Operations & Competition
In many industries today, one no longer needs to be concerned only about competition on a local or national level, but about competition on an international level as well. To be viable in this increasingly competitive environment and to maintain or increase their market share, businesses need to be more concerned than ever with those areas of management that are concerned with productivity, quality, and cost in the operations function as well as strategic planning for the organization. This requires an emphasis on improving various aspects of operational functioning including the development of a sound strategy that will allow the organization to increase its competitive advantage, development of a value chain that will effectively and efficiently distribute inputs to and outputs from the organization while adding value to the product or service that is delivered to the customer, various performance variables including the implementation of a solid infrastructure that supports the business processes, the processes themselves, quality assurance mechanisms, and various human resource considerations including motivation.
In many ways, today's global marketplace offers business many more opportunities than ever before. With the relative ease of transportation, it is significantly easier to provide goods and products to customers across the globe than it was once to provide them to customers across the country. Further, improvements in information technology mean that an increasing number of organizations are trafficking in information and services rather than in tangible products. These things are even better suited to the global marketplace since transportation and storage are typically not issues. In addition, not only does the global economy mean that there are more customers for an organization's goods and services, it also means that there are more opportunities to outsource offshore processes or functions in order to take advantage of cheap labor and production rates in other countries.
On the other hand, globalization also means that there is stiffer competition in many industries. Many organizations no longer need to be concerned only about competition on a local or national level, but about competition on an international level as well. This is true for a wide spectrum of industries. High-tech equipment is more likely to be made abroad than it is domestically. The call for technical help with a software problem may be answered in Manila. The x-ray taken in a local emergency room may be read in Delhi. Local microbrews must compete against the established products of large German breweries.
Importance of Operations Management
To be viable in this increasingly competitive environment and to maintain or increase their market share, businesses need to be more concerned than ever with operations management. This discipline comprises those areas of management that are concerned with productivity, quality, and cost in the operations function (i.e., activities necessary to transform inputs such as business transactions and information into outputs such as completed transactions) as well as strategic planning for the organization. To successfully compete in the global marketplace, an increasing number of organizations are placing emphasis on becoming high performing organizations -- organizations that consistently outperform their competitors. As shown in Figure 1, this approach requires an emphasis on improving various aspects of operational functioning. These include development of a sound strategy that will allow the organization to increase its competitive advantage, a development of a value chain that will effectively and efficiently distribute inputs to and outputs from the organization while adding value to the product or service that is delivered to the customer, various performance variables including the implementation of a solid infrastructure that supports the business processes, the processes themselves, quality assurance mechanisms, and various human resource considerations including motivation.
The first step to be taken in order to become or remain competitive in today's marketplace is to develop a strategic plan that will help clarify the goals and objectives of the organization and develop an approach and processes to achieve these. Strategic planning allows the organization to determine and articulate its long-term goals and to develop a plan to use the company's resources -- including materials, equipment and technology, and personnel -- in reaching these goals. Developing clear goals is essential to achieving and maintaining a competitive advantage in the marketplace. For example, for years, Domino's Pizza tried to differentiate itself from the competition by advertising that it would deliver its pizzas in 30 minutes or less or the pizza was free. Over time, however, Dominos' found that the incentive of fast delivery was insufficient to stay ahead of the plethora of competition from pizza delivery restaurants ranging from other large chains to local mom-and-pop businesses. When a new CEO took over, the reason became clear. Although Domino's did meet its objective of delivering pizza quickly, the new head of the corporation found that not only was the pizza that was delivered not very good, it was also not hot. Steps have been taken to correct this situation so that Domino's can remain competitive in the marketplace.
Approaches for Developing Competitive Strategy
There are a number of approaches to developing a competitive strategy -- a plan of action by which a business attempts to increase its competitive advantage. Typically, this is done in one of three ways. Businesses may achieve a competitive advantage by providing products or services at a lower cost than is done by their competitors. This is the approach used by Walmart, for example. Another approach to achieving a competitive advantage is through differentiating one's product or service from that of the competition. The Domino's example cited above illustrates this approach. A third approach to developing a competitive advantage is by focusing on niche marketing -- a sub-segment of a particular market where the consumers' needs are not being met and on which an organization focuses its efforts. A management consultant who only works with telecommunications companies would be an example of this approach.
Aligning Business Processes with Goals
Strategy alone, however, is insufficient to ensure the competitiveness of the organization. Business processes need to support the achievement of the organization's goals and objectives, and an infrastructure needs to be in place that supports the efficiency of the processes. Business processes are any of a number of linked activities that transform an input into the organization into an output that is delivered to the customer. Business processes include management processes, operational processes (e.g., purchasing, manufacturing, marketing), and supporting processes, (accounting, human resources). Business processes take one or more inputs such as data, raw materials, or components parts, and transform them into something that is of value to the customer. For example, a business could take raw demographic data concerning the people who live within a ten-mile radius of a retail store, analyze it, and create...
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