Excerpt
CONTENT
1. INTRODUCTION, THEORETICAL BACKGROUND AND DEFINITIONS
2. CASE ANALYSIS
2.1 Dell Incorporated (Dell)
2.1.1 Company Profile, Industry and Environment
2.1.2 Order Qualifiers
2.1.3 Order Winners
2.1.4 Operations Strategy
2.2 Zara Trading Incorporated (Zara)
2.2.1 Company profile, Industry and Environment
2.2.2 Order Qualifiers
2.2.3 Order Winners
2.2.4 Operations Strategy
2.3 McDonalds Corporation (McDonalds)
2.3.1 Company profile, Industry and Environment
2.3.2 Order Qualifiers
2.3.3 Order Winners
2.3.4 Operations Strategy
2.4 Deutsche Lufthansa AG (Lufthansa)
2.4.1 Company profile, Industry and Environment
2.4.2 Order Qualifiers
2.4.3 Order Winners
2.4.4 Operations Strategy
3. CONCLUSION
REFERENCES
1. INTRODUCTION, THEORETICAL BACKGROUND AND DEFINITIONS
The purpose of this paper is to compare and contrast the operations strategy of two ‘manufacturing firms’ with two ‘service’ firms and to evaluate the order qualifying and order winning criteria.
Operations strategy is one part of an enterprise’s overall strategy (corporate strategy, business strategy and operational strategy) and defines the enterprise adjustment concerning “core competencies, capabilities and processes, technologies, resources and key tactical activities necessary in any supply network, in order to create and deliver products or services and the value demanded by a customer” (Lowson, 2001). The literature defines operations strategy as “the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall strategy, through the reconciliation of market requirements with operations resources” (Slack and Lewis, 2002, p.16). The content of operations strategy (decisions) is “top-down,” influenced by the corporate or business strategy, and “bottom-up,” influenced by operational experience. The process of operations strategy is also influenced by market requirements (performance objectives) and operations resource capabilities (Slack, Chambers and Johnson, 2007, p.39).
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Figure 1: The four perspectives on operation strategy (adapted from Slack and Lewis, 2002)
The performance objectives of an organisation are directed according to the values demanded by the customers (Competitive Factors). Five possible performance objectives are considered to exist (Slack, Chambers and Johnson, 2007, p.39):
1. “Costs: The ability to produce at low cost.
2. Quality: The ability to produce in accordance with specifications and without error.
3. Speed: The ability to accomplish tasks quickly, in response to customer demand.
4. Dependability: The ability to deliver in accordance with promises made to customers.
5. Flexibility: The ability to change operations:
a. The ability to change the volume of production.
b. The ability to change the production time.
c. The ability to change the combination of different products or services produced.
d. The ability to innovate and introduce new products or services.” (Barnes, 2008, p.24).
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Figure 2: Different competitive factors imply different performance objectives (adapted from Robinson, 2009)
Companies must excel in matching their customers’ requirements to their operations performance objectives. Usually it is not possible to fulfil all objectives at the same time; therefore setting competitive priorities on performance objectives is necessary (Skinner, 1969).
The concept of “order qualifiers” and “order winners” was developed by Terry Hill (professor at London Business School) and describes the criteria that “may lead” an enterprise “to competitive advantage and market success” (Hill, 2000, pp.53-54). The two criteria groups for success are called order qualifiers and order winners. “An order qualifier is a characteristic of a product or service that is required in order for the product/service to even be considered by a customer (competitive factors). An order winner is a characteristic that will win the bid or customer's purchase” (Hill, 2000, pp.53-54). Both criteria are of equal value: order winners are the reasons why customer buys the product or service (the companies qualities must be better than those of the competition) while order qualifiers are the fundamental aspects a good must have in order to be considered (minimum acceptable standard). All other factors have no significant effect on the purchase decision of customers.
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Figure 3: Order-winning, qualifying and less important competitive factors (adapted from Robinson, 2009)
The operations strategy must not only fit to the market requirements but also be suited to the operations resource capabilities. The resourced-based view (RBV) of the company has an important influence on the strategy, as these present the ability to produce products or services (Slack, Chambers and Johnson, 2007, p.39). RBV-decisions are often dividend in the two categories “structural” and “infrastructural”.
“Structural decisions:
1. Facilities: location, size and focus of operational resources (goods/services).
2. Capacity: the capacity of operations and their ability to respond to changes of demand.
3. Process technology: equipment used in operations process.
4. Supply network: the extent to which operations are conducted in-house ore are outsourced.
Infrastructural decisions:
1. Planning and Control: the system used for planning and controlling operations.
2. Quality: quality management policies and practices.
3. Work Organisation: organisational structure, responsibilities and accountabilities.
4. Human Resources: recruitment and selection, training and development, management.
5. Development: system and procedures used to develop and design new products/services.
6. Performance Measurement: financial and non-financial performance management.” (Barnes, 2008, p.36).
2. CASE ANALYSIS
2.1 Dell Incorporated (Dell)
2.1.1 Company Profile, Industry and Environment
Dell Inc., one of the world’s top supplier of PCs, is a technology company that offers a range of product categories, including mobility, desktop PCs, software and peripherals, servers and networking, services, and storage (Reuters, 2009a).
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Table 1: Financial figures of Dell
Dell operates in the computer hardware industry. Lower price points, increased wireless capabilities, decreased weight, expanded product selection and an overall improvement in technical performance are the current trends in this sector. In the USA, the sales of desktop computers fell by 4% in 2008 as result of the growing popularity of laptops. In 2007, the top three laptop brands in terms of market share in the USA were Dell (28%), HP (26%) and Apple (7,8%) (Euromonitor, 2009b).
2.1.2 Order Qualifiers
Order qualifiers in the computer hardware industry are:
Low price: large amount of suppliers, high transparency for the customer
High quality: technical performance, wireless capabilities, decreased weight
Fast delivery: consumer products are regionally and globally easy accessible
Flexibility: in terms of configuration and design, expended product selection
Service: support und maintenance
(Euromonitor, 2009b).
2.1.3 Order Winners
Dell’s order winners are low price, high flexibility and fast delivery, which all influence each other. Dell’s business model has two components “direct-sales” and “built-to-order”. The direct-sales approach allows customers to order directly from Dell, which eliminates retail expenses and thereby lowers the price. The built-to-order-production allows customers to customize their product according to their personal requirements and, in terms of fast delivery, they allow for the opportunity to choose the latest technologies (Kraemer, Dedrick and Yamashiro, 2000).
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Figure 4: Distribution channel of the PC industry vs. Dell’s distribution channel (adapted from Kraemer et al., 2000)
The built-to-order approach answers the high flexibility requirement of the customer and achieves a low price again through the minimization of parts inventories and the financial issues derived from it. Dell achieves fast delivery through a continually improving built-to- order production system.
Dell also incorporates the remaining order qualifiers “high quality” and “service”. In comparison to its main competitors HP and Apple, Dell is competitive in terms of price and flexibility.
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Figure 5: Radar chart Dell and the competition
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