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Unit 2: Strategy and Operations Strategy




             and in 1995 Rockshok FST with front and rear shock absorbers. In 1998, it created a category  Notes
             of geared bikes under the Hercules ‘Top Gear Brand’.

             In the  area of manufacturing, the company took steps at shop-floor restructuring,  and
             sourcing. As a part of an initiative, TQM was introduced in TI Cycles in January 1998. A
             series of small group activities and cross-functional teams were introduced in the company.
             The company obtained the ISO 9000 certificate in March 2000.  In response to these measures,
             productivity per man per day increased from 2.45 cycles in 1994-95 to 5.78 in 1999-2000.
             In 1998, TI Cycles proposed to AVON Cycles, one of the smaller players in Ludhiana, that
             they would provide help in assembling the bike and in ensuring quality and market it
             under ‘TI Cycles’ brand.  This proposal enabled AVON to utilize its capacity and TI Cycles
             to  obtain standard  cycles at  a lower  cost. With  a  view  to  further  improve  its  cost
             competitiveness and delivery, TI Cycles started a unit in Nasik, Maharashtra in 2000, to
             paint and assemble bicycles and cater to the needs of the Western and Northern markets.
             Thus has begun an attempt by one of the great companies to make a come back.
             Essentially, an organization must address two questions: “Who are we?” and “What do we
             want to be?” This is the mission of the organization and it defines its reason for existence.
             It might include a definition of products and services it provides, technologies used to
             provide these products and services, types of markets, important customer needs, and
             distinctive competencies—the expertise that sets the firm apart from others. The mission
             guides the development of strategies by different groups within the firm.

             1.  It determines the value creation logic of the organization;
             2.  Sets limits on available strategic options;
             3.  It governs the trade-offs among the various performance measures and between
                 short-and long-term goals;
             4.  It establishes the context within which daily operating decisions are made; and
             5.  It inspires  employees to  focus  their  efforts toward  the  overall  purpose  of the
                 organization.
             TI Cycles provided value to its customers by producing elegant, high quality bicycles. To
             implement this strategy of producing high quality, beautifully designed cycles, TI Cycles
             adopted a policy of vertical integration. It produced most of the components in-house, all
             the way down to the steel tubes required for the bicycle frame. It created organizational
             values and people processes that supported the vision of the organization.
             Hero Cycles, on the other hand, had a fundamentally different value creation logic.  It
             manufactured  heavy  duty,  low cost  bicycles.  Hero  Cycles  outsourced  most  of  the
             components. It focused on creating a highly efficient assembly operation in-house. Both
             organizations were good at what they were trying to provide. Where did TI Cycles go
             wrong?

             One executive at TI Cycles analyzed the  situation as follows, “We  have continued  to
             maintain our position in our market segment. Hero Cycles tapped the price conscious
             segment which turned out to be the largest market segment in the industry and is the
             leader in that segment. We did not see that market segment becoming so big, nor did we
             believe that we could compete on price with Hero Cycles”.
             A clear understanding of the implications of strategic choices on operational capability is
             vital to success. Without the capability to produce low cost products, no amount of dreaming
             would have made Hero Cycles capable to provide  a product to replace the BSA  and
                                                                                Contd...



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