Page 40 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Unit 2: Strategy and Operations Strategy

2.3.6 Cost Minimisers Notes

These organizations have a strategy of producing standardized, high volume products and
services at low costs. There are a large proportion of business models that fall in this category.

Example: Manufacturers of steel, aluminium, cement, etc., who operate in bulk market;
fast moving consumer products; services like shipping, airlines, passenger trains, etc.
Hero Cycles also falls in this category. These organizations must be cost competitive and position
their product so that it is available in the marketplace, with a controlled and consistent quality.

All the elements of operations strategy have a place in this type of operation. These include
positioning, process technology; capacity/location, job design, and operating decisions. Many
such organizations are vertically integrated. Advanced techniques of inventory control and
process control find an important place in operations in these types of organizations.

Table 2.3: Richardson, Taylor and Gordon Model

Strategy Description Value Creation Functional Focus Examples
Logic
Technology RD driven; Constant Flexibility, Positioning, Job Design, Hewlett-Packard
Frontiersman new product Quality, Supply Operating Decisions
introduction; Skimming Chain
Profits
Technology New Products, Long- Flexibility, Cost, Positioning, Process Microsoft, Texas
Exploiters term Perspective; Availability Technology, Capacity Instruments
Product development Location, Operating
linked with Process decisions, Suppliers
Design, Cost
competition
Technological Custom Service for Flexibility, Positioning; Process Infosys, TCS,
Serviceman Complex systems for Quality Technology; Operating Airbus Industrie,
low volume customers Decisions; Supply Boeing
and markets; Chain
Excellence in Product
Design
Customizers Job shop manufacturing Flexibility, Positioning; Process BARC, Hughes
to build custom designs Quality Technology; Operating Network
Decisions; Supply Systems, ECIL
Chain
Cost Low volume mature Cost, On-time- Positioning, Process Hindustan
Minimizing products manufactured delivery; technology, Supply Shipyards, L&T
Customizers to individual customer Flexibility Chain
designs
Cost High volume producers Cost, Availability, Positioning, Process TISCO, NALCO,
Minimizers of standard commodity Quality Technology; Capacity/ HLL, Nirma, TI
type products, long runs location, Job design, Cycles, Hero
of continuous operating decisions, Cycles
production Vertical Integration

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