Page 41 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes Competitive advantage grows out of the entire system of activities. The value creation logic of
the organization can be visualized in the value chain. The more integrated the fit in the activities
relating to the functional focus are, the more effective is the strategy and the more difficult is it
to be copied by competition. In assessing its competitive strategy, the firm must focus on those
value creating attributes that its customers look for in the product and which the firm is capable
of delivering better than others. The value creation logic should be such that competitors will
find that they cannot easily replicate the value provided by the firm.

Task Take an organization with which you are familiar, and use relevant tools and
frameworks to identify and assess the potential sources of competitive advantage.

Self Assessment

Fill in the blanks:
8. Cost Minimiser organizations have a strategy of producing………………, high volume
products and services at low costs.
9. Technological Serviceman is a strategy of technological leadership in custom service to
……………… markets.

10. Innovation, flexibility and ……………… are the major components of the value creation
logic.
11. ……………… strategy is to build custom designs in low volumes.

2.4 Translating Strategy into Operational Effectiveness

OM is linked directly with many initiatives that firms use to sustain and revitalize
competitiveness. These include such approaches as rapid product development, process
improvement and total quality, lean production, and supply chain management. As the workplace
becomes more flexible, as Information Technology (IT) and e-commerce permit new and
innovative work arrangements, and as customers become more demanding, OM will continue
to play a significant role from a strategic business perspective.
Value is a core concept in a business’s strategy because it directs organizations to strive to
understand the customer buying process. People part with their money to buy a product when
it delivers more “value” than the value they attribute to the money exchange.
The value model assumes that a customer elects to purchase a product when a need exists and
when the core and augmented benefits derived from making a purchase exceed the product’s
cost. The ultimate driver for all activities done within the organization is to satisfy the targeted
customer. The product should also offer more value than the competitor’s product.
This must be the primary way in which the organization views the marketplace and be a
determinant of strategy. The strategy tells the operations function:
1. Who the targeted customers are and what they want,

2. Estimates the size of the market and the anticipated distribution of customers, and
3. Profiles how the firm intends to compete to win these customers.
The rapid changes in the competitive environment, reflected by clock-speed, are having a major
impact on strategy formulation and the competitive environment. There are three forces that
are the major drivers of these changes.

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