Product Strategies

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Strategy :strategy gives the firm its direction and vision for the future and guides its decisions in both the short term and the long term. For sustained growth & maintaining market leadership , long-range production plans and strategies are essential. Eg : Japan Innovation Korea mobilising institutional support

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Main Elements of Strategy

Strategic

analysis

The aim of this is to form a view on the key factors that will have an affect on the future well being of the organization. This enables us to identify & understand the potential opportunities and constraints that exist for our organisation. It will enable us to make informed strategic choices about the future of our organization.

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Main Elements of Strategy

Environmental

Analysis

Analysis of
External environment macro, political, demographic, competitive etc Resources & strategic Capabilities Core competencies, benchmarking Stake holders expectations - stake holder assessment & management

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Main Elements of Strategy

Strategic

Choice Factors considered

Our corporate purpose & aspirations Compatibility between corporate & business unit strategies. Internal strategy development options. External strategic development options

Evaluation

& Selection (criteria)

Suitability Acceptability Feasibility

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Main Elements of Strategy

Strategy

implementation

Translation of strategy into action.

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Strategy

Chapter 1:

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Operations strategies
Operations

strategies are formally defined as the set of decisions across the value chain that supports the implementation of competitive strategies of the business. Objective should be to give the firm a competitive advantage.

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Illustrations 3 types of Business strategies

1.

2.

3.

Produce a well-defined set of products in a fairly stable market environment as a low cost leader. Provide high product variety and customization in a turbulent market that requires innovative designs to meet customer specific requirements. Provide rapid response for constantly changing product lines in an unstable, uncertain & unpredictable market.
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Illustrations 3 types of Business strategies

The firm emphasizes on quality , productivity & flexibility in production 2. The firm operates at different levels of production volume while also achieving low cost & high quality. 3. Product design might have to be more collaborative with customers and suppliers. Production processes would need to be highly flexible. The ability of the orgnization to meet these different requirements depends on performance.
1.
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Performance
Performance

is the cumulative benefits that will result if the product is purchased and used as intended. Performance depends on

Functionality Quality Speed Timeliness Flexibility of the product offering Productivity Cost
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Performance Functionality
Functionality

is a measure of the extent the product is able to accomplish the intended use. : Light bulb = performance can be measured by number of hours it works

Eg

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Performance - Quality
Q

is the extent to which a good or service is delivered consistent with what the customer has been led to expect. Customer thinks of product quality in 2 stages

At the purchase decision making process Post purchase

Organizations

try to build & maintain the quality of the product.

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Performance - Timeliness
Timeliness

is to get the right product to the customer at the right time. a seller the importance of timeliness increases whenever the customer has alternatives for a desired product.

For

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Performance - Speed
Speed

is measured in 2 dimensions

How long a customer can wait for the product How long it takes to design , develop & introduce new products.

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Performance - Flexibility
To

be customer oriented

PRODUCTIVITY

Output /input

COST

Customers may value a product because it is selling for less than a cost savvy competitors product.

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COMPETITIVE STRATEGY
Corporate

strategy & competitive strategies form a hierarchy of strategies. Corporate strategies are concerned with the type of business the organization is in. Business strategies are basically competitive strategies.

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3 Generic competitive Strategies of PORTER

Cost

Leadership Differentiation Focus strategies

Cost focus Differentiation focus

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Cost leadership Strategy

Firm

reduces its cost below that of its competitors. Low-cost producer strategy works

when the buyers are large and have significant bargaining power Price competition among rival sellers Standard item available from variety of sellers Buyers do not value differentiation much Buyers are price-sensitive.

This

strategy gives high margins and a superior return on investments. Eg : Wal-Mart, McDonalds
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Differentiation Strategy
A

firm seeks to be unique in its industry. Differentiation will cause buyers to prefer the companys product/service over brands of rival. Can expect higher revenues & enhanced economic performance. Ways to differentiate

Product features Customization Location/convenience Timing Service & support

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Differentiation
Skills

needed for differentiation

Strong marketing abilities Corporate reputation for quality Strong coordination from functions Amenities to attract highly skilled labour, scientists, or creative people.

Eg

: Toyota , Tanishq - Tata

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Focus & Niche Strategies

The

attention of the organization is concentrated on a narrow section of the total market. The idea is that they will do better job than the rivals , who service the entire market.
Cost

focus

Firm seeks cost advantage in its target market. Low-cost producer strategy focused on the target market only.

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 Differentiation

focus

Offers niche buyers something different from other competitors. Product differentiation in the target market.

Situation

when focus strategy works best

When no other rivals are concentrating on the same segment When the industry has many different segments

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Six-element Framework (Richardson, Taylor and Gordon)Frontiersman Technology

TF 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. Innovation , flexibility & quality are major components. Eg : HP , Oracle

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Six-element Framework (Richardson, Taylor and Gordon)

Technology Exploiters

The strategy is to introduce a stream of new products with the objective is to exploit the potential large volume market.

Eg

: Microsoft

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Six-element Framework (Richardson, Taylor and Gordon)

Technology Exploiters

The strategy is to introduce a stream of new products with the objective is to exploit the potential large volume market. Eg : Microsoft

Technology

Serviceman

Technological leadership in custom service to low volume markets with extremely high money values. Eg Infosys, TCS
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Six-element Framework (Richardson, Taylor and Gordon)

Customizers

Build custom designs in low volumes CNC machine tools, FMS are often used because of low volumes

Cost

minimizing Customizers

Deal with products that are mature, margins are low but money values are high. Construction companies, shipyards, L & T

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Six-element Framework (Richardson, Taylor and Gordon)

Cost minimizers

Produce standardized, high volume products and services at low costs. Eg : Cement , steel, FMCG products, services like airlines, passenger trains etc

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Forces in the competitive environment

Information

technology

B2B, replacing information systems

Demand

for product customization

Eg Maruti Udyog offering Cusomization for its basic model in order to retain goodwill of its customers

Increased

Globalism

General motors sources its components from as many as 50 countries Infosys, HCL , TCS, etc offering offshore services for clients abroad.

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Strategy Implementation
Once

the strategy is finalized it has to be implemented. The operations managers must translate the strategy by working out details how it can or should be executed

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3 stages of strategy implementation

Organizational

level competitive strategy of the organization. It uses corporate strategy as input.The output of this level :

Organizational objectives Organizational design Organizational management

Process

Level : from org level the strategy has to be translated to each individual process

Process objectives Process design Process management translating process obj into specific sub-objectives 4/17/12

3 stages of strategy implementation

Job/performer

level

Job objectives : Eg restaurant waiter to serve 5 tables Job design Job management

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Long Range Strategies

An

imaginative & pragmatic national policy A strategic goal of manufacturing with emphasis on flexibility, quality An effective leadership to give quick response to changing market Emphasis on technological excellence Innovation in production management & process technology. Effective technology management An aggressive marketing strategy
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Medium range strategies

Location

& layout Product selection & technology Capital investment & planning Standardisation of design Inventory policy & planning Codification & product standardisation Flexible organisation structure Cost control

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Short Range Strategies

Production

scheduling Make or buy decisions Purchase QC Maintenance Replacement

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Product development strategies

First-to-market.

Organizations that use this strategy attempt to have their products available before the competition. Second-to-market. Organizations that use this strategy try to quickly imitate successful outputs offered by first-to-market organizations. Cost minimization or late-to-market. Organizations that use this strategy wait until a product becomes fairly standardized and is demanded in large volumes. Market segmentation. This strategy 4/17/12 focuses on serving niche markets with

Production Procedure /Cycle

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Production Procedure
Production

planning starts with the customer & ends with satisfying the needs of the customer. It consists of Sales forecast : Marketing or sales department after a thorough analysis and market research comes out with details. Preparation of Production budget: Production budget is prepared by the finance department in consultation with the production department. The management reviews the budget to take decision regarding annual quantities 4/17/12 be to

1.

2.

Production Procedure
3. Preparation of drawings and Bill of Materials The engineering department prepare drawings, BOM to check & modify the existing ones. 4. Production planning activity Production planning activity is received as soon as the technical information is received from the engineering department. PP results in schedule of production.
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Production Procedure
5.

6.

Despatching : Detailed production orders are sent to the shop specifying what, how, when , where the operations are to be formed. Progressing : Control aspect is excercised and progress is constantly compared with the planned schedule. In case of deviation between planned & actual production suitable steps are taken.

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Production Procedure
7.

8.

9. 10.

Inspection : Inspections are carried out and the quality control exercise ensures that the desired specifications are achieved. Evaluation : Evaluation is carried out before and after production so that steps are devised to improve methods, down times. The finished product is transferred to stock. Product delivered to the customer.
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