1. Operations
Management
Chapter 2 –
Operations Strategy in
a Global Environment
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc. 2–1

2. Outline
 Global Company Profile: Boeing
 A Global View of Operations
 Cultural and Ethical Issues
 Developing Missions And
Strategies
 Mission
 Strategy
© 2008 Prentice Hall, Inc. 2–2

3. Outline – Continued
 Achieving Competitive Advantage
Through Operations
 Competing On Differentiation
 Competing On Cost
 Competing On Response
 Ten Strategic OM Decisions
© 2008 Prentice Hall, Inc. 2–3

4. Outline – Continued
 Issues In Operations Strategy
 Research
 Preconditions
 Dynamics
© 2008 Prentice Hall, Inc. 2–4

5. Outline – Continued
 Strategy Development and
Implementation
 Critical Success Factors and Core
Competencies
 Build and Staff the Organization
 Integrate OM with Other Activities
© 2008 Prentice Hall, Inc. 2–5

6. Outline – Continued
 Global Operations Strategy
Options
 International Strategy
 Multidomestic Strategy
 Global Strategy
 Transnational Strategy
© 2008 Prentice Hall, Inc. 2–6

7. Learning Objectives
When you complete this chapter you
should be able to:
1. Define mission and strategy
2. Identify and explain three strategic
approaches to competitive
advantage
3. Identify and define the 10 decisions
of operations management
© 2008 Prentice Hall, Inc. 2–7

8. Learning Objectives
When you complete this chapter you
should be able to:
4. Identify five OM strategy insights
provided by PIMS research
5. Identify and explain four global
operations strategy options
© 2008 Prentice Hall, Inc. 2–8

9. Global Strategies
 Boeing – sales and production are
worldwide
 Benetton – moves inventory to stores
around the world faster than its
competition by building flexibility into
design, production, and distribution
 Sony – purchases components from
suppliers in Thailand, Malaysia, and
around the world
© 2008 Prentice Hall, Inc. 2–9

10. Global Strategies
 Volvo – considered a Swedish company
but it is controlled by an American
company, Ford. The current Volvo S40 is
built in Belgium and shares its platform
with the Mazda 3 built in Japan and the
Ford Focus built in Europe.
 Haier – A Chinese company, produces
compact refrigerators (it has one-third of
the US market) and wine cabinets (it has
half of the US market) in South Carolina
© 2008 Prentice Hall, Inc. 2 – 10

11. Some Multinational
Corporations
% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce
Citicorp USA 34 46 NA
Colgate- USA 72 63 NA
Palmolive
Dow USA 60 50 NA
Chemical
Gillette USA 62 53 NA
Honda Japan 63 36 NA
IBM USA 57 47 51
© 2008 Prentice Hall, Inc. 2 – 11

12. Some Multinational
Corporations
% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce
ICI Britain 78 50 NA
Nestle Switzerland 98 95 97
Philips Netherlands 94 85 82
Electronics
Siemens Germany 51 NA 38
Unilever Britain & 95 70 64
Netherlands
© 2008 Prentice Hall, Inc. 2 – 12

13. Some Boeing Suppliers (787)
Firm Country Component
Latecoere France Passenger doors
Labinel France Wiring
Dassault France Design and
PLM software
Messier-Bugatti France Electric brakes
Thales France Electrical power
conversion system
and integrated
standby flight display
Messier-Dowty France Landing gear structure
Diehl Germany Interior lighting
© 2008 Prentice Hall, Inc. 2 – 13

14. Some Boeing Suppliers (787)
Firm Country Component
Cobham UK Fuel pumps and valves
Rolls-Royce UK Engines
Smiths Aerospace UK Central computer
system
BAE SYSTEMS UK Electronics
Alenia Aeronautics Italy Upper center
fuselage &
horizontal stabilizer
Toray Industries Japan Carbon fiber for
wing and tail units
© 2008 Prentice Hall, Inc. 2 – 14

15. Some Boeing Suppliers (787)
Firm Country Component
Fuji Heavy Japan Center wing box
Industries
Kawasaki Heavy Japan Forward fuselage,
Industries fixed section of wing,
landing gear well
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Japan Wing box
Industries
Chengdu Aircraft China Rudder
Group
Hafei Aviation China Parts
© 2008 Prentice Hall, Inc. 2 – 15

16. Some Boeing Suppliers (787)
Firm Country Component
Korean Aviation South Wingtips
Korea
Saab Sweden Cargo access doors
© 2008 Prentice Hall, Inc. 2 – 16

17. Reasons to Globalize
Reasons to Globalize
Tangible 1. Reduce costs (labor, taxes, tariffs, etc.)
Reasons 2. Improve supply chain
3. Provide better goods and services
4. Understand markets
Intangible 5. Learn to improve operations
Reasons 6. Attract and retain global talent
© 2008 Prentice Hall, Inc. 2 – 17

18. Reduce Costs
 Foreign locations with lower wage
rates can lower direct and indirect
costs
 Maquiladoras
 World Trade Organization (WTO)
 North American Free Trade
Agreement (NAFTA)
 APEC, SEATO, MERCOSUR
 European Union (EU)
© 2008 Prentice Hall, Inc. 2 – 18

19. Improve the Supply Chain
 Locating facilities closer to
unique resources
 Auto design to California
 Athletic shoe production to China
 Perfume manufacturing in France
© 2008 Prentice Hall, Inc. 2 – 19

20. Provide Better Goods
and Services
 Objective and subjective
characteristics of goods and
services
 On-time deliveries
 Cultural variables
 Improved customer service
© 2008 Prentice Hall, Inc. 2 – 20

21. Understand Markets
 Interacting with foreign customers
and suppliers can lead to new
opportunities
 Cell phone
design from
Europe
 Cell phone
fads from
Japan
 Extend the product life cycle
© 2008 Prentice Hall, Inc. 2 – 21

22. Learn to Improve Operations
 Remain open to the free flow of
ideas
 General Motors partnered with a
Japanese auto manufacturer to
learn
 Equipment and layout have been
improved using Scandinavian
ergonomic competence
© 2008 Prentice Hall, Inc. 2 – 22

23. Attract and Retain Global
Talent
 Offer better employment
opportunities
 Better growth opportunities and
insulation against unemployment
 Relocate unneeded personnel to
more prosperous locations
 Incentives for people who like to
travel
© 2008 Prentice Hall, Inc. 2 – 23

24. Cultural and Ethical Issues
 Cultures can be quite different
 Attitudes can be quite different
towards
 Punctuality  Thievery
 Lunch breaks  Bribery
 Environment  Child labor
 Intellectual
property
© 2008 Prentice Hall, Inc. 2 – 24

25. You May Wish To Consider
 National literacy rate  Work ethic
 Rate of innovation  Tax rates
 Rate of technology  Inflation
change  Availability of raw
 Number of skilled materials
workers  Interest rates
 Political stability  Population
 Product liability laws  Number of miles of
 Export restrictions highway
 Variations in language  Phone system
© 2008 Prentice Hall, Inc. 2 – 25

26. Match Product & Parent
 Braun Household
Appliances 1. Volkswagen
 Firestone Tires 2. Bridgestone
 Godiva Chocolate 3. Campbell Soup
 Haagen-Dazs Ice 4. Ford Motor Company
Cream
5. Gillette
 Jaguar Autos
6. Nestlé
 MGM Movies
7. Pillsbury
 Lamborghini Autos
8. Sony
 Alpo Petfoods
© 2008 Prentice Hall, Inc. 2 – 26

27. Match Product & Parent
 Braun Household
Appliances 1. Volkswagen
 Firestone Tires 2. Bridgestone
 Godiva Chocolate 3. Campbell Soup
 Haagen-Dazs Ice 4. Ford Motor Company
Cream
5. Gillette
 Jaguar Autos
6. Nestlé
 MGM Movies
7. Pillsbury
 Lamborghini Autos
8. Sony
 Alpo Petfoods
© 2008 Prentice Hall, Inc. 2 – 27

28. Match Product & Country
 Braun Household
Appliances
 Firestone Tires
1. Great Britain
 Godiva Chocolate
2. Germany
 Haagen-Daz Ice
3. Japan
Cream
4. United States
 Jaguar Autos
5. Switzerland
 MGM Movies
 Lamborghini Autos
 Alpo Pet Foods
© 2008 Prentice Hall, Inc. 2 – 28

29. Match Product & Country
 Braun Household
Appliances
 Firestone Tires
1. Great Britain
 Godiva Chocolate
2. Germany
 Haagen-Daz Ice
3. Japan
Cream
4. United States
 Jaguar Autos
5. Switzerland
 MGM Movies
 Lamborghini Autos
 Alpo Pet Foods
© 2008 Prentice Hall, Inc. 2 – 29

30. Developing Missions and
Strategies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there
© 2008 Prentice Hall, Inc. 2 – 30

31. Mission
 Mission - where are
you going?
 Organization’s
purpose for being
 Answers ‘What do
we provide society?’
 Provides boundaries
and focus
© 2008 Prentice Hall, Inc. 2 – 31

32. FedEx
FedEx is committed to our People-Service-Profit
philosophy. We will produce outstanding financial
returns by providing total reliable, competitively
superior, global air-ground transportation of high
priority goods and documents that require rapid,
time-certain delivery. Equally important, positive
control of each package will be maintained using
real time electronic tracking and tracing systems. A
complete record of each shipment and delivery will
be presented with our request for payment. We will
be helpful, courteous, and professional to each other
and the public. We will strive to have a completely
satisfied customer at the end of each transaction.
Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 32

33. Merck
The mission of Merck is to provide
society with superior products and
services - innovations and solutions
that improve the quality of life and
satisfy customer needs - to provide
employees with meaningful work and
advancement opportunities and
investors with a superior rate of return
Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 33

34. Hard Rock Cafe
Our Mission: To spread the spirit of Rock ‘n’
Roll by delivering an exceptional
entertainment and dining experience. We
are committed to being an important,
contributing member of our community and
offering the Hard Rock family a fun, healthy,
and nurturing work environment while
ensuring our long-term success.
Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 34

35. Arnold Palmer Hospital
Arnold Palmer Hospital is a healing
environment providing family-centered
care with compassion, comfort and
respect… when it matters the most.
Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 35

36. Factors Affecting Mission
Philosophy
and Values
Profitability
Environment
and Growth
Mission
Customers Public Image
Benefit to
Society
© 2008 Prentice Hall, Inc. 2 – 36

37. Sample Missions
Sample Company Mission
To manufacture and service an innovative, growing, and
profitable worldwide microwave communications business
that exceeds our customers’ expectations.
Sample Operations Management Mission
To produce products consistent with the company’s mission
as the worldwide low-cost manufacturer.
Figure 2.3
© 2008 Prentice Hall, Inc. 2 – 37

38. Sample Missions
Sample OM Department Missions
Product design To design and produce products and
services with outstanding quality and
inherent customer value.
Quality management To attain the exceptional value that is
consistent with our company mission and
marketing objectives by close attention to
design, procurement, production, and field
service operations
Process design To determine and design or produce the
production process and equipment that will
be compatible with low-cost product, high
quality, and good quality of work life at
economical cost.
Figure 2.3
© 2008 Prentice Hall, Inc. 2 – 38

39. Sample Missions
Sample OM Department Missions
Location To locate, design, and build efficient and
economical facilities that will yield high
value to the company, its employees, and the
community.
Layout design To achieve, through skill, imagination, and
resourcefulness in layout and work methods,
production effectiveness and efficiency
while supporting a high quality of work life.
Human resources To provide a good quality of work life, with
well-designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange
for outstanding individual contribution from
employees at all levels.
Figure 2.3
© 2008 Prentice Hall, Inc. 2 – 39

40. Sample Missions
Sample OM Department Missions
Supply chain To collaborate with suppliers to develop
management innovative products from stable, effective,
and efficient sources of supply.
Inventory To achieve low investment in inventory
consistent with high customer service levels
and high facility utilization.
Scheduling To achieve high levels of throughput and
timely customer delivery through effective
scheduling.
Maintenance To achieve high utilization of facilities and
equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.
Figure 2.3
© 2008 Prentice Hall, Inc. 2 – 40

41. Strategic Process
Organization’s
Mission
Functional
Area Missions
Finance/
Marketing Operations
Accounting
© 2008 Prentice Hall, Inc. 2 – 41

42. Strategy
 Action plan to
achieve mission
 Functional areas
have strategies
 Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
© 2008 Prentice Hall, Inc. 2 – 42

43. Strategies for Competitive
Advantage
 Differentiation – better, or at least
different
 Cost leadership – cheaper
 Response – rapid response
© 2008 Prentice Hall, Inc. 2 – 43

44. Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customer’s perception of
value
 Safeskin gloves – leading edge products
 Walt Disney Magic Kingdom –
experience differentiation
 Hard Rock Cafe – dining experience
© 2008 Prentice Hall, Inc. 2 – 44

45. Competing on Cost
Provide the maximum value as
perceived by customer. Does not
imply low quality.
 Southwest Airlines – secondary
airports, no frills service, efficient
utilization of equipment
 Wal-Mart – small overheads, shrinkage,
distribution costs
 Franz Colruyt – no bags, low light, no
music, doors on freezers
© 2008 Prentice Hall, Inc. 2 – 45

46. Competing on Response
 Flexibility is matching market changes in
design innovation and volumes
 Institutionalization at Hewlett-Packard
 Reliability is meeting schedules
 German machine industry
 Timeliness is quickness
in design, production,
and delivery
 Johnson Electric,
Bennigan’s, Motorola
© 2008 Prentice Hall, Inc. 2 – 46

47. OM’s Contribution to Strategy
Operations Specific Competitive
Decisions Examples Strategy Used Advantage
Product FLEXIBILITY:
Sony’s constant innovation
Quality of new products………………………………....Design
HP’s ability to lead
the printer market………………………………Volume
Process
Southwest Airlines No-frills service……..…..LOW COST
Location
DELIVERY:
Pizza Hut’s 5-minute guarantee Differentiation
Layout at lunchtime…………………..…..………………….Speed (Better)
Federal Express’s “absolutely,
positively on time”………………………..….Dependability
Human
resource QUALITY: Response
Motorola’s HDTV converters….……........Conformance (Faster)
Motorola’s pagers………………………..….Performance Cost
Supply chain
leadership
Caterpillar’s after-sale service (Cheaper)
Inventory on heavy equipment……………....AFTER-SALE SERVICE
Fidelity Security’s broad
Scheduling line of mutual funds………….BROAD PRODUCT LINE
Maintenance Figure 2.4
© 2008 Prentice Hall, Inc. 2 – 47

48. 10 Strategic OM Decisions
1. Goods and 6. Human resources
service design and job design
2. Quality 7. Supply chain
3. Process and management
capacity design
8. Inventory
4. Location
selection 9. Scheduling
5. Layout design 10. Maintenance
© 2008 Prentice Hall, Inc. 2 – 48

49. Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Goods and Product is usually Product is not
service tangible tangible
design
Quality Many objective Many subjective
standards standards
Process Customers not Customer may be
and involved directly involved
capacity Capacity must
design match demand
Table 2.1
© 2008 Prentice Hall, Inc. 2 – 49

50. Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Location Near raw Near customers
selection materials and
labor
Layout Production Enhances product
design efficiency and production
Human Technical skills, Interact with
resources consistent labor customers, labor
and job standards, output standards vary
design based wages
Table 2.1
© 2008 Prentice Hall, Inc. 2 – 50

51. Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Supply Relationship Important, but
chain critical to final may not be
product critical
Inventory Raw materials, Cannot be stored
work-in-process,
and finished
goods may be
held
Scheduling Level schedules Meet immediate
possible customer demand
Table 2.1
© 2008 Prentice Hall, Inc. 2 – 51

52. Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Maintenance Often preventive Often “repair” and
and takes place takes place at
at production site customer’s site
Table 2.1
© 2008 Prentice Hall, Inc. 2 – 52

53. Managing Global Service
Operations
Requires a different perspective
on:
 Capacity planning
 Location planning
 Facilities design and layout
 Scheduling
© 2008 Prentice Hall, Inc. 2 – 53

54. Process Design
High Process-focused Mass Customization
JOB SHOPS Customization at high
(Print shop, emergency Volume
room, machine shop, (Dell Computer’s PC,
Variety of Products
fine-dining Repetitive (modular) cafeteria)
restaurant) focus
ASSEMBLY LINE
Moderate (Cars, appliances,
TVs, fast-food
restaurants) Product focused
CONTINUOUS
(steel, beer, paper,
bread, institutional
kitchen)
Low
Low Moderate High
Volume
© 2008 Prentice Hall, Inc. 2 – 54

55. Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive Product Differentiation Low Cost
Advantage
Product Heavy R&D investment; Low R&D investment;
Selection and extensive labs; focus on focus on development
Design development in a broad of generic drugs
range of drug
categories
Quality Major priority, exceed Meets regulatory
regulatory requirements requirements on a
country by country
basis
Table 2.2
© 2008 Prentice Hall, Inc. 2 – 55

56. Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive Product Differentiation Low Cost
Advantage
Process Product and modular Process focused;
process; long general processes; “job
production runs in shop” approach, short-
specialized facilities; run production; focus
build capacity ahead of on high utilization
demand
Location Still located in the city Recently moved to low-
where it was founded tax, low-labor-cost
environment
Table 2.2
© 2008 Prentice Hall, Inc. 2 – 56

57. Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Scheduling Centralized production Many short-run
planning products complicate
scheduling
Layout Layout supports Layout supports
automated product- process-focused “job
focused production shop” practices
Table 2.2
© 2008 Prentice Hall, Inc. 2 – 57

58. Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Human Hire the best; Very experienced top
Resources nationwide searches executives; other
personnel paid below
industry average
Supply Chain Long-term supplier Tends to purchase
relationships competitively to find
bargains
Table 2.2
© 2008 Prentice Hall, Inc. 2 – 58

59. Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive Product Differentiation Low Cost
Advantage
Inventory High finished goods Process focus drives up
inventory to ensure all work-in-process
demands are met inventory; finished
goods inventory tends
to be low
Maintenance Highly trained staff; Highly trained staff to
extensive parts meet changing demand
inventory
Table 2.2
© 2008 Prentice Hall, Inc. 2 – 59

60. Issues In Operations Strategy
 Research about effective
operations management
strategies
 Preconditions for developing
effective OM strategies
 The dynamics of OM strategy
development
© 2008 Prentice Hall, Inc. 2 – 60

61. Characteristics of
High ROI Firms
 High product quality
 High capacity utilization
 High operating efficiency
 Low investment intensity
 Low direct cost per unit
From the PIMS program of the Strategic Planning Institute
© 2008 Prentice Hall, Inc. 2 – 61

62. Strategic Options to Gain a
Competitive Advantage
28% - Operations Management
18% - Marketing/distribution
17% - Momentum/name recognition
16% - Quality/service
14% - Good management
4% - Financial resources
3% - Other
© 2008 Prentice Hall, Inc. 2 – 62

63. Elements of Operations
Management Strategy
 Low-cost product
 Product-line breadth
 Technical superiority
 Product characteristics/differentiation
 Continuing product innovation
 Low-price/high-value offerings
 Efficient, flexible operations adaptable to
consumers
 Engineering research development
 Location
 Scheduling
© 2008 Prentice Hall, Inc. 2 – 63

64. Preconditions
One must understand:
 Strengths and weaknesses of competitors and
possible new entrants into the market
 Current and prospective environmental,
technological, legal, and economic issues
 The product life cycle
 Resources available within the firm and within
the OM function
 Integration of OM strategy with company’s
strategy and with other functional areas
© 2008 Prentice Hall, Inc. 2 – 64

65. Dynamics of
Strategic Change
 Changes within the organization
 Personnel
 Finance
 Technology
 Product life
 Changes in the environment
© 2008 Prentice Hall, Inc. 2 – 65

66. Product Life Cycle
Introduction Growth Maturity Decline
Best period to Practical to change Poor time to Cost control
Company Strategy/Issues
increase market price or quality change image, critical
share image price, or quality
R&D engineering is Strengthen niche Competitive costs
critical become critical
Defend market
position
CD-ROMs
Internet search engines
Analog TVs
Drive-through
LCD & plasma TVs restaurants
Sales iPods
3 1/2”
Xbox 360 Floppy
disks
Figure 2.5
© 2008 Prentice Hall, Inc. 2 – 66

67. Product Life Cycle
Introduction Growth Maturity Decline
Product design Forecasting Standardization Little product
and critical Less rapid differentiation
development Product and product changes Cost
OM Strategy/Issues
critical process – more minor minimization
Frequent reliability changes Overcapacity
product and Competitive Optimum in the
process design product capacity industry
changes improvements Increasing Prune line to
Short production and options stability of eliminate
runs Increase capacity process items not
High production returning
Shift toward Long production
costs good margin
product focus runs
Limited models Reduce
Enhance Product
capacity
Attention to distribution improvement and
quality cost cutting
Figure 2.5
© 2008 Prentice Hall, Inc. 2 – 67

68. SWOT Analysis
Mission
Internal External
Strengths Opportunities
Analysis
Internal External
Weaknesses Threats
Strategy
© 2008 Prentice Hall, Inc. 2 – 68

69. Strategy Development Process
Environmental Analysis
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
Determine Corporate Mission
State the reason for the firm’s existence and identify the
value it wishes to create.
Form a Strategy
Build a competitive advantage, such as low price, design, or
volume flexibility, quality, quick delivery, dependability, after-
sale service, broad product lines.
© 2008 Prentice Hall, Inc. Figure 2.6 2 – 69

70. Strategy Development and
Implementation
 Identify critical success factors
 Build and staff the organization
 Integrate OM with other activities
The operations manager’s job is to implement
an OM strategy, provide competitive
advantage, and increase productivity
© 2008 Prentice Hall, Inc. 2 – 70

71. Critical Success Factors
Marketing Finance/Accounting Production/Operations
Service Leverage
Distribution Cost of capital
Promotion Working capital
Channels of distribution Receivables
Product positioning Payables
(image, functions) Financial control
Lines of credit
Decisions Sample Options Chapter
Product Customized, or standardized 5
Quality Define customer expectations and how to achieve them 6, S6
Process Facility size, technology, capacity 7, S7
Location Near supplier or near customer 8
Layout Work cells or assembly line 9
Human resource Specialized or enriched jobs 10, S10
Supply chain Single or multiple suppliers 11, S11
Inventory When to reorder, how much to keep on hand 12, 14, 16
Schedule Stable or fluctuating production rate 13, 15
Maintenance Repair as required or preventive maintenance 17
Figure 2.7
© 2008 Prentice Hall, Inc. 2 – 71

72. Activity Mapping
Courteous, but
Limited Passenger
Service
Lean, Short Haul, Point-to-
Productive Point Routes, Often to
Employees Secondary Airports
Competitive Advantage:
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 72

73. Activity Mapping
Courteous, but
Limited Passenger
Service
Lean, Short Haul, Point-to-
Productive Point Routes, Often to
Employees Secondary Airports
Automated ticketing machines
Competitive Advantage:
No seat assignments
Low Cost
No baggage transfers
High Frequent,
Aircraft No meals (peanuts) Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 73

74. Activity Mapping
Courteous, but
Limited Passenger
Service
No meals (peanuts)
Lean,
Lower gate costs at Short Haul, Point-to-
Productive Point Routes, Often to
secondary airports
Employees Secondary Airports
High number of flights
Competitive Advantage:
reduces employee idle time
Low Cost
between flights
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 74

75. Activity Mapping
High number of flights
Courteous, but
reduces employee Passenger
Limited idle time
Service
between flights
Lean, Short Haul, Point-to-
Saturate a city with flights,
Productive Point Routes, Often to
lowering administrative
Employees Secondary Airports
costs (advertising, HR, etc.)
Competitive Advantage:
per passenger for that city
Low Cost
Pilot training required on
only one type of aircraft
High Frequent,
Aircraft Reliable
Reduced maintenance
Utilization Schedules
Standardized
inventory required of Boeing
Fleet because
of only one type ofAircraft
737 aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 75

76. Activity Mapping
Pilot training required on
Courteous, but
only one type of aircraft
Limited Passenger
Service
Reduced maintenance
Lean, inventory required because Haul, Point-to-
Short
Productive of only one type of aircraft Routes, Often to
Point
Employees Secondary Airports
Excellent supplier relations
with Boeing has aided
Competitive Advantage:
financing
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 76

77. Activity Mapping
Courteous, but
Limited Passenger
Reduced maintenance
Service
inventory required because
Lean, of only one type of aircraft Point-to-
Short Haul,
Productive Point Routes, Often to
Flexible union
Employees Flexible employees and
Secondary Airports
contracts standard planes aid
Competitive Advantage:
scheduling
Low Cost
Maintenance personnel
High trained only one type of
Frequent,
Aircraft aircraft Reliable
Utilization Standardized Schedules
20-minute gate turnarounds
Fleet of Boeing
737 Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 77

78. Activity Mapping
Automated ticketing
Courteous, but
machines
Limited Passenger
Service
Empowered employees
Lean, High employee
Short Haul, Point-to-
Productive compensation Routes, Often to
Point
Employees Secondary Airports
Hire for attitude, then train
Competitive Advantage:
Low Cost of stock
High level
ownership
High Frequent,
Aircraft High number of flights Reliable
Utilization reduces employee idle time
Standardized Schedules
Fleetbetween flights
of Boeing
737 Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 78

79. Four International
Operations Strategies
International
High
Strategy
 Import/export or
Cost Reduction Considerations
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 79

80. Four International
Operations Strategies
High
Cost Reduction Considerations
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 80

81. Four International
Operations Strategies
Global
High Strategy
 Standardized
Cost Reduction Considerations
product
 Economies of scale
 Cross-cultural
learning
Examples
International Strategy
 Import/export or
Texas Instruments
license existing
product
Examples Caterpillar
Harley Davidson Elevator
Otis
U.S. Steel
Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 81

82. Four International
Operations Strategies
High
Global Strategy
 Standardized product
Cost Reduction Considerations
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 82

83. Four International
Multidomestic
Operations Strategies
Strategy
High
 Use existing
Global Strategy
domestic model
 Standardized product
Cost Reduction Considerations
 Economies of scale
globally
 Cross-cultural learning
Examples
 Franchise, joint
Texas Instruments
Caterpillar
Otis Elevatorventures,
subsidiaries
International Strategy
Examples
 Import/export or
Heinz
license existing
product
Examples
McDonald’s
U.S. Steel
The Body Shop
Harley Davidson
Low Hard Rock Cafe
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 83

84. Four International
Operations Strategies
High
Global Strategy
 Standardized product
Cost Reduction Considerations
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
International Strategy Multidomestic Strategy
 Use existing
 Import/export or domestic model globally
license existing  Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonald’s Hard Rock Cafe
Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 84

85. Four International
Operations Strategies
Transnational
High Strategy
 Move material,
Global Strategy
 Standardized product
Cost Reduction Considerations
people, ideas
 Economies of scale
 Cross-cultural learning
Examples across national
Texas Instruments
Caterpillar boundaries
Otis Elevator
 Economies of scale
 Cross-cultural
International Strategy Multidomestic Strategy
learning
 Import/export or
 Use existing
domestic model globally
license existing  Franchise, joint ventures,
product subsidiaries
Examples
Examples Examples
Coca-Cola
U.S. Steel
Harley Davidson
Heinz The Body Shop
McDonald’s Hard Rock Cafe
Low Nestlé
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 85

86. Four International
Operations Strategies
High
Global Strategy Transnational Strategy
 Standardized product  Move material, people, ideas
Cost Reduction Considerations
 Economies of scale across national boundaries
 Cross-cultural learning  Economies of scale
 Cross-cultural learning
Examples
Texas Instruments Examples
Caterpillar Coca-Cola
Otis Elevator Nestlé
International Strategy Multidomestic Strategy
 Use existing
 Import/export or domestic model globally
license existing  Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonald’s Hard Rock Cafe
Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 86

87. Ranking Corruption
Rank Country 2006 CPI Score (out of 10)
1 Finland 9.6 Least
1 Iceland 9.6 Corrupt
1 New Zealand 9.6
5 Singapore 9.4
7 Switzerland 9.1
11 UK 8.6
14 Canada 8.5
15 Hong Kong 8.3
16 Germany 8.0
17 Japan 7.6
20 USA, Belgium 7.3
34 Israel, Taiwan 5.9
70 Brazil, China, Mexico 3.3 Most
121 Russia 2.5 Corrupt
Table 8.2
© 2008 Prentice Hall, Inc. 2 – 87