Importance of Operations Strategy in Achieving Competitive Advantage: Critical Assessment
Importance of Operations Strategy in Achieving Competitive Advantage
As customers all over
the world increase in their taste for quality and grow in sophistication, the
operation function of the company becomes increasingly important; thus, the
need for an operations strategy in gaining competitive advantage over the
myriad of competitors home and abroad. (Buffa, 1984; Hayes and Wheelwright,
1984; Prahalad and Hamel, 1990).
“Operations strategy
is generally defined as the development of specific competitive strengths based
on the operations function that is aimed at helping an organization achieve its
long-term competitive goals” (Amoako-gyampah & Boye
2001).
The core function of operations strategy therefore is to make available a plan
as to the best utilization of resources. This is to enable the realization of
objectives enshrined in the corporate strategy. Generally, resources tend to be
limited and so there is the need for a plan that clearly shows the most
effective way to use resources. An organization’s resources may constitute
employees, machines, technology, information and the like.
The advent of Skinner’s (1969) work
brought the concept of operations strategy into the limelight. In his work,
Skinner (1969) underscored the importance of a manufacturing strategy in the
formulation and implementation of corporate strategy. Corporate strategy is a
by-product of the identification of the company’s mission, environmental
scanning and the core competencies of the firm. Identification of the company’s
mission entails taking a decision on the following variables: choice of line of
business, choice of target customers and how the firm’s values and beliefs
would brand the business. While core competencies are the strengths of the
company, the ultimate aim of environmental scanning is to identify
opportunities and threats via an inspection of prevailing market trends in the
socioeconomic and political landscape of the proposed country of operation.
Indeed, operations strategy is important in
achieving competitive advantage (Buffa,
1984; Hayes and Wheelwright, 1984; Prahalad and Hamel, 1990). The
operations strategy is put together by first establishing the competitive
priorities of the firm (Boyer & Lewis 2002); hence, competitive
priorities may be considered as the cardinal component of the operations
strategy. Once the competitive priority is identified, all aspects of
production as pertaining to structure and infrastructure of the company is
appropriately altered to match the firm’s competitive priorities. Operating
decision on structure covers capacity, facilities, technology. Decisions on
infrastructure cover workforce, quality, production planning, and organization.
Most importantly, care must be taken how they are matched with the
organization’s key competitive priorities.
According to Boyer & Lewis (2002), competitive
priorities signify an intentional focus on building up specific manufacturing competencies
that may boost a plant’s position in the marketplace. It therefore stands to
reason that competitive priorities and their appropriateness for a given market
may dictate the degree of competitive advantage a firm would wield in the
marketplace.
In fact, Boyer
& Lewis (2002) are of the view that competitive priorities can be used to
measure operations strategies,
provided there is a relative weighting of the various priorities. In simple
terms, competitive priority defines how
companies compete in the marketplace. The competencies leveraged in operations
strategy for competitive advantage include cost, quality, flexibility,
and delivery/time (Schmenner
and Swink 1998; Ward, McCreery, Ritzman, and Sharma 1998), though
innovativeness and service have been suggested as supplementary priorities by
some researchers. Nevertheless, empirical research and theories on operations
strategy continue to focus on the aforementioned four fundamental capabilities.
Even as cost has to do with keeping
costs low, quality centers on the capability of the product or service to satisfy
customer’s specifications or requirements. Speed of delivery and/or on-time
delivery performance is the focus of the competitive priority, time. However, flexibility
is concerned with the ability to make to order the product or quickly change
the production quantity. For instance, the Japanese auto company, Toyota has
adopted an operations strategy concentrated on producing quality cars. This
strategy has giving it the reputation of having one of the least defects rates
in the industry. LensCrafters, a glass making firm, has focused on the speed of
delivery promising to make glasses of customers in one hour or less. By
‘tweaking’ their operations strategy, these two firms are able to achieve
competitive advantage in the marketplace.
Although
the general outline for operations strategy is somewhat well defined, there are
continued disputes over how the competitive priorities stated above relate with
each other. This debate involves three schools of thought: the trade-off,
cumulative, and integrative models (Boyer & Lewis 2002). The trade-off
model is the most developed, first put forward by Skinner (1969). This model
argues that firms must make choices relating to which particular or sets of
specific competitive priorities should be allocated the greatest proportion of
time and resources. Under this model, firms are usually compelled to make
trade-offs between different priorities, on the basis of their relative
significance.
The cumulative model espouses singular focus
on a single core competence into which limited resources will be invested. Others
argue that advanced manufacturing technology (AMT) allows for simultaneous improvements
in quality, cost, flexibility, and delivery. Additionally, findings indicate
that the trade-off model is still the most pervasive (Boyer & Lewis 2002).
An organization’s
competitiveness depends on the appropriate trade-off of its operational
priorities. This assertion supports the main theme of Skinner’s (1969) work where
he indicated that there are trade-offs associated with the crafting of a
suitable operations strategy – a fact which management of firms needed to come
to grips with. It was the view of Skinner that the business environment drives
the content of operations strategy through the latter’s connection with the corporate
strategy. Consequently, an appreciation of the
business environment is vital in understanding the formulation of an effective
operations strategy. This means that the business environment in a way
influence what operations strategy would be adopted by way of content. This
also presupposes that the selection of the appropriate competitive priorities
(i.e. content) would give a firm the needed competitive advantage in the
marketplace.
It
is the competitive priority that makes the operations strategy adaptable to
varying business environment. Studies by
Amoako-Gyampah and Boye (2001) showed that in an environment of high business
cost, more emphasis is placed on the cost and delivery priorities, as well as
flexibility priority. They also discovered that in a competitive hostile
business environment, firms cost, quality, and flexibility priorities. Studies
by Amoako-Gyampah and Boye (2001) reveal that perceived business costs and
competitive hostility were the two most important factors that influenced the
extent of emphasis placed on operations strategy. As such, it could be posited
that operations strategy is the key way by which businesses respond to changes
and maneuver in the business environment. Without doubt operations strategy
does play a critical role in the achievement of competitive advantages by firms
– the key differentiator between Japanese companies and their United States
counterparts especially in the latter part of the 20th century.
Key Terms
Importance of operations strategy
Evaluate the importance of operations strategies in achieving competitive advantage
Importance of operation strategy
Role of operations strategy
Operations management for competitive advantage
What is operation strategy
Importance of operational strategy
Operation management for competitive advantage
Some References
Amoako-gyampah, K. & Boye, S.S.,
2001. Operations strategy in an emerging economy : the case of the Ghanaian
manufacturing industry. Journal of Operations Management, 19, pp.59–79.
Anonymous,
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date accessed 8/10/14.
Armstrong, J.S. & Green, K.C., 2012.
Demand forecasting: evidence-based methods., (February).
Arthur, J., 2000. Six Sigma
Simplified-Quantum Improvement Made Easy. Denver, Lifestar.
Boyer, K.K. & Lewis, M.W., 2002.
Competitive prioritities: Investigating the need for trade-offs in operations
strategy. Production and Operations Management, 11(1).
Buffa,
E.S., 1984. Meeting the Competitive Challenge. Dow Jones-Irwin, Homewood, IL
Domingo, R. T., 1997. Quality means
survival-caveat vendidor let the seller beware. Singapore, New York; Prentice
Hall.
Hahn, G. J., Hill, W. J., Hoerl, R. W.,
& Zinkgraf, S. A., 1999. The impact of Six Sigma improvement—A glimpse into
the future of statistics. American
Statistician, 53 (3), pp. 208– 215.
Harry, M. and Schroeder, R., 1999. Six
Sigma: The Breakthrough Management Strategy Revolutionizing the World’s Top
Corporations. Doubleday: New York, 1999.
Hayes, R. H., Wheelwright, S. C., 1984.
Restoring our Competitive Edge: Competing through Manufacturing. Wiley, New
York, NY.
Prahalad, C.K., Hamel, G., 1990. The
core competence of the corporation. Harvard Business Review 68 (3), pp. 79–91.
Qureshi,
M.I. et al., 2012. Customer Satisfaction Measurement and Analysis Using Six
Sigma in Telecom Sector of Pakistan. European Journal of Sustainable
Development, 1(1), pp.53–68.
Taylor, J.W., 2008. A comparison of
univariate time series methods for forecasting intraday arrivals at a call
center. Management Science, 54, pp.253–265.
World Bank., 2014. Ebola: New World Bank Group
study forecasts billions in economic loss if epidemic lasts longer, spreads in
West Africa. http://www.worldbank.org/en/news/press-release/2014/10/08/ebola-new-world-bank-group-study-forecasts-billions-in-economic-loss-if-epidemic-lasts-longer-spreads-in-west-africa,
date accessed 8/10/14.
Keywords
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