Strategic Operations Management - Coursework Example

Strategic Operations Management Strategic Operations Management Introduction Every organization is working to enhance their capabilities to gain competitive advantage over other firms. With respect to strategic operations management, dynamic capabilities play an important role in developing, sustaining and exploiting competencies within the organizations (Ambrosini & Bowman, 2009). The basic purpose of this report is to generate an understanding of dynamic capabilities and its relationship with operations strategy. In this regard, it would be necessary to examine the work of different scholars, researchers who carried out their study on the subject. Dynamic Capabilities Teece (2007) was the pioneer of dynamic capability, he had the view that dynamics capability refer to the mechanisms through which firms are able to construct new skills and capabilities through any innovation that can match or create a change in the market (Teece et al., 1997). According to Teece and Pisano (1997), strategic management has the role of adapting, integrating internal and external resources and skills for successful working environment. Thus, if the environments are altered or modified and their capabilities are improved through changing dynamics it would help the organizations get a privileged of having a competitive edge over other firms (Teece et al., 1997). However, it is important to state that Teece et al. (2007) emphasized on the change through internal factors rather than external factors as dynamic capabilities depend on behaviors existing within the organizations that gives rise to firm’s survival as well as growth (Teece, 2007). Dynamic Capabilities approach helps organizations analyze their sources of wealth and build substitutable resources that are required in changing business environments. They help improve operational management and its performances through certain motivational processes that shape the variable existing within and outside the organizations. Most importantly, it is said that dynamic capability is the environment that contains different enablers and inhibitors that create a value that impacts management practice (Helfat & Winter, 2011). Dynamic Capability and Resource Based View According to Barney (1995), the resource-based view (RBV) makes the resources valuable and rare that becomes a source of competitive advantage. Teece and Pisano (1997) state the resource-based view is restricted and does not provide useful explanations as firms cannot demonstrate how they can improve their management capability to improve themselves. It also fails in product innovation in a rapid, flexible as well as in a timely manner. In this regard, dynamic capability can be adapted by organizations as they help construct themselves through internal and external competencies in varying circumstances (Teece et al., 1997). Organizations using dynamic capabilities should be able to work through two basic imperatives that are somewhat contradictory. Firstly, organizations need to deliver their distinct capabilities by being stable throughout their life and secondly they need to be resilient and flexible to shift their working processes when the need arises and the market or the circumstances change (Eisenhardt & Martin, 2000). Dynamic capabilities are unique in every company as they are basically based on what they have done in their past and then with time company adopt processes, capabilities as well as skills like evolutionary fitness, making improvement in their production. A company can only use this approach through three basic steps. Firstly, when they can identify and assess the opportunities that come from outside the organization. Secondly, the company can seize that opportunity by mobilizing their resources, making innovative changes in them through alteration or modification. Thirdly, they can keep renewing and transforming their framework and capability for positive outcomes (Helfat et al., 2007). The role of environment in dynamic capabilities Teece (2007) states that though there is no reliable theory that supports the concept of dynamic capability, but the approach is predictive and cannot be falsified as they relate to building capacities to get superior capabilities. However, Zahra, Sapienza and Davidson (2006) have the view that dynamic capabilities are always associated with different environmental conditions that make the concept vague as turbulent environmental conditions may not be a precondition for dynamic conditions. Moreover, Ambrosini and Bowman (2009) state that while dynamic capabilities have emphasis of environment it is important to estimate two basic characteristic features firstly, its volatility and secondly unpredictability. In short, it means that the industry has an impact of market changes due to changing demand patterns, changes in industry structure and other environmental shocks as well. Operations Strategy Matrix In order to make strategic operational decisions, organizations need to incorporate dynamic capabilities that assist them to use technology, supply network, and other resources in an effective pattern and helps them gain competitive benefit. In other words, it guides them to make better decisions to enhance their capabilities. However, these business decisions depend on five performance objectives: quality, speed, dependability, flexibility and cost (Slack & Lewis, 2008). Slack & Lewis (2008) have the view that dynamic resource-based perspective helps organizations make use of available resources like machinery, equipment and quality products to be used in a simple manner to reduce its complex scheduling. It helps resource building and sustaining activities and increases the capability of complex schedules. The theory of operations strategy matrix is concerned with bringing the results of performance objectives in line with the operations strategy decisions. It helps organizations understand what they want, how strategic decisions are made and risks are reduced. Slack and Lewis theory of operations strategy matrix can be effectively used with respect to utilization of resources (Slack & Lewis, 2008). Organizations can focus on the following. 1. Using operational strategy matrix to identify and assess business risks that are occurring due to any losses, for example, any technological disaster. 2. While evaluating or developing any strategy, reviewing the four components of operations strategy, which are performance objectives, decision areas, assessing how many resources are used and knowing competition that existing in the market. 3. Evaluating that the organization’s performance areas correspond with company’s decisions that are capacity, supply network, process technology, development and organization. 4. As operational decisions are effected by competition in the markets and resources utilization so it would be feasible to review sales and target reports and use quality and temperature control over to protect resources of the organizations. Part B Background Information IKEA is a Swedish company, which was founded in 1943 by Ingvar Kamprad. The company expanded rapidly in Switzerland, Germany and then in US and UK (Berger, 2011). In order to understand the operations strategy adopted by IKEA that meets the market demands, it is important to look at stakeholder’s expectations and requirements from IKEA. From stakeholder’s perspective, IKEA is required to provide good quality products in low prices. The market structure expects IKEA to keep its operations strategy localized in different countries but innovative at the same time. As operations strategy has the purpose of to integrate the needs of the market with the capabilities of the operations resources thus, IKEA promises to provide a variety of best products in low costs in all the countries they operate by executing a value chain that stimulates work dynamics in a way that the customers’ requirements are fulfilled. IKEA uses a self-serving approach where customers can choose products from shelves in storable flat packages that are easy to handle. The supply chain of IKEA aims to convert raw materials into an innovative product with low price range (Barnes, 2001, p.15). The design of operations is such that it is dependent on bulk and diversity of products being offered by an organization as well as evaluating the performance objectives, capacity and variability. Hence with respect to IKEA’s operations, it is seen that it take cares of the resources looking at the market demand, converting its raw material into an end product and distributing it across supply chain (Ferrell & Hartline, 2010, p.493). Performance Objectives After examining the market demand and expectations from IKEA about its operations, the following performance objectives are being identified (Berger, 2011). Cost: IKEA management first performance management objective is to focus on “zero waste” policy, which means to use high-quality products in low prices. Moreover, as the primary objective of the company is to use low cost strategy so if their operations are focused on high quality they would not need to redo things, the relationship with customers would be good that would increase sales, lower cost and overheads. The company uses high automation services to fulfill this performance objective, and global resourcing to reduce costs as there would be no heavy investments. The company also uses stock control and management information systems that are fast reacting, saving costs and making resources available in unexpected circumstances (Berger, 2011). Quality: After cost, quality is an important variable for IKEA where the company focuses on meeting the specifications of the products and providing supplementary services of high quality. IKEA’s stores consist of unique design and layout, which conforms to their identity of the brand. The store is clean having appropriate size, and it has supportive staff and childcare services with a value for money as the primary motive (Gong, 2013). Dependability: Being one of the world’s largest home store and furniture supplier, they focus on maintaining durability of their products, being able to do their operations on time. For this reason, there is dependability on their system so that they can use their opening hours to ensure that the stocks and reorder systems are working effectively. Operations also need to ensure that there is enough queuing time especially more on weekends and holidays. IKEA provides online shopping of goods on time too. Thus, IKEA team is dependent on working groups to save time and provide good quality services (Berger, 2011). Speed: Speed becomes significant for them as they are involved in product and service delivery and being involved in transporting bulk furniture at retail outlets. The structure of the store is unique having a layout that provides parking facilities. Moreover, there is prompt availability of goods and customers can pick goods from the warehouse of their choice. Moreover, checkout system is fast as ramped conveyor belt helps them transport purchased items (Berger, 2011). Flexibility: In order to fulfill the criteria of its customers and achieve customer satisfaction, IKEA makes a variety of products so that customers can choose the product of their choice. The operations use global sourcing strategy to focus on responding to its customers’ requirements. The strategy helps them maintain a relationship with their supplies in such a way there is an introduction of new items for customers (Slack & Lewis, 2008). Operations Strategy Matrix The basic aim of the operations strategy matrix of Slack & Lewis (2008) is to identify and manage any harmful risks occurring in any organization. The matrix can be used by viewing the checklist of the given performance objectives, identifying decisions areas along with resource usage and market competitiveness. In this regard, it is seen that in order to keep the costs down, IKEA does not have its own manufacturing facilities but operates through a network of suppliers, using subcontracted manufactures (Ferrell & Hartline, 2010). IKEA can use the option of vertical integration through manufacturing and outsourcing through which they can track the progress of their product from the manufacturing process to manufacturing plants and then to stores. IKEA shall be able to identify any risks in production, material movement and will be able to manage excess inventory and other bottlenecks in operations. The vertical integration shall help the company reach its performance objectives effectively keeping in mind the decision areas, resource uses and competitiveness (Jones & Robinson, 2012). IKEA can manage its keys decision areas with respect to its performance objectives by focusing on managing supply change in which the activities include cash flow management to reduce costs, maximizing value of product by offering the product on the right place and time. Moreover focus needs to be on proper distribution and logistics systems as it would ensure inventory management, storage as well as order management and distribution of products and service. Finally, looking at the performance objectives and decision categories, the company can help the meet the market demand by ensuring that there is an adequate supply of liquid assets, customer relationships are intact and procurement. Moreover, there should be options of shopping that include being able to acquire components of products, purchasing raw materials and supplies, which provide the final product. Warehouse management systems offer support relating to flow of products, taking care of customer requirement, which is the main purpose of the company (Chase, 2006). List of References Ambrosini, V. & Bowman, C., 2009. What are dynamic capabilities and are they a useful construct in strategic management? International Journal of Management Reviews, 11(1), p. 29–49. Barnes, D., 2001. Understanding Business: Processes. Wolverhampton: Psychology Press. Barney, J.B., 1995. Looking inside for competitive advantage Executive. Academy of Management , 9(4), p.49–61. Berger, A., 2011. Operations Management: IKEA. Sunderland: GRIN Verlag. Chase, 2006. Operations Management for Competitive Advantage. New Delhi: Tata McGraw-Hill Education. Eisenhardt, K.M. & Martin, J., 2000. A Dynamic capabilities: What are they? Strategic Management Journal;, 21, pp.1105-21. Ferrell, O.C. & Hartline, M., 2010. Marketing Strategy. Mason: Cengage Learning. Gong, Y., 2013. Global Operations Strategy: Fundamentals and Practice. Ecully: Springer Science & Business Media. Helfat, C. et al., 2007. Dynamic Capabilities:Understanding Strategic Change in Organizations. Oxford: Blackwell. Helfat, C.E. & Winter, S.G., 2011. Untangling Dynamic and Operational Capabilities: Strategies for the (N) Never Changing World. Strategic Management Journal, 32, p.1243–1250. Jones, P. & Robinson, P., 2012. Operations Management. Oxford: Oxford University Press. Slack, N. & Lewis, M., 2008. Operations Strategy. New Delhi: Pearson Education India. Teece, D., 2007. Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), p.1319–1350. Teece, D., Pisano, G. & Shuen, A., 1997. Dynamic capabilities and Strategic Management. Strategic Management Journal, 18(7), p.509–533. Zahra, S., Sapienza, H. & Davidsson, P., 2006. Entrepreneurship and dynamic capabilities: a review, model and research agenda. Journal of Management Studies, 43, p.917–955. Read More