This is a summary of the chapters discussed during the operations management class. The cases of chapter 2, chapter 5 and supplement 5 are also added to the summary. The summary does also contain what is discussed about Industry 4.0/IoT and Management Control & Reporting System (MCRS).
Summary Operations Management IBC fall semester
Chapters: 2, S5, 5, 6, 16, 7 and module B
+cases chapter 2, S5, 5 and about Industry 4.0/IoT and MCRS-theory.
Study: Business Administration
Semester: Fall (13&14)
Author: Willem van der Heijden
,Chapter 2: The global environment and operations strategy
Six reasons for internalization:
1. Improve supply chain: facilities in countries where unique resources are available
(low-cost labor, raw material etc.).
2. Reduce costs: direct and indirect costs due to government regulations (e.g.
environmental control, lower taxes, free trade zones etc).
3. Improve operations: learn how business is done in different countries, and also
reduce response time with locating facilities in customers countries (e.g. Japan
improved inventory management because of knowledge in the world).
4. Understand markets: knowing what customers and suppliers want to learn about
opportunities for new products and services. And expand the product life cycle.
5. Improve products: open for free flow of ideas (e.g. bounding Toyota and BMW;
Europe vs Asian knowledge).
6. Attract and Retrain global talent: offer growth opportunities and insulation of
unemployment in economic down times.
Achieving Competitive Advantage: 3 different strategies
1. Differentiation: providing uniqueness that the customer perceives as added value.
Four options for differentiation:
a. Innovative design: always having the newest innovation in the product design
and be one step before the competition (e.g. glove manufacture; gloves
without allergic reactions, texture on gloves etc.)
b. Broad product line: offering a very broad range of products
c. After-sales service: having an outstanding service after the sale is made (e.g.
maintained, warranty etc.)
d. Experience: in services. Such as in Hard-rock cafe the dinning expiernce.
2. Low-cost leadership: maximum value defined by the customer. Looking at all 10 OM
decisions to drive down costs while meeting customers expectation of value. Low-
cost leaders attributes:
a. Low overhead: shutting as much as possible overhead costs down
b. Effective capacity use: productive use of equipment and personnel (e.g.
Ryan-air)
c. Inventory management: smart use of inventory with high turnover rate (e.g.
Wal-Mart with smart and optimized distribution system.
3. Response: rapid, flexible and reliable performance.
a. Flexible: match changes in marketplace with operations, like volume and
design (e.g. HP with fast market changes in design and volumes)
b. Reliability of scheduling: deliver when you say you are going to deliver (e.g.
German manufactures; even because they are more expensive)
c. Quickness: quick respond to customer demand (e.g. Mac Donalds within 5
minutes your food).
Key Success Factors (KSF): those activities that are necessary for a firm to achieve its goals.
KSF can be very significant that a must get them right to survive (e.g. Layout for Mac
Donlads; drive-thru and work sells in kitchen).
, Core competences: set of unique skills, talents and capabilities that a firm does very good to
develop a competitive advantage (e.g consistency and quality at Mac Donalds; or gas-
powerd engines at Honda). Core competence can be ability to perform the KSF’s.
- Outsourcing = can be done by non-core activities (contract manufacturing) (e.g.
Apple outsourcing because core-competences are: creativity, innovation and product
design. Sony not outsourcing manufacturing because core competences are:
electronical design of chips and rapid response and specialized production of chips).
10 OM decisions: used to implement a specific strategy and yield a competitive advantage.
International business: a firm that engages in cross border transactions (import/export).
Multinational corporation (MNC): a firm with extensive involvement in international
business, owing or controlling facilities in more than one country (e.g. IBM; import
components from 50 countries, export to 130 countries, has facilities in 45 countries and
earns more than half its sales and profits abroad). For MNC’s there are 4 strategies:
1. International strategy: exports and licenses = least advantageous/ easiest (e.g.
Harley-Davidson)
2. Global strategy: high degree of centralization. Focus = cost reduction (e.g. Texas
instruments).
3. Transnational strategy: both economies of scale and responsiveness (e.g. Nestle)
4. Multidomestic strategy: decentralized authority = maximizing competitive response.
Exporting the management instead of the products (e.g. Heinz)
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