Chapter 4

Chapter 4
Strategy

Master Model Image Map

Chapter Overview

Chapter 4 provides an overview of how operations decisions relate to the corporate and business strategy. Functional strategies form the basis of a hierarchy. The functional strategy supports the business strategy. The business strategy supports the corporate strategy. Ultimately, day-to-day decisions in operations, that fit into the pattern, can provide support for very global goals at the business or even corporate level. Operations strategy dictates how decisions related to operations-controlled resources will be made, so that business strategies are successful. Strategic decisions are often categorized as structural or infrastructural. Chapter 4 provides an extensive discussion of how structural and infrastructural decisions impact each other and the value attributes produced by the business and sought by its customers.

Chapter Resources

Esources
Esource 4.1	Coldwater Creek's focused strategy has gained it a reputation among catalog retailers. Their website provides an example of their attention to service and excellence. Check out the company background information in "about us" for information on a company that has a very specific focus.
Esource 4.2	GAP provides an example of how major decisions can effect a firm's success, Inc. GAP Company Milestones provides a chronological description of that provides evidence of the outcomes of GAP's strategy. You might also want to look at GAP Information for students.
Esource 4.3	An example of the impact of strategic process technology decisions can be found at Gentex Corporation, of Zeeland, Michigan. Gentex’s original product line was limited to fire alarms that utilized light-sensing technology. Gentex's ability to master the high-tech processes associated with this technology has been leveraged for use in other products. Most recently Gentex has become the leader in producing smart "auto-dimming" mirrors for cars. Visit the Gentex web site. You should also check out Gentex's "core competencies" for a concise description of what they do best.

Reel Operations Video Clips
Reel Operations 4.1	ABTCO's Strategy is Overhauled by New Owners Working to Save It In Chapter 4, the importance of adapting a strategy when conditions change is stressed. In this Reel Operations 4.1, ABTCO, a producer of trailers, changes its strategy as new owners take over.
Reel Operations 4.2	Manufacturing Strategies Depend on Matching Resources with Volume, Flexibility, and Product Variety Needs Reel Operations 4.2 provides examples and video footage of each type of manufacturer to enhance your understanding of the product/process matrix.
Reel Operations 4.3	First Chicago National Bank Utilizes All Aspects of the Service System Design Matrix The service system design matrix, introduced in Chapter 4, provides a framework for common service system tradeoffs. In Reel Operations 4.3, First Chicago National Bank is examined and examples of the various service system design tradeoffs are identified.

Supplementary Readings
Supplementary Reading 4.1	For text page 4. Changing times and changing customer demands can result in a firm having to change its strategy. In Can Gap Put It All Together Again?, Business Week, 8/14/1999, it is implied that Gap's more recent strategy hasn't succeeded, so they are shifting to another one. The article provides insight into the need for companies to change their strategies when necessary.
Supplementary Reading 4.2	For text pages 8 & 9. Motorola has gone through a period of instability in value. According to A Leaner Motorola, BusinessWeek, 8/7/2000), Motorola's ownership of large stakes in Next Level Communications, Nextel Communications, and Broadcom, should be viewed as very valuable assets for the company. The article provides a snapshot in time of how Motorola's strategy motivated them to acquire a stake in each of these firms.
Supplementary Reading 4.3	For text p. 10. In a customer interaction that can be as complex as providing investment advice, it should be no surprise that customers would want to communicate in their first language. Speaking the Customer's Language--Literally, Business Week, 9/25/2000 describes how adapting to the customs of ethnic groups is simply a means of meeting all customer expectations. This article summarizes efforts being made in the financial services industry.

Links to Operations On Site Companies
Operations On Site 4.1	Coldwater Creek's focus strategy is best understood by examining their website and products.

OM Exploration

Check it out: Internet Reference Sites for Chapter 4
Strategic planning is a critical function for all businesses. Several web sites and hundreds of consultants offer assistance with this process Check out the following websites offering a variety of strategic planning services.
Center for Simplified Strategic Planning	The Strategic Planning Society

OM in Action

OM in Action 4 .1

Merlin and Cannondale offer two very different approaches to meeting the needs of mountain bike customers. Explore each site.
a. From their web sites, how do you think their business strategies differ?
b. What evidence is present to indicate how these differences have resulted in different decisions within the resource areas of inventory, work force, capacity, facilities, and customer relationships?

Online Business Tour

Online Business Tour 4.1

Visit the websites and process tours for two furniture companies: CaseWorks Furniture Manufacturing Healthcare Furniture and Stickley Furniture . These two companies have similar resources and capabilities, but serve very different markets.
a. Based on their capabilities, compare their strategies. How would you describe them as to competing on price, differentiation, or focus? What leads you to your conclusion?
b. What competitive priorities has each emphasized in operations?
c. For each company, how have competitive priorities affected choices made in designin production processes?

Letters from the Top
Letter from the Top 4.1	A company's strategy can often be best understood over time, watching how it reacts to different business conditions and outcomes. From 2001 to 2002 many businesses, particularly technology-oriented businesses, saw drastic changes in their performance. Iomega, producers of data storage products like Zip drives, was one such company. Read Chairman David J. Dunn's 2000 letter to shareholders. a. From the statements made, the tone, and the plans, describe what appears to be Iomega's strategy. One year can mean a lot of change. Read Chairman Dunn's letter to shareholders in 2001. b. How would you characterize this letter when compared to the previous year? c. Describe Iomega's strategy, as it appears in 2001, following a year of poor performance.
Letter from the Top 4.2	Sara Lee Corporation has a total of 27 top brands, including Playtex, Hanes, Hillshire Farm, Diim, Kiwi, and Sara Lee. A range of products from shoe polish to undergarments to meats to coffee to cheesecake. a. From CEO's letter to stockholders, how would you describe the Sara Lee corporate strategy? b. Check out the Sara Lee "See our Brands" page and examine 2 or 3 of the businesses. Describe the focus of those businesses. How does the corporate strategy affect the three main businesses of Sara Lee? c. Select two brands that are familiar to you. How do the plans described in the letter to stockholders apply to those brands?

Putting It All Together: Virtual Case Studies
Putting It all Together 4.1	The Children's Hospital at Montifiore was a $123 million addition to the Montefiore Medical Center, serving southern Westchester County and the Bronx. Spear-headed by Dr. Irwin Redlener, the hospital is different from typical children's hospitals in almost every way possible. Strategic Innovation: The Children's Hospital at Montifiore (FastCompany, May 2002) provides and overview of the hospitals strategy and goals. The medical center's website provides information about the medical center that houses the children's hospital. More information about the more information about the children's hospital can be obtained from the Children's Hospital at Montifiore website. a. Describe how The Children's Hospital at Montifiore has linked customer needs to the primary ways differentiates itself. How did Redlener's three objectives fit into the customers' needs? b. The hospital is described as a model for other children's hospitals. Would the needs of a children's hospital differ in other places or could this model be transplanted exactly to any community?
Putting It all Together 4.2	General Electric has been a major player in financial services for a long time. Their most recent venture into online financial services, however, leaves experts puzzled. In "GE Catches Online Fever," (BusinessWeek, August 14, 2000) the venture is perceived as a high risk endeavor because they are so late entering the market. Banks like Bank One are providing more services than GEFN.com. a. Given that this type of competition exists for GEFN, what corporate-level strategic objectives do you think are being met by its venture into online banking? b. How can GEFN differentiate itself from competitors? What can GEFN do that competitors cannot do? What resources make this possible for GEFN?

Additional Reading
Additional Reading 4.1	For text page 34. Read Manufacturing: Once Is Not Enough, Business Week 4/16/2001. The concept of "remanufacturing" has grown in popularity and has been a win-win scenario for manufacturers and environmentalists. It clearly requires that strategic decisions be made at the product design stage, to develop product designs that facilitate re-use. This article provides an excellent overview of this trend.
Additional Reading 4.2	In Customizing for the Masses, Business Week, 3/20/2000 the concept of high volume customization is reviewed as it applies to a variety of industries that all share an implementation of technological solutions to meeting the traditional contradiction between customizing and producing in high volumes.