Page 38 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Unit 2: Strategy and Operations Strategy

Limited, Hero Global Design, etc. The group maintained its policy of minimizing risks by Notes
spreading it through developing and promoting ancillary units to support its production
programs.
TI Cycles followed a differentiation strategy while Hero Cycles followed a strategy of cost
leadership as the competitive strategy. Both companies were extremely good in following the
strategies that they had adopted. Since TI Cycles had started the cycle industry in India, the
general psychology inside TI was that their leadership would continue owing to the technical
sophistication of the product. Hero Cycles intuitively learned to make the cycles on its own and
offered value for money. It competed on price and tapped the price conscious segment. What TI
Cycles lost track of was that the price conscious segment was growing much faster than the
quality, durability conscious segment. When TI Cycles recognized its position, they found that
they had not developed the competencies or the network to compete effectively in the price
conscious segment. This enabled Hero Cycles to strengthen its position and the TI Cycles got
marginalized and was almost forced to vacate many of its traditional markets, and became a sick
company.

There are several generic components of a healthy company—a robust and credible strategy
based on market realities; productive, well-maintained assets; innovative products, services,
and processes; and a fine reputation with customers, wholesalers, dealers, governments, and
other stakeholders.
Thinking about health, as opposed to the technical sophistication or quality of the product or
service, helps managements understand how to look after companies today in a way that will
ensure that they remain strong in the future. It focuses the mind on what must be done today to
deliver the outcome of long-term performance. Companies not focusing enough on managing
the health of their businesses often lose out, as was the case with TI Cycles.

Self Assessment

Fill in the blanks:
5. The ‘low-cost producer’ strategy works best when buyers are large and have significant
……………… power.
6. Successful differentiation creates ……………… against the five competitive forces.
7. The generic strategy of focus rests on the choice of a ……………… competitive scope
within an industry.

2.3 The Richardson, Taylor and Gordon Framework

As is apparent from many situations in the real world, operations strategies do not fit in neatly
with the three generic strategies of Porter. Another way of looking at operations strategy has
been suggested by Richardson, Taylor and Gordon. They have developed a six-element
framework for operational strategy. Their framework is described below:

2.3.1 Technology Frontiersman

The strategy is to remain at the leading edge of technology with a focus on product innovations.
Technology Frontiersmen take advantage of the initial high margins of new product offerings
and move on to newer products when the product or service begins to draw tough price
competition, or a host of imitators.
Innovation, flexibility and quality are the major components of the value creation logic. The
production system has to have the organizational structure and controls to deal with the continuing

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