BUS300 Study Guide
Unit 2: Operations Strategy
2a. Identify the importance of operations strategy for creating corporate, business, and functional level strategies
- What are the two main approaches to strategic management?
- What are the five steps of strategic management?
- What is the role of a Board in strategy development?
- What is the function of a strategic architecture?
- What are the main components of the planning process?
Strategic management is the broadest level of management within an organization in that it covers all aspects of an organization's operations. The industrial approach to management focuses on economic factors such as resource allocation, competition, and profit maximization. The sociological approach focuses on human interactions and behavior. Under these broad corporate strategies, operations for corporate, business, and functional activities are performed.
Strategic management encompasses all of the factors that impact the organization. This includes the mission and vision of the organization and the objective and policies that will lead to business growth. The steps for achieving these goals are analysis, strategy formulation, goal setting, structure, and feedback.
In determining strategic direction, Boards have generally been involved in only approving strategies and not necessarily setting them. Principally, this is because strategic planning is the responsibility of management and that a Board does not have the time or expertise to craft corporate direction. However, there are some situations where a greater Board involvement is needed, such as during a corporate crisis, a decline in productivity, or when a new CEO is brought on. Additionally, creating a process where directors can participate in the strategic planning process can result in greater knowledge of strategic planning, a more satisfying sense of involvement, and greater collaboration between the Board and top management.
Strategic architecture is a way to understand and control the complexities of an organization. The first step is to build the architecture, which explores the path of performance and the reasons for that performance. The next step is to use the architecture, which evaluates the current situation's details and what improvements are needed. The following step includes strategies for improvements and growth. The next activity defines how the process will be managed to ensure positive outcomes.
The planning process involves creating a corporate Mission Statement, which defines what the company does and why it exists. The next step is to analyze the company's internal and external environments. This is followed by setting organizational goals and objectives, and the tactics used to achieve those points.
To review, read Approaches to Strategic Management, Strategic Management, Who is Responsible for Strategy Development?, Building and Managing the Strategic Architecture, and Strategic Planning and Ten-Ten Planning.
2b. Explain the role of the value chain for operations strategy formulation
- What is the role of a "brand" in the value chain?
- How do economies of scale benefit the consumers?
- How do companies compete with interchangeable brands?
- How has technology expanded distribution channels?
A strong brand embodies all the company has to offer and can instill trust in consumers. A strong brand can set a company apart from other products in the marketplace and create a significant competitive advantage. If a customer cannot rely on a product, they will go elsewhere to solve their problems.
As companies grow, they can take advantage of economies of scale and produce their goods at a lower cost per item. This can be passed along to the consumer in the form of a lower selling price.
Since many products can be interchangeable, companies seek to differentiate themselves from the competition and offer a feature or benefit that is unique to their product. An example of this is orange juice, where one brand might highlight the source of the oranges, the lack of additives, or price.
The path by which a product reaches the consumer is essential to product success. Distribution channels have gone beyond traditional truck and rail routes to reach customers online via Amazon and their affiliates and Microsoft and Google.
To review, read Powerful Resources.
2c. discuss how operational competencies contribute to the development of a competitive advantage for an organization
- What are Porter's Five Forces?
- How do switching costs benefit an organization?
- What is the impact of network effects on a company's position in the marketplace?
- How can a company benefit from their intellectual property and other internal resources?
Porter's Five Forces are the rivalry among competitors, the threat of new entrants, the threat of substitute goods or services, buyers' bargaining power, and the bargaining power of sellers.
One of the factors that impacts each of these forces is technology. Consider the impact of email on document delivery services like the US Postal Service. Through email, we can send documents quickly without using any resources such as paper, stamps, or ink.
Government regulations can also impact the competitive advantage of an organization. Consider a food manufacturer that is now required to include more information on their packaging. What is the cost to re-design and distribute new goods?
Changes in demographics can also impact the operations of an organization. Population shifts of older consumers to warmer climates can impact the locations from which they are moving and the locations to which they are moving.
Switching costs are the expenses customers incur when they change from one tech provider to another. The company charges the customer for moving on to another product or service, which can deter the customer from making the change. This firms up the company's ownership of that customer, who may be reluctant to incur those costs.
As a company gains more customers or users, it becomes more attractive to other organizations. For example, a gaming company with a growing number of users may be more attractive to advertisers, related products or services, as well as potential employees.
Finally, intellectual property can provide companies with a competitive advantage, at least for a short time. An organization can protect its programs and innovations, but it can ultimately be copied. Companies are better served by protecting their employees' skills, corporate secrets, and manufacturing processes.
To review, read Key Framework: The Five Forces of Industry Competitive Advantage and Powerful Resources.
Unit 2 Vocabulary
This vocabulary list includes terms that might help you with the review items above and some terms you should be familiar with to be successful in completing the final exam for the course.
Try to think of the reason why each term is included.
- strategic management
- industrial approach
- sociological approach
- strategy formulation
- goal setting
- strategic architecture
- the planning process
- mission Statement
- Porter's Five Forces
- switching costs
- network effects
- intellectual property