Operations Strategy and Corporate Strategy - Essay Example

Operations Strategy and Corporate Strategy. It is established in theory that it is important that a company’s operations strategy aligns with is its corporate strategy. However, achieving this is extremely difficult in practice. This is primarily due to the complexity of functions as well as their different demands. Strategy refers to the comprehensive master plans put in place at different organisational levels to hall achieve both short and long-term missions & objectives. Strategy can be defined at the levels of corporate, business and functions. Many organisations devise specific strategies for all these levels. Yet it is not straight forward the amount of coordination and relations that are required between the various strategies. Whereas every unit may have its own strengths, capabilities and knowledge, coordination is particularly critical to organisational success. If on organisation lacks structures in place to ensure transferability of strategy decisions from the corporate level to different functions could be catastrophic. In this paper I will be exploring the reasons why it is practically difficult align the corporate and operations strategies. As a business function, the operations division plays a central role to the success of any organization. It is for this reason that the operations arm of an organisation tends to more intensive on capital and human asses than any other. Realising that the operations strategy is a weapon for competitive edge, businesses expend a great deal of production costs toward operations. It is therefore important for the business world to find an answer to the question of what relation exist the business and operations of strategy. Businesses must find an answer to the best way of aligning strategic elements of operations to the overall corporate strategy. In order to achieve the best fit, various elements roll into play; the business strategies, competitive priorities, strategic decision making for operations and the resultant operational strategy. Business strategy is the manner in which an organisation attains competitive advantage. It has been found to be instrumental in ensuring favourable market performance for the business relative to other players. Companies create this much needed competitive advantage trough either differentiation or cost containment. Business strategy can be evaluated from a two dimension approach; market range competitive strategies and resource advantage i.e. cost or differentiation. Consensus in literature is that companies will typically adopt and perfect on either of the two dimensions. A company that decides to go by both strategic dimensions in most cases will come second to another on either of the strategies. This is explained by the fact that it is almost impossible to develop cost leadership and differentiation at the same time. Differentiating requires more investment and therefore increases costs. This categorisation which was introduced by Porter has been subject to criticism. The criticism firstly notes that differentiation could as well deliver the position of low cost for a business and as such the two not incompatible necessarily. Secondly, industries have many conditions in which the low cost position may not exist. Achieving strategic competitive edge thus requires the simultaneous deployment of strategies of cost leadership and differentiation. A concept for achieving competitiveness has thus been developed that introduces three pathways in which value principles are applied. The three value principles necessary for the development of strategy include customer intimacy, operational excellence and customer/product leadership. Operational excellence involves a uniquely distinct approach to the manner in which a firm produces and provides its services and products. Its main goal is to emerge an industry price leader. Business that seek to achieve operational excellence typically device ways of reducing costs of overload and optimising their internal business processes at all levels. This enables such firms to make their products and services available in the market to prices that are highly competitive. On the other hand are businesses constantly deploying strategic resources to achieve customer intimacy. This seems to be a more expensive strategy but the firms will pay for it so as to eventually gain intimacy with customers. Following the third principle pathway requires that businesses strive to avail products and services that are start of the art. The value proposition is customers to identify with products because of quality and aesthetics. Operations Strategy. Operations is the arm of any business responsible for the production of goods and provision of services. It is thus the engine that generates profits for the firm. As such a lot of attention should be given to operations when formulating strategy so as to accord it its central strategic role. A lot of literature has pointed to the notion that the weapon of competitive advantage for any company is the operations unit. Therefore failure by a company to establish a working alignment between the corporate and operations strategies spells doom. The eventual system will definitely be non-competitive and accordingly not only expensive but also time consuming. However while this is supported in literature and theory as very crucial for success of business there is also consensus that attaining the alignment is extremely difficult in practice. A key decision making variable for operations is competitive priorities. The term ‘competitive priorities’ implies that strategic emphasis is placed on the development of certain production capabilities that help position the firm in the market. The emphasis may thus guide decision making when it comes to processes, production capacity, technologies, and control and planning aspects. The past two decades have seen some significant growth of consensus in research on operations strategy. Most studies have contended that operations strategy is as being driven rating of capabilities on four dimensions of quality, low-cost, delivery and flexibility. Another consensus in literature is that consistency the competitive strategies emphasized and decision on the structure and infrastructure of operations determine the efficiency of the operations strategy (Hill and Cuthbertson, 2011). There are three perspective approaches to explaining the relative difficulty in practical alignment of the operations and corporate strategies. In the trade-off model, it is opined that businesses have to make choice decisions on which particular competitive priorities to accord the most investment in terms of resources and time. In most instances, companies will make have to make trade-offs between the various priorities relative to their importance. Operations managers therefore select production priorities and allocate the limitedly available resources in accordance. In the cumulative model, competitive priorities are conversely perceived to be complimentary i.e. one capability aids the development of others. The third model also known as the integrative perspective appears to reconcile the trade-off and cumulative models. It proposes that the two models address different aspects of the overall operations strategy thus permitting liking of their contrasting insights. The trade-offs model is the most developed approach and it requires that managers make choice between competitive priorities. The entire operations system is then designed and operated accordingly with efforts being concentrated on the development of assets and practices that facilitate achievement of organisational goals. It is recognised that the various priorities such delivery capability, flexibility and quality require the support of different operational infrastructures and structures and as such firms need to focus on a single priority at a time. Wide consensus in research is that it is extremely hard and potentially detrimental for any business to attempt an approach at competing through superiority in all the dimensions. In most cases such a firm will eventually end up as number two on every priority after others that allocate more resources towards the development of specific aspects of competitive advantage. Prioritization is an important factor as then firms can direct resources to those capabilities that enhance attainment of strategic goals. Studies for instance have often indicated that organisation must decide between pursuing the strategy of low costs or increasingly flexibility. A business pursuing low-cost as an operational goal seeks to eliminate wastes, enhance productivity, design efficient systems and standardise operational tasks. Those pursuing flexibility on the other hand seek to rapidly respond to changes in customer expectations in terms of product features. This has been support widely in literature and it points to the reason why aligning corporate strategy to operations strategy is almost impossible. While the corporate strategy my envisage the attainment of perfection on all dimensions of business strategic priority, operations strategy on the other hand recognises that the various elements require different structures and therefore a simultaneous approach at both may not be easily feasible. The cumulative model does not recognise the necessity for tradeoffs. The argument is that competition has intensified significantly with globalisation of business and the putting pleasure on firms to seek improvement on the various dimensions at the same time. An example is where pursuing high quality enables organisations emerge as responsive to the needs of customers. In the event they stand out for efficiency and reliability. Secondly Advancement Manufacturing Technologies (AMT) i.e. flexible systems, integration of production with computers and other software sees to it that firms can pursue the development of multiple capabilities at the same time. AMT enhances precision, efficiency and speed in n the operations of a business. Those in support of the integrative model tend to content that elements of the other two models are both applicable. The kind of trade-offs firms have to deal with today may not be the same as those of 25years ago but there still are trade-offs in technology based systems. Advancement in technology and management styles has significantly changed the nature of trade-offs and advanced the frontier of overall performance. Manufacturers of aircrafts today are faced with a trade-off situation between speedy production and producing in an economic manner. However the final products in both cases are better than what was produced thirty years ago. The bottom line is that operations managers will continue to face the trade-off situation but today’s trade-offs are more subtle; not only do they involve the dimensions of competitive priority but also the rates at which the same are improving. A critical look at the two models shows that they evaluate operations strategy from two perspectives that are different but complimentary. Trade-offs reflects across organisations at certain points in time while the cumulative abilities law reflects when organisations improve over time. Changes in technology provide businesses with more room for improving thus allowing simultaneous enhancements of multiple capabilities. This is a pure fit of the cumulative model, but as businesses increasingly become utilised building of calls for more resources and this increases the need for focussing. The trade-off model is therefore reflected in firms operating on the asset frontier. What this means is that operations strategy will continue to required the trade-off approach. Therefore, as predicted in the cumulative model, organisations largely perceive the various production abilities necessary for competitive advantage. However, distinctions in the priorities show that operations managers recognise the need for trade-offs. Even with the promise of AMT to enhance improvements on both quality aspects, delivery of end products, cost saving and increasing flexibility, organisations focus on specific capabilities at a time depending on their perceived importance. Furthermore different firms, managers and operators may look at strategy from different perspectives. This signifies a need for clear definition of business priorities by organisations so to ensure decisions made on a daily basis work to support the overall operations strategy. Whereas strategy is initiated by managers, operations decision making is a continuous process done daily at the different organisational levels. This further makes it extremely difficult to practically align the corporate strategy with the firm’s operations structure. Bibliography 1. Alex Hill , Richard Cuthbertson, (2011),"Fitness map: a classification of internal strategic fit in service organisations", International Journal of Operations & Production Management, Vol. 31 Iss 9 pp. 991 – 1021. Available at: http://dx.doi.org/10.1108/01443571111165857 2. Bob Lillis, Mike Sweeney. (2013). Managing the fit Between the Views Competitive Strategy of Competitive Strategic Role of Service Operations. 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