Operations Management

1. © 2006 Prentice Hall, Inc. 2 – 1
OPERATIONS STRATEGY
IN A
GLOBAL ENVIRONMENT
© 2006 Prentice Hall, Inc.
Engr. Ped Salvador, PhD
Southville Business School
SISC MBA 2019
November 16, 2019

2. © 2006 Prentice Hall, Inc. 2 – 2
Outline
 Global Company Profile: Boeing
 A Global View of Operations
Cultural and Ethical Issues
 Developing Missions And Strategies
Mission
Strategy

3. © 2006 Prentice Hall, Inc. 2 – 3
Outline – Continued
 Achieving Competitive Advantage
Through Operations
Competing On Differentiation
Competing On Cost
Competing On Response
 Ten Strategic OM Decisions

4. © 2006 Prentice Hall, Inc. 2 – 4
Outline – Continued
 Issues In Operations Strategy
Research
Preconditions
Dynamics
 Strategy Development And
Implementation
Identify Critical Success Factors
Build and Staff the Organization
Integrate OM with Other Activities

5. © 2006 Prentice Hall, Inc. 2 – 5
Outline – Continued
 Global Operations Strategy
Options
International Strategy
Multidomestic Strategy
Global Strategy
Transnational Strategy

6. © 2006 Prentice Hall, Inc. 2 – 6
Learning Objectives
 Mission
 Strategy
 Ten decisions of OM
 Multinational corporation
When you complete this chapter, you
should be able to:
Identify or Define:

7. © 2006 Prentice Hall, Inc. 2 – 7
Learning Objectives
 Specific approaches used by OM
to achieve strategies
 Differentiation
 Low cost
 Response
When you complete this chapter, you
should be able to:
Describe or Explain:

8. © 2006 Prentice Hall, Inc. 2 – 8
Learning Objectives
 Four global operations strategies
 Why global issues are important
When you complete this chapter, you
should be able to:
Describe or Explain:

9. © 2006 Prentice Hall, Inc. 2 – 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

10. © 2006 Prentice Hall, Inc. 2 – 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

11. © 2006 Prentice Hall, Inc. 2 – 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

12. © 2006 Prentice Hall, Inc. 2 – 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

13. © 2006 Prentice Hall, Inc. 2 – 13
Boeing Suppliers (787)
Firm Country Component
Dassault France Design and
PLM software
Messier-Bugatti France Landing gear
Thales France Electrical power
conversion system
and integrated
standby flight display
Diehl Germany Interior lighting
FR-HiTemp UK Fuel pumps
and valves
Smiths Aerospace UK Central computer
system

14. © 2006 Prentice Hall, Inc. 2 – 14
Boeing Suppliers (787)
Firm Country Component
BAE SYSTEMS UK Electronics
Alenia Aeronautics Italy Upper center
fuselage &
horizontal stabilizer
Toray Industries Japan Carbon fiber for
wing and tail units
Fuji Heavy Japan Center wing box
Industries
Kawasaki Heavy Japan Forward fuselage,
Industries fixed section of wing,
landing gear well

15. © 2006 Prentice Hall, Inc. 2 – 15
Boeing Suppliers (787)
Firm Country Component
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Japan Wing box
Industries
Chengdu Aircraft China Rudder
Group
Hafei Aviation China Parts

16. © 2006 Prentice Hall, Inc. 2 – 16
Reasons to Globalize
Reasons to Globalize
 Reduce costs (labor, taxes, tariffs, etc.)
 Improve supply chain
 Provide better goods and services
 Understand markets
 Learn to improve operations
 Attract and retain global talent
Tangible
Reasons
Intangible
Reasons
Figure 2.1

17. © 2006 Prentice Hall, Inc. 2 – 17
Reduce Costs
 Foreign locations with lower wage
rates can lower direct and indirect
costs
Maquiladoras
World Trade Organization (WTC)
North American Free Trade
Agreement (NAFTA)
APEC, SEATO, MERCOSUR
European Union (EU)

18. © 2006 Prentice Hall, Inc. 2 – 18
Improve the Supply Chain
 Locating facilities closer to
unique resources
Auto design to California
Athletic shoe production to China
Perfume manufacturing in France

19. © 2006 Prentice Hall, Inc. 2 – 19
Provide Better Goods
and Services
 Objective and subjective
characteristics of goods and
services
On-time deliveries
Cultural variables
Improved customer service

20. © 2006 Prentice Hall, Inc. 2 – 20
Understand Markets
 Interacting with foreign customer
and suppliers can lead to new
opportunities
Cell phone design from Europe
Cell phone fads from Japan
Extend the product life cycle

21. © 2006 Prentice Hall, Inc. 2 – 21
Learn to Improve Operations
 Remain open to the free flow of
ideas
General Motors partnered with a
Japanese auto manufacturer to
learn
Scandinavian design ideas have
been used to improve equipment
design and layout

22. © 2006 Prentice Hall, Inc. 2 – 22
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

23. © 2006 Prentice Hall, Inc. 2 – 23
Cultural and Ethical Issues
 Cultures can be quite different
 Attitudes can be quite different
towards
 Punctuality
 Lunch breaks
 Environment
 Intellectual
property
 Thievery
 Bribery
 Child labor

24. © 2006 Prentice Hall, Inc. 2 – 24
You May Wish To Consider
 National literacy rate
 Rate of innovation
 Rate of technology
change
 Number of skilled
workers
 Political stability
 Product liability laws
 Export restrictions
 Variations in language
 Work ethic
 Tax rates
 Inflation
 Availability of raw
materials
 Interest rates
 Population
 Number of miles of
highway
 Phone system

25. © 2006 Prentice Hall, Inc. 2 – 25
Match Product & Parent
 Braun Household
Appliances
 Firestone Tires
 Godiva Chocolate
 Haagen-Dazs Ice
Cream
 Jaguar Autos
 MGM Movies
 Lamborghini Autos
 Alpo Petfoods
1. Volkswagen
2. Bridgestone
3. Campbell Soup
4. Ford Motor Company
5. Gillette
6. Nestlé
7. Pillsbury
8. Sony

26. © 2006 Prentice Hall, Inc. 2 – 26
Match Product & Parent
 Braun Household
Appliances
 Firestone Tires
 Godiva Chocolate
 Haagen-Dazs Ice
Cream
 Jaguar Autos
 MGM Movies
 Lamborghini Autos
 Alpo Petfoods
1. Volkswagen
2. Bridgestone
3. Campbell Soup
4. Ford Motor Company
5. Gillette
6. Nestlé
7. Pillsbury
8. Sony

27. © 2006 Prentice Hall, Inc. 2 – 27
Match Product & Country
Braun Household
Appliances
Firestone Tires
Godiva Chocolate
Haagen-Dazs Ice
Cream
Jaguar Autos
MGM Movies
Lamborghini Autos
Alpo Petfoods
1. Great Britain
2. Germany
3. Japan
4. United States
5. Switzerland

28. © 2006 Prentice Hall, Inc. 2 – 28
Match Product & Country
Braun Household
Appliances
Firestone Tires
Godiva Chocolate
Haagen-Dazs Ice
Cream
Jaguar Autos
MGM Movies
Lamborghini Autos
Alpo Petfoods
1. Great Britain
2. Germany
3. Japan
4. United States
5. Switzerland

29. © 2006 Prentice Hall, Inc. 2 – 29
Developing Missions and
Strategies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there

30. © 2006 Prentice Hall, Inc. 2 – 30
Mission
 Mission - where are
you going?
Organization’s
purpose for being
Answers ‘What do
we provide society?’
Provides boundaries
and focus

31. © 2006 Prentice Hall, Inc. 2 – 31
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

32. © 2006 Prentice Hall, Inc. 2 – 32
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

33. © 2006 Prentice Hall, Inc. 2 – 33
Hard Rock Café
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

34. © 2006 Prentice Hall, Inc. 2 – 34
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

35. © 2006 Prentice Hall, Inc. 2 – 35
Benefit to
Society
Mission
Factors Affecting Mission
Philosophy
and Values
Profitability
and Growth
Environment
Customers Public Image

36. © 2006 Prentice Hall, Inc. 2 – 36
Strategic Process
Marketing Operations
Finance/
Accounting
Functional
Area Missions
Organization’s
Mission

37. © 2006 Prentice Hall, Inc. 2 – 37
Strategy
 Action plan to
achieve mission
 Functional areas
have strategies
 Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses

38. © 2006 Prentice Hall, Inc. 2 – 38
Strategies for Competitive
Advantage
 Differentiation – better, or at least
different
 Cost leadership – cheaper
 Quick response – more
responsive

39. © 2006 Prentice Hall, Inc. 2 – 39
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 – theme experience

40. © 2006 Prentice Hall, Inc. 2 – 40
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

41. © 2006 Prentice Hall, Inc. 2 – 41
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

42. © 2006 Prentice Hall, Inc. 2 – 42
OM’s Contribution to Strategy
Product
Quality
Process
Location
Layout
Human
resource
Supply-chain
Inventory
Scheduling
Maintenance
FLEXIBILITY
Sony’s constant innovation
of new products………………………………....Design
HP’s ability to follow
the printer market………………………………Volume
Southwest Airlines No-frills service……..…..LOW COST
DELIVERY
Pizza Hut’s five-minute
guarantee at lunchtime…………………..…..……..Speed
Federal Express’s “absolutely,
positively on time”………………………..….Dependability
QUALITY
Motorola’s automotive products
ignition systems…………………………......Conformance
Motorola’s pagers………………………..….Performance
IBM’s after-sale service
on mainframe computers……....AFTER-SALE SERVICE
Fidelity Security’s broad
line of mutual funds………….BROAD PRODUCT LINE
Figure 2.4
Operations Specific Competitive
Decisions Examples Strategy Used Advantage
Response
(Faster)
Cost
leadership
(Cheaper)
Differentiation
(Better)

43. © 2006 Prentice Hall, Inc. 2 – 43
10 Strategic OM Decisions
 Goods and service
design
 Quality
 Process and
capacity design
 Location selection
 Layout design
 Human resource
and job design
 Supply-chain
management
 Inventory
 Scheduling
 Maintenance

44. © 2006 Prentice Hall, Inc. 2 – 44
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Goods and
service
design
Product is usually
tangible
Product is not
tangible
Quality Many objective
standards
Many subjective
standards
Process
and
capacity
design
Customers not
involved
Customer may be
directly involved
Capacity must
match demand
Table 2.1

45. © 2006 Prentice Hall, Inc. 2 – 45
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Location
selection
Near raw
materials and
labor
Near customers
Layout
design
Production
efficiency
Enhances product
and production
Human
resources
and job
design
Technical skills,
constant labor
standards, output
based wages
Interact with
customers, labor
standards vary
Table 2.1

46. © 2006 Prentice Hall, Inc. 2 – 46
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Supply-
chain mgmt
Relationship
critical to final
product
Important, but
may not be
critical
Inventory Raw materials,
work-in-process,
and finished
goods may be
held
Cannot be stored
Scheduling Level schedules
possible
Meet immediate
customer demand
Table 2.1

47. © 2006 Prentice Hall, Inc. 2 – 47
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Maintenance Often preventive
and takes place
at production site
Often “repair” and
takes place at
customer’s site
Table 2.1

48. © 2006 Prentice Hall, Inc. 2 – 48
Process Design
Low Moderate High
Volume
High
Moderate
Low
Variety
of
Products
Process-focused
JOB SHOPS
(Print shop, emergency
room, machine shop,
fine dining Repetitive (modular)
focus
ASSEMBLY LINE
(Cars, appliances,
TVs, fast-food
restaurants) Product focused
CONTINUOUS
(steel, beer, paper,
bread, institutional
kitchen)
Mass Customization
Customization at high
Volume
(Dell Computer’s PC)

49. © 2006 Prentice Hall, Inc. 2 – 49
Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Product
Selection and
Design
Heavy R&D; labs; focus
on development in a
broad range of drug
categories
Low R&D; focus on
development of generic
drugs
Quality Major priority, exceed
regulatory requirements
Meets regulatory
requirements on a
country by country
basis
Table 2.2

50. © 2006 Prentice Hall, Inc. 2 – 50
Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Process Product and modular
process; long
production runs in
specialized facilities;
build capacity ahead of
demand
Process focused;
general processes; job
shop approach, short
production runs; focus
on high utilization
Location Still located in the city
where it was founded
Recently moved to low-
tax, low-labor-cost
environment
Table 2.2

51. © 2006 Prentice Hall, Inc. 2 – 51
Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Scheduling Centralized production
planning
Many short-run
products complicate
scheduling
Layout Layout supports
automated product-
focused production
Layout supports
process-focused job
shop practices
Table 2.2

52. © 2006 Prentice Hall, Inc. 2 – 52
Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Human
Resources
Hire the best;
nationwide searches
Very experienced top
executives; other
personnel paid below
industry average
Supply Chain Long-term supplier
relationships
Tends to purchase
competitively to find
bargains
Table 2.2

53. © 2006 Prentice Hall, Inc. 2 – 53
Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Advantage
Product Differentiation Low Cost
Inventory High finished goods
inventory to ensure all
demands are met
Process focus drives up
work-in-process
inventory; finished
goods inventory tends
to be low
Maintenance Highly trained staff;
extensive parts
inventory
Highly trained staff to
meet changing demand
Table 2.2

54. © 2006 Prentice Hall, Inc. 2 – 54
Managing Global Service
Operations
 Capacity planning
 Location planning
 Facilities design and layout
 Scheduling
Probably requires a different
perspective on:

55. © 2006 Prentice Hall, Inc. 2 – 55
Characteristics of
High ROI Firms
 High quality product
 High capacity utilization
 High operating effectiveness
 Low investment intensity
 Low direct cost per unit
From the PIMS program of the Strategic Planning Institute

56. © 2006 Prentice Hall, Inc. 2 – 56
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

57. © 2006 Prentice Hall, Inc. 2 – 57
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

58. © 2006 Prentice Hall, Inc. 2 – 58
Preconditions
 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
One must understand:

59. © 2006 Prentice Hall, Inc. 2 – 59
Dynamics of
Strategic Change
 Changes within the organization
 Personnel
 Finance
 Technology
 Product life
 Changes in the environment

60. © 2006 Prentice Hall, Inc. 2 – 60
Product Life Cycle
Best period to
increase market
share
R&D engineering is
critical
Practical to change
price or quality
image
Strengthen niche
Poor time to
change image,
price, or quality
Competitive costs
become critical
Defend market
position
Cost control
critical
Introduction Growth Maturity Decline
Company
Strategy/Issues
Internet
Flat-screen
monitors
Sales
DVD
CD-ROM
Drive-through
restaurants
Fax machines
3 1/2”
Floppy
disks
Color printers
Figure 2.5

61. © 2006 Prentice Hall, Inc. 2 – 61
Product Life Cycle
Product design
and
development
critical
Frequent
product and
process design
changes
Short production
runs
High production
costs
Limited models
Attention to
quality
Introduction Growth Maturity Decline
OM
Strategy/Issues
Forecasting
critical
Product and
process
reliability
Competitive
product
improvements
and options
Increase capacity
Shift toward
product focus
Enhance
distribution
Standardization
Less rapid
product changes
– more minor
changes
Optimum
capacity
Increasing
stability of
process
Long production
runs
Product
improvement
and cost cutting
Little product
differentiation
Cost
minimization
Overcapacity
in the
industry
Prune line to
eliminate
items not
returning
good margin
Reduce
capacity
Figure 2.5

62. © 2006 Prentice Hall, Inc. 2 – 62
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

63. © 2006 Prentice Hall, Inc. 2 – 63
Strategy Development Process
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.
Environmental Analysis
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
Figure 2.6

64. © 2006 Prentice Hall, Inc. 2 – 64
Strategy
Analysis
SWOT Analysis
Internal
Strengths
Internal
Weaknesses
External
Opportunities
External
Threats
Mission

65. © 2006 Prentice Hall, Inc. 2 – 65
Critical Success Factors
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
Marketing
Service
Distribution
Promotion
Channels of distribution
Product positioning
(image, functions)
Finance/Accounting
Leverage
Cost of capital
Working capital
Receivables
Payables
Financial control
Lines of credit
Production/Operations
Figure 2.7

66. © 2006 Prentice Hall, Inc. 2 – 66
Activity Mapping
Courteous, but
Limited Passenger
Service
Standardized
Fleet of Boeing
737 Aircraft
Competitive Advantage:
Low Cost
Lean,
Productive
Employees
Short Haul, Point-to-
Point Routes, Often to
Secondary Airports
High
Aircraft
Utilization
Frequent,
Reliable
Schedules
Figure 2.8

67. © 2006 Prentice Hall, Inc. 2 – 67
Activity Mapping
Courteous, but
Limited Passenger
Service
Standardized
Fleet of Boeing
737 Aircraft
Competitive Advantage:
Low Cost
Lean,
Productive
Employees
Short Haul, Point-to-
Point Routes, Often to
Secondary Airports
High
Aircraft
Utilization
Frequent,
Reliable
Schedules
Figure 2.8
Automated ticketing machines
No seat assignments
No baggage transfers
No meals (peanuts)

68. © 2006 Prentice Hall, Inc. 2 – 68
Activity Mapping
Courteous, but
Limited Passenger
Service
Standardized
Fleet of Boeing
737 Aircraft
Competitive Advantage:
Low Cost
Lean,
Productive
Employees
Short Haul, Point-to-
Point Routes, Often to
Secondary Airports
High
Aircraft
Utilization
Frequent,
Reliable
Schedules
Figure 2.8
No meals (peanuts)
Lower gate costs at
secondary airports
High number of flights
reduces employee idle time
between flights

69. © 2006 Prentice Hall, Inc. 2 – 69
Activity Mapping
Courteous, but
Limited Passenger
Service
Standardized
Fleet of Boeing
737 Aircraft
Competitive Advantage:
Low Cost
Lean,
Productive
Employees
Short Haul, Point-to-
Point Routes, Often to
Secondary Airports
High
Aircraft
Utilization
Frequent,
Reliable
Schedules
Figure 2.8
High number of flights
reduces employee idle time
between flights
Saturate a city with flights,
lowering administrative
costs (advertising, HR, etc.)
per passenger for that city
Pilot training required on
only one type of aircraft
Reduced maintenance
inventory required because
of only one type of aircraft

70. © 2006 Prentice Hall, Inc. 2 – 70
Activity Mapping
Courteous, but
Limited Passenger
Service
Standardized
Fleet of Boeing
737 Aircraft
Competitive Advantage:
Low Cost
Lean,
Productive
Employees
Short Haul, Point-to-
Point Routes, Often to
Secondary Airports
High
Aircraft
Utilization
Frequent,
Reliable
Schedules
Figure 2.8
Pilot training required on
only one type of aircraft
Reduced maintenance
inventory required because
of only one type of aircraft
Excellent supplier relations
with Boeing has aided
financing

71. © 2006 Prentice Hall, Inc. 2 – 71
Activity Mapping
Courteous, but
Limited Passenger
Service
Standardized
Fleet of Boeing
737 Aircraft
Competitive Advantage:
Low Cost
Lean,
Productive
Employees
Short Haul, Point-to-
Point Routes, Often to
Secondary Airports
High
Aircraft
Utilization
Frequent,
Reliable
Schedules
Figure 2.8
Reduced maintenance
inventory required because
of only one type of aircraft
Flexible employees and
standard planes aid
scheduling
Maintenance personnel
trained only one type of
aircraft
20-minute gate turnarounds
Flexible union
contracts

72. © 2006 Prentice Hall, Inc. 2 – 72
Activity Mapping
Courteous, but
Limited Passenger
Service
Standardized
Fleet of Boeing
737 Aircraft
Competitive Advantage:
Low Cost
Lean,
Productive
Employees
Short Haul, Point-to-
Point Routes, Often to
Secondary Airports
High
Aircraft
Utilization
Frequent,
Reliable
Schedules
Figure 2.8
Automated ticketing
machines
Empowered employees
High employee
compensation
Hire for attitude, then train
High level of stock
ownership
High number of flights
reduces employee idle time
between flights

73. © 2006 Prentice Hall, Inc. 2 – 73
Four International
Operations Strategies
Cost
Reduction
Considerations
High
Low
High
Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
International
Strategy

74. © 2006 Prentice Hall, Inc. 2 – 74
Four International
Operations Strategies
Cost
Reduction
Considerations
High
Low
High
Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson

75. © 2006 Prentice Hall, Inc. 2 – 75
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Four International
Operations Strategies
Cost
Reduction
Considerations
High
Low
High
Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
 Standardized
product
 Economies of scale
 Cross-cultural
learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
Global
Strategy

76. © 2006 Prentice Hall, Inc. 2 – 76
Four International
Operations Strategies
Cost
Reduction
Considerations
High
Low
High
Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson

77. © 2006 Prentice Hall, Inc. 2 – 77
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Four International
Operations Strategies
Cost
Reduction
Considerations
High
Low
High
Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
 Use existing
domestic model
globally
 Franchise, joint
ventures,
subsidiaries
Examples
Heinz
McDonald’s
The Body Shop
Hard Rock Cafe
Multidomestic
Strategy

78. © 2006 Prentice Hall, Inc. 2 – 78
Four International
Operations Strategies
Cost
Reduction
Considerations
High
Low
High
Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
Heinz The Body Shop
McDonald’s Hard Rock Cafe

79. © 2006 Prentice Hall, Inc. 2 – 79
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
Heinz The Body Shop
McDonald’s Hard Rock Cafe
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy
Four International
Operations Strategies
Cost
Reduction
Considerations
High
Low
High
Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
 Move material,
people, ideas
across national
boundaries
 Economies of scale
 Cross-cultural
learning
Examples
Coca-Cola
Nestlé
Transnational
Strategy

80. © 2006 Prentice Hall, Inc. 2 – 80
Four International
Operations Strategies
Cost
Reduction
Considerations
High
Low
High
Low
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
Global Strategy Transnational Strategy
 Move material, people, ideas
across national boundaries
 Economies of scale
 Cross-cultural learning
Examples
Coca-Cola
Nestlé
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
Heinz The Body Shop
McDonald’s Hard Rock Cafe

81. © 2006 Prentice Hall, Inc. 2 – 81
Ranking Corruption
Rank Country 2004 CPI Score (out of 10)
1 Finland 9.7
2 New Zealand 9.6
5 Singapore 9.3
7 Switzerland 9.1
9 Australia 8.8
11 United Kingdom 8.6
12 Canada 8.5
15 Germany 8.2
16 Hong Kong 8.0
17 Ireland 7.5
17 USA 7.5
24 Japan 6.9
35 Taiwan 5.6
64 Mexico 3.6
71 China 3.4
Good
Not So
Good