For example, long ago Gillette developed the "razor and blades" business model—give away the razor but make your money on the replacement blades. • Many businesses follow this same type of model (printers, industrial equipment). Dell successfully applied the "direct sales" business model in computers—sell computers directly to the end consumer. A "loyalty" business model rewards customers for continuing to deal with the firm. This model has been widely implemented in the airline industry (through the frequent flier program) and in the retail trade (e.g., as in Best Buy's "Reward Zone" program). • Changes in technologies, competitors, and markets can at the same time destroy the viability of an existing business model while giving rise to new ones. Consider, for example, how customers' growing concerns over sustainability issues have opened up the possibility of new business models that offer organic and eco-friendly products. These kinds of changes make it important for operations and business strategy managers to continually evaluate their existing busines swot analysis see page 27, for model - ANS swot analysis A strategic planning technique to help firms identify opportunities where they can develop a sustainable competitive advantage and areas where the firm is significantly at risk. A business unit's strategy and business model are both shaped by the corporate strategy, by the specific requirements of the SBU's products and markets, and by the SBU's operating capabilities. One technique that managers use to assess these attributes is SWOT analysis (short for Strengths-Weaknesses-Opportunities-Threats). A SWOT analysis helps managers match strategies with strengths and opportunities while also reducing risks associated with weaknesses and threats. SWOT can be used in various ways—to kick off strategic thinking or as a serious detailed strategic assessment/planning tool. Questions often considered in a typical SWOT analysis are summarized in Table 2-1 on the next page. Functional Strategic Planning functional strategy what critical questions must the functional strategy address? - ANS functional strategy Determines how the function will support the overall business unit strategy Every SBU consists of functional groups such as internal operations, marketing, accounting, engineering, supply management, logistics, and finance (to name a few). Each function has to generate a strategic plan—one that is coordinated with and supportive of the SBU plan. To that extent, the functional strategy must address certain critical questions: What specifically do we have to do to support the corporate and SBU strategies? What are the critical resources that we have to manage carefully if we are to achieve the corporate/SBU objectives? What metrics should we have in place to ensure we are making progress on these plans? What capabilities found in our function should be considered or recognized by the two higher stages of strategy?