Operations Strategies Essay

Abstract

Operations strategies, whether prompted by competitive or regulatory forces, can greatly impact firm performance. While operations strategies cover a wide spectrum of issues - supply chain management, technology choice, capacity allocation, etc. - this dissertation focuses on two such issues, namely, sustainability and product development. The thesis comprises three essays. The first essay (Chapter 2) examines a regulatory aspect of sustainability strategy, product take-back, a form of Extended Producer Responsibility (EPR). With a stylized model, we analyze the trade-offs between assigning full responsibility for product recovery to a single echelon in a multi-echelon supply chain versus sharing responsibility between echelons. We demonstrate how the sharing of EPR program costs between the echelons can move the supply chain closer to the coordinated profit benchmark. The second essay (Chapter 3) examines a voluntary aspect of sustainability from an empirical perspective. We investigate the impact from various types of corporate environmental initiatives and environmental awards and certifications on the market value of the firm. We find that the market is selective in reacting to environmental performance, with certain types of initiatives and awards even valued negatively. The third essay (Chapter 4) is an empirical examination of the shareholder value effects that result from the restructuring of firms' product development activities. We find that, on average, the stock market reacts positively to product development restructuring, and that the reaction is dependent on the firm's prior financial performance, restructuring objective, R&D expenditures, and size.

URI
http://hdl.handle.net/1853/31655

The statement that “operations strategy is the total pattern of decisions which shape the long term capabilities of any type of operation and their contribution to overall strategy, through the reconciliation of market requirements with operations resources”, is true. First, define the words operations strategy, and operations strategy. Operations is what a company “does”. It is how it delivers its products or services to its customer.

Operations is the case of a company’s business i. e. hatever that is, for example hospitality companies offer service, manufacturing companies make products, stockholders, purchase, store and distribute, which retailers procure, stock and supply the public with the goods. This definition can be applied to almost any organization. Strategy is a deliberate search for a plan of action that will develop a business’s distinctive competence and compound it. Organizations strategy describes how it intends to create value for its shareholders, customers, and the citizens.

Operations strategy consists of a sequence of decisions that over time enables the business unit to achieve a desired operations, structure, infrastructure and set of specific capabilities in support of the competitive priorities. Operations strategy is concerned with matching characteristics of operations function with the requirements of the market in order to fulfill needs of the business. A proper approach of this process requires not only understanding of the ideas and methods used to develop operations systems but also knowledge of the techniques and principles involved in its implementation.

Implementation requires knowledge of operations system and policies including those that relate to resource planning and activity control, quality, motivation and organization of people, performance metrics and continuous improvement. Operations strategy has several components that range from structure decision, categories to others. Decision strategies includes such things as capacity, which defines the size of the organization. Facilities available in the business unit also forms part of the structural decision categories of the operations strategy.

Vertical integration is another aspect of the structural decision category. Technological trends in the organization is also part of the structural decision category. Infrastructural decision categories includes things like work place, organization, information and control systems. The conditions of the work place affect the infrastructure of the business unit. Information and control systems defines the infrastructure of the organization. Capabilities are also a component of operations. Each business has unique capabilities.

For example a firm A may have the capability of providing higher levels of services than firm B. Competition priories are also part of the components of operations strategy. In this category cost is an important aspect and determines the competitiveness of a business organization. The other aspect in this category is quality. Here higher performance decisions are made and also maintaining consistence in quality. Time is also critical and on it emphasis is on fast delivery, on-time delivery of services and products and also the development sped. Flexibility is another aspect in the category of competitive priorities.

There should be customization of services and also volume flexibility meaning that the business unit should be ready to serve even increased volume of clients. Operations is what a company does to achieve a set of four objectives. These are increasing customer satisfaction, increasing financial performance, increasing employee satisfactions and creating value for the citizens. Customer satisfactions levels is determined by the levels an quality of services, the value for their money, the speed of service, the behavior of the service staff, the atmosphere and theme of service.

Customer satisfaction leads to increase in business hence margins go up. Financial performance as mentioned above depends on the sales volumes that depend on customer satisfaction. This is determined by checking the profit margins and the costs involved in doing a business. The task of the business is to gain more margins while minimizing the costs. Employee satisfaction results from the way the employees are treated by management. This treatment is based on the nature o work being performed and also the way the workers are enumerated.

Employees’ satisfaction depends on levels of motivation that they get at the work place i. . being given challenging job tasks, being rewarded for excellent performance etc. Businesses should also create value for the citizens and this is mainly through practicing social responsibility. This involves giving back something to the community as an appreciation for benefits derived from doing business in that community. Example of this include building hospitals, homes for orphans and supporting other disadvantaged people in the community. It is through the operations of work done in the various functions or departments in a business unit that the above objectives can be met.

There are three levels of strategy in an organization. These are the corporate level, business or divisional level and operations the functions level. Operations strategy ultimately contribute to the overall strategy key functional areas with an organization include the finance, human resources, marketing, product development among others. In each category there are several challenges encountered in achieving and maintaining a suitable operations strategy. Marketing of hospitability services is complicated by several features or characteristics of services marketing.

First the services are intangible meaning that they cannot be displayed for customers. There the market has to use great skills to convince a customer to buy the service. The aspect of inseparability of services also complicates the marketing task. This means that the services also produced and consumed simultaneously. The other characteristic of services marketing is perishability meaning that services are perishable if not used at the time they are available e. g. a hotel room goes wasted if it is not used on a particular night. Variability is another characteristic of services.

A service given to a guest in a restaurant may vary with similar service provided to the guest by another employee at the same restaurant. In the case of Wynn Macau’s casino and resort that is to open September this year the general manger of Wynn Resort Macau confessed that they faced some challenges in their marketing plan. First, they want to set up a gaming facility yet it is illegal to advertise and promote gaming in China. To counter this situation the company is trying to hook up customers with high growing levels of disposable income and who travel a lot.

It is targeting people living on the eastern seaboard of China who represent 80% of Chinas wealth belt. Another challenge is that Macau receives few people from the western countries (who are more interested in gaming) Macau being a one-day trip market poses another challenge for marketers. This will call for targeting of people with high spending power. Another challenge facing the marketing staff as they try to develop operations strategy is the aspect of seasonality of the hospitability business. In this case you find different approaches being used at different times of the year.

There is also the problem of money laundering in Macau among the agents poses yet another challenge. For this problem, Wynn Macau has created their own investigation team to look at the matter. In Macau most gaming revenues come from the VIP market yet, Wynn Macau is targeting the mass market. This means more marketing is to be done to attract the mass market in the gaming business. The finance function is also faced with several challenges in the hospitability industry. Finance department is involved in looking for or designing ways of getting money to do business.

It is also involved in establishing the way revenue is generated or not generated in the organization. Finance function makes investment and diversification decision. Challenges may arise when a business opts to do diversity its operations in that you may find that revenue contribution from one kind of business e. g. gaming may differ from place to place. In the case of Macau, it is believed that the non-gaming assets are going to change the hotel chains penetration into the market. This will be finding more people interested in gambling and other activities that go together.

Organizations have different ways of financing business. Among these is ploughing back some of the profits realized and this may conflict with the shareholders who want to be paid their dividends. These banks which fund hotels and other hospitability organizations sometimes ask for high interest in loans and give conditions that are too hard to abide by. These problems bring challenges to the hospitability businesses when they require funds for more investments. Other challenges like disperanities in revenues from similar businesses at different parts of the world also comes as a challenge to organization.

It becomes difficult to predict the expected revenue fro the whole business chain. The issue of cost doing business varying in different parts of the world poses challenges to organizations wishing to go global. As in the case with Wynn Macau, the staff needs is not uniform. Higher-skilled workers are asking for more wages thus filling more pressure on the organization. It is also evident that the staff needs vary for those of the skilled employees to those of that at the introductory level who need to be trained. Salary scales are also different in different part of the world.

As in the case of Wynn Macau, salaries in China are higher than is the case in Las Vegas and this has some financial implications. With increase in business more employees will be required thus building more pressure for wages. Although, diversification has succeeded for some organizations, it also involves a lot of risk taking. This is so because the organizations are venturing in unfamiliar grounds hence being in a position to face many challenges. The challenges may include issues of recession in such part of the country and also political instability, which can affect the financial well being of the business.

Some examples of successful diversifications in the hospitability industry include that of Hilton hotels co-operation that went into a merger with the Grand casinos. In this case the Grand Casinos were given an excellent strategies opportunity to diversify their operations. Product development in hospitality industry means the process of coming up with new products or services. This has impacts on operations strategy in that, it is through the process new products and service come into being and helps in raising the customer’s satisfaction.

New services or products development serves as a challenge to the employees hence raise their motivation. Challenges common in this function include lack of resources i. e. both material and human resources. Failure by management to encourage or recognize employee’s ideas may act as a hindrance to the development of new services or products. Another challenge comes from the customers who are not familiar with unusual quality of services. These customers are likely to avoid the services hence keeping the business low in terms of sales volumes.

New products and services may sometime help in increasing customer satisfaction by giving a variety of services/products to the customer. The new products and services may also possess higher quality than similar services and products. Maintaining the new set standards may prove to difficult and expensive since it may call for more training of the staff. Another challenge facing product/service development is that some customers could be alienated by an unusual quality of service. This is due to conservations among some clients meaning they will be unwilling to accept new products.

The human resources in any organization form the backbone to its success. Operations strategy poses a key challenge due to its symbiotic dependence on the organization structure. The organization is made up of human beings who are living things aggregating the skills complexities and the drivers of the people within them (the organization). These aspects impact and constrain operations strategy. In many cases organizations evolve rather than being designed and changes become adaptation of the former structure without revisiting the underlying strategy and operations (Schroeder Roger 1989).

Comparing recruiting and training of workers in has Vegas and Macau you find that these processes are not different. Although these processes may not differ for two locations, culture differences pose major challenges for Wynn Macau Resorts and any other gaming companies planning to operate in Macau. Human resource recruiting has gone online with many applications for jobs at Wynn Macau being generated from an online service. This is a new trend which may mean that those who have started using it will benefit by getting a large pool of applicants and get the best candidates.

Those who fail to adopt this may not benefit from getting high quality staff. Training materials for people in foreign places with different languages have to be translated into language of the targeted group. There are also hiring and work differences between different places in different parts in the world e. g. Las Vegas and Macau. This is a challenge for Hospitality Company like Wynn Macau which is planning to offer its services in the two different places of the world. Another challenge facing hiring of staff for a company like Wynn Macau is Chinese government’s tough immigration rules.

This means neatly all management and staff at Wynn Macau will be Chinese. In some countries there no industrial or trade unions and this is a challenge to the human resources welfare. Although there may be strong governmental regulations related to employment, employees in such places are likely to be treated unfairly in organizations. Employee performance in a place with culture they are not used to may be another challenge facing the human resources function. As for Wynn Macau and Hilton Hotels Corporation venturing into overseas business, the way they perform in a different setting is critical to their survival in such places.

This means they have to put a lot of efforts in staffing and training of their staff to cope up with challenges associated with the new locations. Another challenge facing human resources for Wynn Macau is the fact that workers are not used to working in hotels offering the level of service Wynn customers expect. Were it not for the Chinese government’s tough immigration policy, the company could import professionals who are familiar with the level of service of Wynn customers.

Motivation of staff is one of the roles of human resource management; motivation among the staff can be achieved through giving challenging tasks, employee recognition for good work done, good enumeration among other things. Highly motivated employees will perform their duties well which in turn leads to high customer satisfaction. Employees being human beings can do a very bad job if they are not motivated. Keeping the employees highly motivated is a challenge to the organization since motivation comes as a result of mixing several variables (Schroeder Roger 1989).

Employee turn-over is the other critical challenge to the human resources function in any business unit. Lack of motivation is the main reason for employee turn-over in organizations. Employee retention is an operation strategy that relates to the human resources function and therefore organization should endeavor to satisfy their employees and ultimately retain them. Remember employees are the implementers of any strategy in the organization and as such they should be rated as the most important component of the organization. Operations process also includes the functions of the purchasing and supplies department.

This department is expected to develop and sustain supplier relationships. Companies enjoy significant competitive advantage from their established networks of superb supplier relationships. The objective is to lower the total “cost ownership” i. e. the cost of acquiring goods, materials and services. Challenges facing the purchasing and supplies function include competition in business. A business organization competing with another may go to the supplier of the latter and get a better deal for materials from the same supplier thus affecting supply to the former business organization.

Instability of prices for materials and services poses some challenges to the purchasing and supplies function of the organization. Capacity is another dimension to the operations strategy. It entails growth as needed through additional business units, but capacity added carefully. An example of building a business capacity is that of McDonald’s that planned to add more stores its chain. The challenge is that increasing the capacity should be done carefully and in a calculated manner otherwise it may end up adding costs of business without or with little margins being recognized.

Process/informative technology is a new age in business organization are forms an important part of its functions. Strategies relating to this include having a high degree of understanding of the latest advances in it (process/information technology). Another strategy for process information technology is that organizations seek to be leaders in IT in their specific industry. Challenges could include high costs of acquisition and maintenance of the information systems. IT is also viewed by conservative people as way of reducing staff from organizations and as such it is likely to face resistance from some employees.

In the hospitality industries introduction of automated machines is a challenge in that it affects the “human” aspect of service. Customers prefer to be served by people and thus be able to enjoy the human contact created by the employee’s presence. Another dimension of operations strategy is the vertical integration. This focuses on partnership arrangements with other organizations. It also focuses on maintaining long-term relationship with suppliers in order to promote innovation and quality improvement.

Some organizations may fear partnering with the others thinking that the other organization has intentions of “stealing: their business ideas. Operations strategy can be evaluated using two different approaches. One is checking its internal and external consistency. It entails consistency between the operations strategy and overall business strategy, between operations strategy and other functional strategies within the business among decision categories that make up operations strategy, and between operations strategy and business environment (resource available, competitive behavior, government restraints).

The other approach to operations strategy evaluation is looking at contribution to competitive advantage. It involves making trade-offs explicit, and enabling operations to set priorities that enhance competitive advantage. It also involves directing attention to opportunities that complement the business strategy. The other thing is promoting clarity regarding the operations strategy throughout the business unit to realize its potential.

Lastly it involves providing operations capabilities that will be required business in the future. Conclusion Looking at the operations strategy along the various dimensions discussed in this paper, it can be concluded that they are support the operations mission and ultimately contribute to the overall business strategy of the organization. This is so because all aspects of the operations strategy work together in a complex mix to give the overall results expected by an organization.

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