Functional Strategy - a game plan to reinforce the 3 levels of Strategy Hierarchy - Corporate, Business and Operations Strategy.
Functional Strategy
Functional strategy refers to the strategies used by the functional areas in business organizations, such as marketing, HR, Finance, R&D, production/operations, to support corporate and business strategies. Each functional area has a number of strategic choices that interact with and must be consistent with the overall company strategies. Functional strategies are concerned with the effectiveness and efficiency of methods/tactics used in implementing strategic choices; and commitments regarding resources. Functional strategy comprises the set of management decisions and actions taken in an organization's functional areas, to enhance resources and organizational capabilities to better achieve the organization's strategic goals and objectives. Functional strategies deal with how each of the functional areas/units in the organization will carry out its functional activities to be efficient and effective, and maximize resource productivity. Each functional area within a business organization can then derive its own strategy in support of the firm's overall business strategy. Functional strategies are linked through agenda set by markets to corporate, business and operations objectives.
Functional strategy is the short-term game plan for key functional areas, within a company, required to reinforce the implementation and execution of the organization's strategy. Functional strategies are relatively short-term activities that each functional area within a company will carry out to implement the broader, longer-term corporate-level and business-level strategies. Functional strategies are concerned with the effectiveness and efficiency of methods/tactics used in implementing strategic choices; and commitments regarding resources. Development of functional strategies help in implementation of strategic choices - corporate, business and operations levels - by organizing and activating specific sub-units of the organization to pursue the organization's business strategy in daily activities through tactics.
Tactics
Tactics are the actionable decisions that pertain to everyday moves in functional areas in a company to improve for example, its market share, competitive pricing, customer service, sales, or other aspects in response to current real world conditions, that can give it a competitive advantage. Tactics are most meaningful in the service of long-term goals. They involve seizing opportunities and managing risks as they arise. A tactic is an immediate action/task designed to respond to fast changing realities. Tactical control emphasizes the current operations of an organization. Managers determine what the various parts of the organization must do for the organization to be successful in the near future (one year or less).
Tactical Planning
Tactical planning is the shorter-term planning of an objective that will take a year or less to achieve. It is usually carried out by an organization's middle management. Tactical planning is usually aimed at a specific area or department of the organization, such as its facilities, production, finance, marketing or personnel.
Functional strategy refers to the strategies used by the functional areas in business organizations, such as marketing, HR, Finance, R&D, production/operations, to support corporate and business strategies. Each functional area has a number of strategic choices that interact with and must be consistent with the overall company strategies. Functional strategies are concerned with the effectiveness and efficiency of methods/tactics used in implementing strategic choices; and commitments regarding resources. Functional strategy comprises the set of management decisions and actions taken in an organization's functional areas, to enhance resources and organizational capabilities to better achieve the organization's strategic goals and objectives. Functional strategies deal with how each of the functional areas/units in the organization will carry out its functional activities to be efficient and effective, and maximize resource productivity. Each functional area within a business organization can then derive its own strategy in support of the firm's overall business strategy. Functional strategies are linked through agenda set by markets to corporate, business and operations objectives.
Functional strategy is the short-term game plan for key functional areas, within a company, required to reinforce the implementation and execution of the organization's strategy. Functional strategies are relatively short-term activities that each functional area within a company will carry out to implement the broader, longer-term corporate-level and business-level strategies. Functional strategies are concerned with the effectiveness and efficiency of methods/tactics used in implementing strategic choices; and commitments regarding resources. Development of functional strategies help in implementation of strategic choices - corporate, business and operations levels - by organizing and activating specific sub-units of the organization to pursue the organization's business strategy in daily activities through tactics.
Tactics
Tactics are the actionable decisions that pertain to everyday moves in functional areas in a company to improve for example, its market share, competitive pricing, customer service, sales, or other aspects in response to current real world conditions, that can give it a competitive advantage. Tactics are most meaningful in the service of long-term goals. They involve seizing opportunities and managing risks as they arise. A tactic is an immediate action/task designed to respond to fast changing realities. Tactical control emphasizes the current operations of an organization. Managers determine what the various parts of the organization must do for the organization to be successful in the near future (one year or less).
Tactical Planning
Tactical planning is the shorter-term planning of an objective that will take a year or less to achieve. It is usually carried out by an organization's middle management. Tactical planning is usually aimed at a specific area or department of the organization, such as its facilities, production, finance, marketing or personnel.
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Marketing Management and Strategy
Marketing is the process of satisfying the needs and wants of the consumers. The goal of marketing is identifying unfulfilled needs and desires, and exploring, creating, and delivering value to satisfy those needs of a target market at a profit. Marketing management encompasses the analysis planning, organizing, leading and controlling marketing programs and initiatives designed to bring about the desired exchanges with target audiences for the purpose of personal or mutual gain. Marketing management is the process of planning, organizing, directing and controlling the execution of promotions and distribution of products and/or services in order to attract and retain customers. The functions of marketing management - planning, organizing, coordinating and executing procedures designed to increase customer engagement, drive sales, and create product/service awareness. These functions focus on implementing business strategy, as well as managing the process of the exchange of ownership of goods and services from seller to the buyer. Marketing management identifies market opportunities and comes up with appropriate strategies for exploring those opportunities profitably.
Marketing management decision-making involves determining which market segments the company is capable of serving the best, and the design and promotion of appropriate products and services to satisfy the needs and wants of that market. Marketing management decisions are guided by marketing strategy; they encompass decisions about market segmentation, product quality and design, the choice of distribution channels, corporate image building, advertising budgets, sales promotions, etc. These decisions are strategic since success depends on decision-makers ability to influence the outcomes of marketing policy.
Marketing Function
Marketing is the business function that controls the level and composition of demand in the market. It deals with creating and maintaining demand for goods and services of the organization. Marketing function comprises the activities, set of institutions, and processes for creating, communicating, delivering and exchanging offers that have value for customers, clients, partners and society at large. Typical marketing function within an organization might include performing tasks such as: market research, producing a marketing plan, product development, as well as strategically overseeing advertising, promotion, distribution for sale, customer service and public relations, sales and communications. Traditionally, markets were viewed as a place for exchange of goods and services between sellers and buyers to the mutual benefit of both. Marketing is exchange of values between the seller and the buyer. Value implies worth related to the goods and services being exchanged. The buyer will be ready to pay for the goods if they have some value for him.
Marketing Strategy
Marketing strategy may be defined as a business's overall game plan for reaching prospective consumers and turning them into customers of the goods or services the business provides through building brand awareness. A marketing strategy contains the company's value proposition, key brand messaging, data on target customer demographics, and other high-level elements. Marketing strategy defines competitive advantage, how precisely you are going to compete against competitors for customers. It covers the following market-mix factors:
Answers to the above questions provide a good foundation on which to build your company's marketing strategy. Marketing strategy is concerned with the decisions about markets, their development and how to leverage the opportunities the markets offer.
Marketing strategy sets specific long-term vision to work towards and review performance against. Marketing strategy sets specific long-term objectives that drive marketing tactics and effort. Marketing strategy provides the means to persuade, influence and motivate a targeted audience and generate visibility. It is also employed to communicate and make customers aware of the features, specifications and benefits of a company’s products. A marketing strategy highlights what your marketing goals are, and details how you can achieve them through your marketing efforts. A marketing strategy is essentially, an extension of your overall business strategy. It is the reasoning part that informs your future marketing decisions. Some examples of types of marketing strategy include:
Marketing strategy involves decisions on how you are going to get your company in front of the people who are going to buy from it. Marketing strategy defines how to engage the audience through branding. Marketing strategy should align with your business and marketing goals.
The key elements of a successful marketing strategy include:
Marketing strategies are used by businesses to collaborate with their consumers. It is basically focused on encouraging target population to buy those specific products and services. The goal of a marketing strategy is to attract customers who will choose to purchase your offering - products/services. Market strategy defines priority markets, audiences and products. This is where segmentation, targeting, and product positioning fits.
Marketing Strategy Formulation
Marketing strategy formulation is a process of deciding what the product or services are, determining the desired actions that will put the product in the desired position in the marketplace, and the processes that will be used to implement these actions. A well crafted marketing strategy can help you make sense of your situation and cut through all the noise and be your vehicle to success. The marketing strategy to be successful has to be implemented.
Marketing Tactics
Marketing tactics are the actual strategic actions that direct the promotion of a product or service to influence specific marketing goals. Marketing tactics are high-level concepts that direct content creation and intentional marketing funnel experiences. Marketing tactics support the overall direction of the business as defined by the corporate and business strategy. Tactics involves the best way Some examples include:
These marketing strategies contribute to and reinforce business strategy.
Marketing Channels and Communication Strategy
Marketing channel refers to medium or communications channels organizations use to get their messaging and brand across to prospects and customers. Communication is important because it verses people on the different things that the business has to offer. A marketing communications channel, also sometimes referred to as a marketing media channel, is a delivery vehicle to your customers for your message or offer. The types of marketing channels may include:
A marketing channel consists of the people, organizations and activities necessary to transfer the ownership of goods from the point of production to the point of consumption. It is the way products get to the user. An example of marketing channel is a target audience member's email inbox, pay-per-click (PPC) marketing tactics, referral marketing tactics, event marketing tactics, and more .
Marketing Activities
A marketing activity is anything you do to help you acquire customers. Marketing activities aim to create brand awareness, generate leads or direct sales,or retain existing customers using different marketing channels. They are the methods companies use to sell and promote their products or services to returning and new customers. Some examples include:
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Marketing Strategy that Reinforces Corporate Strategy
These marketing strategies contribute and reinforce corporate strategy.
Marketing Strategy that Reinforces Operations Strategy
These marketing strategies contribute to and reinforce operations strategy.
[TBD]
There are myriad of different marketing strategies available to companies. Picking the appropriate marketing strategy for your business situation requires analyzing the needs of business, your target audience, and specifications of your product.
Marketing Strategy Development
When it comes to marketing, strategy and planning are closely linked. Developing a marketing strategy leads into creating a marketing plan. Some of the steps you can take when developing marketing strategies may include:
When you create a marketing strategy you need to anticipates the needs of your target customers, and how you can meet those needs more effectively than your competitors.
Marketing Strategy Implementation
Marketing strategy implementation is the process of turning your marketing strategy into reality - real-life actions: tasks and projects, people responsible for them, and deadlines. In other words, Its about bringing your marketing plan to life. To do so, you need a marketing implementation plan which puts the marketing strategy/plan into actionable and practical tasks, duties and goals that are easy to understand and have directed guidance. A marketing implementation plan details the steps and resources required to execute your marketing strategy/marketing plan.
The implementation plan includes information about the company's resources, goals, and step by step instructions to implement the campaign successfully. A marketing implementation plan takes your long-term plans and turns them into clear processes - marketing workflows, tasks templates, and check lists, and marketing Kanban boards. With a marketing implementation plan, goals and projects are broken down into workflows and individual tasks. Then, as tasks get assigned, their owners know how their work impacts everyone else’s work. A marketing implementation plan, like any project plan, defines the objectives, of the campaign and the requirements to fulfill them.
Marketing strategy execution is the process that turns your marketing strategy into action. It brings your marketing goals and tactics to life. Your marketing strategy is a guide that helps you choose, prioritize, plan, and execute projects that ultimately improve your company’s bottom line. With marketing execution, you’ll turn your strategy into real-life activities so you can deliver the right content to the right people at the right time. A marketing implementation plan can be adjusted at any point based on the results from the metrics. If digital ads are performing better than expected, for example, the budget for a campaign can be adjusted to fund a higher performing platform or the company can initiate a new budget. The challenge for marketing leaders is to ensure that every platform has sufficient time to show results.
Marketing Plan
A marketing plan is a document that outlines a business's marketing strategies for a certain campaign. It provides the overall, high level strategy based on the brand's objectives over a period of time. Marketing plan offers clear and clear-cut statement about the strategies and actions that is to be implemented. Fundamentally, a marketing plan is a way to lay out the marketing for business, products, and services. It envelops everything from information about target market to specific step-by-step processes company use to develop certain marketing systems (programs) and strategies. It typically follows a specific period, such as throughout a quarter or fiscal year. The purpose of the marketing plan is to describe who your clients are and where they are, and how you can reach them.
Elements of Marketing Plan
A marketing plan is an overview of all your marketing initiatives. This will include all the campaigns you intend to run over a set period of time, your goals and ambitions for the projects as a whole, and any research you have compiled to support these aims.
Marketing plans detail specific strategies to reach the company's goals, and contain the time tables for when certain marketing strategies will take place and details the logistics of marketing campaigns. The logistical details of executing your strategy include elements such as budgets, more detail time scales for objectives and goals, who in the organization will manage the various points in the strategy, the logistics of various distribution channels and their incumbent costs. etc.
A marketing plan consists of all the strategies that a company will execute to reach its marketing goals over a period of time. Marketing plans usually outline marketing activities on a monthly, quarterly or annual basis.
Marketing plan is the framework from which all your marketing strategies are created. The marketing strategy is outlined in the marketing plan, which is a document that details the specific types of marketing activities a company conducts and contains timetables for rolling out various marketing initiatives. Marketing Initiatives are typically new ideas, campaigns, or solutions to solve either a new or previously existing problem.
The plan helps you connect each strategy back to the larger marketing operation and business goal. A marketing plan sums up the ideas for what a company wants to accomplish its objectives. The marketing plan is a more lively document than your strategy, and will need to be updated more frequently and adjusted to accommodate changes in costings, market conditions, economic conditions and other factors.
Marketing Campaigns
A marketing campaign is a focused tactical initiative to achieve a specific marketing goal. Campaign plan is a plan to achieve an objective, usually of a large-scale over an extended period of time. It usually coordinates many activities and uses of resources involving multiple organizations. A campaign plan could also have subordinate objectives or intermediate milestones and is often broken down by phases.
A campaign is typically focused on an event or particular asset. The process of campaign planning helps you organize your thoughts, identify appropriate target markets and craft effective messages to reach them. Campaign plans sit within your overall marketing strategy to promote specific products, performances, exhibitions or services. Marketing campaign types may include:
Most marketing campaigns focus directly on promoting a product. The choice of marketing media strategy is one important element of a successful marketing campaign. Combined with your messaging and the right creative for the channel, it can resonate with your ideal customers and encourage them to do business with you.
Marketing Programs
A marketing program is all the people, processes, technologies and activities involved in making connections and building relationships to achieve an end goal. In B2B and B2C markets, that end goal is to engage potential customers and improve sales of products and services. A program focuses engaging, nurturing, and converting buyers with relevant content that aligns to the needs and buying processes of the customer. A programmatic approach (unlike campaigns) does not start with the asset or tactics in mind. A programmatic approach is first built to be perpetual - always-on. This is in stark contrast to a one-and-done campaign.
Some examples of marketing programs include:
A program is a group of projects that are similar or related to one another, and which are often managed and coordinated as a group instead of independently. Programs are continuously optimized by analyzing key performance indicators (KPIs) and using the business intelligence, that is derived, to make mid-course adjustments that will improve the program's overall performance. A project is a temporary endeavor undertaken by a company or organization such as: the creation of a new service, goods, or result. A marketing program needs to be implemented and executed to be of any use, this requires some sort of framework. to help in execution of the plan
Marketing Projects
A marketing project is a series of related action plans (workflows) that further the implementation of your marketing strategies. A project has a clear beginning and end. For example, advertising takes place on a weekly or monthly basis, but developing the ads for the first quarter of the year is done once, and that woud be a marketing project. The first step in any marketing project is to determine the budget for the project.
For example, setting up an advertisement campaign consists of several projects, such as:
A campaign is typically focused on an event or particular asset.
Marketing is the process of satisfying the needs and wants of the consumers. The goal of marketing is identifying unfulfilled needs and desires, and exploring, creating, and delivering value to satisfy those needs of a target market at a profit. Marketing management encompasses the analysis planning, organizing, leading and controlling marketing programs and initiatives designed to bring about the desired exchanges with target audiences for the purpose of personal or mutual gain. Marketing management is the process of planning, organizing, directing and controlling the execution of promotions and distribution of products and/or services in order to attract and retain customers. The functions of marketing management - planning, organizing, coordinating and executing procedures designed to increase customer engagement, drive sales, and create product/service awareness. These functions focus on implementing business strategy, as well as managing the process of the exchange of ownership of goods and services from seller to the buyer. Marketing management identifies market opportunities and comes up with appropriate strategies for exploring those opportunities profitably.
Marketing management decision-making involves determining which market segments the company is capable of serving the best, and the design and promotion of appropriate products and services to satisfy the needs and wants of that market. Marketing management decisions are guided by marketing strategy; they encompass decisions about market segmentation, product quality and design, the choice of distribution channels, corporate image building, advertising budgets, sales promotions, etc. These decisions are strategic since success depends on decision-makers ability to influence the outcomes of marketing policy.
Marketing Function
Marketing is the business function that controls the level and composition of demand in the market. It deals with creating and maintaining demand for goods and services of the organization. Marketing function comprises the activities, set of institutions, and processes for creating, communicating, delivering and exchanging offers that have value for customers, clients, partners and society at large. Typical marketing function within an organization might include performing tasks such as: market research, producing a marketing plan, product development, as well as strategically overseeing advertising, promotion, distribution for sale, customer service and public relations, sales and communications. Traditionally, markets were viewed as a place for exchange of goods and services between sellers and buyers to the mutual benefit of both. Marketing is exchange of values between the seller and the buyer. Value implies worth related to the goods and services being exchanged. The buyer will be ready to pay for the goods if they have some value for him.
Marketing Strategy
Marketing strategy may be defined as a business's overall game plan for reaching prospective consumers and turning them into customers of the goods or services the business provides through building brand awareness. A marketing strategy contains the company's value proposition, key brand messaging, data on target customer demographics, and other high-level elements. Marketing strategy defines competitive advantage, how precisely you are going to compete against competitors for customers. It covers the following market-mix factors:
- Product - What the company is selling; value proposition.
- Price - Profit margins, marketing budgets, etc.
- Place - What channels or platforms will the company use?
- Promotion - What are you trying to achieve? For example, are you hoping to build your social media presence, increase brand perception, promote a new product, or something else?
- People - Who is your target audience? What drives them?
Answers to the above questions provide a good foundation on which to build your company's marketing strategy. Marketing strategy is concerned with the decisions about markets, their development and how to leverage the opportunities the markets offer.
Marketing strategy sets specific long-term vision to work towards and review performance against. Marketing strategy sets specific long-term objectives that drive marketing tactics and effort. Marketing strategy provides the means to persuade, influence and motivate a targeted audience and generate visibility. It is also employed to communicate and make customers aware of the features, specifications and benefits of a company’s products. A marketing strategy highlights what your marketing goals are, and details how you can achieve them through your marketing efforts. A marketing strategy is essentially, an extension of your overall business strategy. It is the reasoning part that informs your future marketing decisions. Some examples of types of marketing strategy include:
- Brand marketing - Brand positioning strategy brings your competitive positioning to life, and works to position you as a certain "something" in the mind of your prospects and customers. Brand strategy defines; (1) What the company stands for, (2) A promise you make, and (3) The personality you convey. And while it includes your logo, color palette, and slogan; those are only creative elements that convey your brand. Instead, your realized/actual brand lives in everyday day-to-day interactions you have with your market, such as:(1) The images you convey, (2) The messages you deliver through e.g., your website, etc., (3) The way your employees interact with customers. Brand strategy, when successful, can help you capture market share. Brand marketing strategy recommends effective marketing channels based on reaching your target market/customers. Brand marketing strategy contributes to and reinforces corporate level strategy.
- Brand Marketing - Branding strategy is a part of brand positioning; it defines how toengage the audience. This involves considering how your business can appeal to audiences through key messages including message architecture, and tone-of-voice. This is part of brand positioning relative to competitors. ..
- Product Marketing Positioning - Product Marketing positioning strategy, like brand strategy, is about identifying and committing the unique thoughts you want to own in the minds of your customers and prospects versus your competition. It is a process that involves creating an identity/image of the brand or product within the target customers' minds, and allows the company to differentiate itself from competitors. The process indicates how you differentiate your product/service from that of your competitors and then determine which market niche to fill. Positioning in marketing may be based on pricing, quality of goods/services, differentiation, convenience, customer service and relationship-building factors e.g., personal contact. An effective market positioning strategy combines elements of the marketing mix; and It is designed to meet the organization's marketing objectives by providing its customers with value. Marketing positioning strategy contributes to and reinforces the business and competitive strategy.
- Relationship marketing - This is a facet of customer relationship management (CRM) that focuses on customer loyalty and long-term customer engagement rather than shorter-term goals like customer acquisition and individual sales. The goal of relationship marketing (or customer relationship marketing) is to create strong, even emotional, customer connections to a brand that can lead to ongoing business, free word-of-mouth promotion and information from customers that can generate leads. This type of marketing is basically focused on customer building. Enhancing existing relationships with customers and improving customer loyalty. Organizations capitalizing on long-term and trustworthy customer relationships can help design value-enhancing marketing strategies that will subsequently generate competitive advantages and lead to superior performance. This type of marketing is basically focused on customer building. Enhancing existing relationships with customers and improving customer loyalty. A relationship marketing strategy uses a mix of tactics to promote long-term satisfaction and customer loyalty. Examples of relationship marketing include: proactive customer service, loyalty programs, encouraging feedback, and promoting the benefits of a product rather than just its features. Affiliate programs are part of relationship marketing.
- Transactional Marketing - Transactional marketing strategy is based on more traditional approach that concentrates on acquiring the highest number of new sales. With the emphasis on increasing traffic and conversions, transactional marketing encourages you to look for quick wins.
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Marketing strategy involves decisions on how you are going to get your company in front of the people who are going to buy from it. Marketing strategy defines how to engage the audience through branding. Marketing strategy should align with your business and marketing goals.
The key elements of a successful marketing strategy include:
- Segmentation - This is the process of classifying existing and potential customers into particular groups or segments characterized by their 'needs'. It involves identifying these groups and their needs through market research and market reports, and then addressing those needs more successfully than the competition.
- Targeting and Positioning - This involves aiming to sell to the market segments that will be most profitable for your business. Your product/service offering must meet the needs of your chosen target market. Create a marketing strategy that makes the most of your strengths and matches them to the needs of your target market.
- Promotional tactics - Once you have created your marketing strategy decide which marketing activity/activities will ensure your target market know about the products or services you offer, and why they meet their needs.
- Monitoring and evaluation - Monitoring is the systematic collection of data to inform decisions to improve the efficiency and effectiveness of service delivery and service operations. This involves motoring and evaluating how effective the marketing strategy has been. Forms of monitoring may include: survey asking each customer how they heard about the business. Deeper analysis can come from questionnaires, focus groups, etc.
- Marketing plan - The marketing plan sets out how you intend to implement and execute your marketing strategy and evaluate its success. The plan should be constantly reviewed and if necessary, updated, so you can respond quickly to changes in the environment and factors such as: customer needs and attitudes in your industry and in the broader economic climate.
Marketing strategies are used by businesses to collaborate with their consumers. It is basically focused on encouraging target population to buy those specific products and services. The goal of a marketing strategy is to attract customers who will choose to purchase your offering - products/services. Market strategy defines priority markets, audiences and products. This is where segmentation, targeting, and product positioning fits.
Marketing Strategy Formulation
Marketing strategy formulation is a process of deciding what the product or services are, determining the desired actions that will put the product in the desired position in the marketplace, and the processes that will be used to implement these actions. A well crafted marketing strategy can help you make sense of your situation and cut through all the noise and be your vehicle to success. The marketing strategy to be successful has to be implemented.
Marketing Tactics
Marketing tactics are the actual strategic actions that direct the promotion of a product or service to influence specific marketing goals. Marketing tactics are high-level concepts that direct content creation and intentional marketing funnel experiences. Marketing tactics support the overall direction of the business as defined by the corporate and business strategy. Tactics involves the best way Some examples include:
- Marketing mix - The marketing mix decision are used to achieve the general marketing strategies by guiding the decisions within important marketing areas such as product, pricing, distribution/placement, and promotion for goods marketing; and product, pricing, distribution/placement, promotion, physical evidence, people and process for service marketing.
- Product - The product element of the marketing-mix refers to what you are offering, as a whole, to your customers. Product decisions include functionality, branding, packaging, service, quality, appearance, and warranty. When thinking about your product consider the key features, benefits, and the needs and wants of customers. The options selected by an organization is dependent on whether the organization is attempting to reach new or existing customers, and whether the products - goods or services - are new or already exist.
- Pricing - Pricing element refers to the model or method used to establish the best price for a product - goods or service. This is the way you set prices for your product or services. Your pricing will also depend on your businesses position in the market. Pricing is concerned with decisions on influencing increase in volume or communicating brand value. For example, if you advertise your company as targeting budget conscious customers then your price should reflect that. Pricing is how the seller uses pricing to achieve a certain business objective. Pricing decisions are set at a higher organization or brand level, and is aimed at the life-cycle of the product.
- Promotion - Promotion refers to all the activities and methods you use to put products - goods or services - in the public eye or target market. This may include sales, public relations, direct marketing, advertising, sponsorship, social media, and word of mouth.
- Distribution/Place - The Place element refers to how you get your product or service to your customers at the right time, at the right place, and in the right quantity. It includes distribution channels, location, logistics, service levels and market coverage. It identifies, "where", "when", and by "whom" the products - goods or services - are to be offered for sale.
- People - This refers to the customers, service personnel whose presence and actions define the service that satisfies the wants and needs of the consumer to whom the service is directed. The People element of service marketing-mix includes anyone directly or indirectly involved in the business-side of the enterprise; these include employees who are involved in selling the product - service, designing it, managing teams, representing customers, recruitment, culture, etc. Employing and retaining the right people is imperative in both the long and short term success of the organization. People decisions are usually centered around customer service - how do you want your employees to be perceived by the customers?
- Process - The Process element describes a series of actions that are taken in delivering the service product to the customer. The process may comprise a number of parts such as: sales funnel, payment systems, distribution procedures, and managing customer relationships. Assessing, adjusting and optimizing the different parts of your process helps you streamline your business efforts while also ensuring your methods are up-to-date and in line with current trends.
- Branding - Branding can also be considered at the tactical level, for example, which brand identity or color-ways to use.
- Email marketing - Email marketing is a form of interactive digital marketing that involves sending email messages directly to consumers. An email marketing campaign might work by sending informational and promotion emails to existing customers to encourage them to make more purchases with a company. Another email marketing method is to create a newsletter that consumers can subscribe to and receive periodically to learn about company updates or new products.
- Direct Mail - [TBD]
- Outbound marketing - Outbound Marketing is any kind of marketing where the company initiates the conversation and sends its message out to an audience. This includes traditional approaches such as direct mail, cold calling, radio ads, TV ads, trade shows, and telemarketing. Outbound marketing focuses on creating advertisements that bring your products or services to the customer.
- Inbound Marketing - Inbound marketing is a business methodology that attracts customers by creating valuable content and experiences tailored to them. While outbound marketing interrupts your audience with content they don't always want, inbound marketing forms connections they are looking for and solves problems they already have. This includes approaches such as email marketing, SEO, social media, local search, and mobile marketing. Inbound marketing focuses on putting the right structures in place to allow customers to find you.
- Content Marketing - Content marketing involves promoting your website and business with various forms of quality content through blogs, search engine optimization, social media, infographics, newsletter, podcasts, white papers, eBooks, etc. The useful content pulls visitors towards your website, brings them closer to your brand, engages them and converts them into customers as well as loyal followers. In content marketing a mix of Inbound and Outbound tactics are deployed to maximize effectiveness. Content marketing is another form of digital marketing strategy in which marketing professionals create internet content to build excitement around a company or product. Many initiatives in content marketing spend more time and effort producing content that's engaging and has the potential to attract new customers.
- Direct Marketing - Direct Marketing strategy refers to an approach based on Directly connecting with carefully targeted individuals to cultivate a lasting relationships. Used for direct outreach to prospects in a database or sales list.
- Influencer Marketing - []
- Referral Marketing - []
- Affiliate Marketing - []
- Partner Marketing - []
- Employee Advocacy - []
- Market Segmentation - Defining groups (segments) in your audience based on specific traits.
- Targeting - Deciding which segments you should market to.
These marketing strategies contribute to and reinforce business strategy.
Marketing Channels and Communication Strategy
Marketing channel refers to medium or communications channels organizations use to get their messaging and brand across to prospects and customers. Communication is important because it verses people on the different things that the business has to offer. A marketing communications channel, also sometimes referred to as a marketing media channel, is a delivery vehicle to your customers for your message or offer. The types of marketing channels may include:
- Traditional Media - This refers to media channels such as; direct mail, telephone, Television, Radio, and Print media, Bill boards, etc. These will be the offline focus used for introducing your audience to your products and services through advertising.
- Digital Media - Digital media channels refers to platforms such as; Internet; Search Engine platforms such as Google; Social media platforms such as Facebook, Twitter, Linkedin, etc.; Email platforms, such as Google, Microsoft, Yahoo mail. etc., used for connecting with carefully targeted individuals to cultivate a lasting relationships.
- Owned Media - These are channels that the organization owns, such as: Website, Social media accounts, Blogs, etc.)
- PPC (Per per Click) Advertising - This is a paid media. It is a way to advertise by paying search engines for each user that clicks on your brand's content. PPC monitors the performance of ads.
- Social media Ads.
- Influencers
- Affiliate marketing
- Public Relations - This refers to types of communications such as: Press releases, exhibitions, sponsorship deals and conferences. Used for getting news worthy attention.
- Events - This refers to meetings, conferences and trade shows.
- Partnerships and joint ventures
A marketing channel consists of the people, organizations and activities necessary to transfer the ownership of goods from the point of production to the point of consumption. It is the way products get to the user. An example of marketing channel is a target audience member's email inbox, pay-per-click (PPC) marketing tactics, referral marketing tactics, event marketing tactics, and more .
Marketing Activities
A marketing activity is anything you do to help you acquire customers. Marketing activities aim to create brand awareness, generate leads or direct sales,or retain existing customers using different marketing channels. They are the methods companies use to sell and promote their products or services to returning and new customers. Some examples include:
- Advertising - Advertising in business is a type of communication that persuades and encourages people to take a particular action. Communication is important because it verses people on the different things that the business has to offer. Advertisements also shows the advantages, features and values of a certain product. Advertising is any paid form of communication from an identified sponsor or source that draws attention to ideas, goods, services or the sponsor itself; essentially commercials and ads (whether digital or print).
- Content Marketing - This aspect of content marketing involves creating helpful content for a company's target audoence. Content marketing helps establish your brand as a thought leader in your industry. This builds trust with your audience.
- Direct Marketing - Communicate directly with customers and prospects through ail, email, texts, fliers and other promotional material.
- Marketing Research - Process of collecting and analyzing information about a company's target audience, current customers,and competitors in the market.
- New Product Development - This is concerned with development of product marketing campaigns; brand development campaign; email marketing campaign, content marketing campaign, etc.
- Content Creation - []
- Design -[]
- Promotion -
- Email Marketing - This is the process of obtaining customer or potential customers' email address and distributing messages.
[TBD]
Marketing Strategy that Reinforces Corporate Strategy
These marketing strategies contribute and reinforce corporate strategy.
- Cause Marketing - Cause marketing links the services and products of a company to a social cause or issue.
- []
Marketing Strategy that Reinforces Operations Strategy
These marketing strategies contribute to and reinforce operations strategy.
[TBD]
- Word of mouth marketing - It totally relies on what impression you leave on people. It is traditionally the most important type of marketing strategy. Being heard is important in business world. When you give quality services to customers, it is likely that they’d promote you.
- Interactive Marketing - Interactive marketing involves interaction between the employees of your company and customers. It occurs at the retail stalls, customer service counter of banks, hotels, restaurants, and all those places employees and customers get in contact with one another. Interactive marketing influences the decision-making of buyers, because the customer needs help to make the choice, and the employees of your company help him to do so.
- Search engine optimization - Search engine marketing is a form of digital marketing that focudes on bringing new traffic toa company's website. Taking advantage of true search engine optimization skills and incorporating SEO into content on a blog or website is the best way to stimulate traffic and unique visitors.
- Local search - Local search marketing is all about putting your business on the map in local searches when customers are searching for a business like yours. For a more formal definition, local search marketing is a form of search engine optimization that helps local businesses show up in relevant local searches.
- Social media - Social Media Marketing is a form of digital marketing strategy that allows consumers to interact with advertisement and promotions on the internet.
- Mobile Marketing - Mobile marketing is a type of interactive digital marketing that focuses on making online advertisements compatible with mobile devices.
- Public relations - This is the strategic management of relationships between an organization and its diverse publics, through the use of communication, to achieve mutual understanding, realize organizational goals, and serve the public interest. Public relations is more than managing the flow of information between an organization and its public. It is a communications discipline that engages and informs key audiences, builds important relationships and brings vital information back into an organization for analysis and action.
There are myriad of different marketing strategies available to companies. Picking the appropriate marketing strategy for your business situation requires analyzing the needs of business, your target audience, and specifications of your product.
Marketing Strategy Development
When it comes to marketing, strategy and planning are closely linked. Developing a marketing strategy leads into creating a marketing plan. Some of the steps you can take when developing marketing strategies may include:
- Define Marketing Strategy Goal - This should align with your overall business goals.
- Do your marketing analysis,
- Know your customers - when you create a marketing strategy you need to anticipate what your customers' needs are, and how you can meet them more effectively than your competitors.
- Know your product and resources - You need an understanding what you are offering your customers. Your goal here is to understand your position in the market/industry. There are well established techniques you can use at this stage, such as marketing mix. The marketing mix can give you a firmer understanding of the products and resources you have available when it comes to marketing.
- Define your objectives - Define objectives to achieve the goals defined in step #1. You need to be strategic in your thinking when setting objectives you can achieve along the way to reaching your goals. For example, for a goal to increase revenue, some example objectives might be: gaining new customers, increasing sales or conversion rates, increasing brand awareness and engagement, growing your email list, etc.
- Outline techniques - Once you have defined your objectives, think of some of the marketing techniques and channels available that can help achieve your objectives.
- Set a Budget.
- Create a marketing plan.
- Analyze Performance.
When you create a marketing strategy you need to anticipates the needs of your target customers, and how you can meet those needs more effectively than your competitors.
Marketing Strategy Implementation
Marketing strategy implementation is the process of turning your marketing strategy into reality - real-life actions: tasks and projects, people responsible for them, and deadlines. In other words, Its about bringing your marketing plan to life. To do so, you need a marketing implementation plan which puts the marketing strategy/plan into actionable and practical tasks, duties and goals that are easy to understand and have directed guidance. A marketing implementation plan details the steps and resources required to execute your marketing strategy/marketing plan.
The implementation plan includes information about the company's resources, goals, and step by step instructions to implement the campaign successfully. A marketing implementation plan takes your long-term plans and turns them into clear processes - marketing workflows, tasks templates, and check lists, and marketing Kanban boards. With a marketing implementation plan, goals and projects are broken down into workflows and individual tasks. Then, as tasks get assigned, their owners know how their work impacts everyone else’s work. A marketing implementation plan, like any project plan, defines the objectives, of the campaign and the requirements to fulfill them.
Marketing strategy execution is the process that turns your marketing strategy into action. It brings your marketing goals and tactics to life. Your marketing strategy is a guide that helps you choose, prioritize, plan, and execute projects that ultimately improve your company’s bottom line. With marketing execution, you’ll turn your strategy into real-life activities so you can deliver the right content to the right people at the right time. A marketing implementation plan can be adjusted at any point based on the results from the metrics. If digital ads are performing better than expected, for example, the budget for a campaign can be adjusted to fund a higher performing platform or the company can initiate a new budget. The challenge for marketing leaders is to ensure that every platform has sufficient time to show results.
Marketing Plan
A marketing plan is a document that outlines a business's marketing strategies for a certain campaign. It provides the overall, high level strategy based on the brand's objectives over a period of time. Marketing plan offers clear and clear-cut statement about the strategies and actions that is to be implemented. Fundamentally, a marketing plan is a way to lay out the marketing for business, products, and services. It envelops everything from information about target market to specific step-by-step processes company use to develop certain marketing systems (programs) and strategies. It typically follows a specific period, such as throughout a quarter or fiscal year. The purpose of the marketing plan is to describe who your clients are and where they are, and how you can reach them.
Elements of Marketing Plan
A marketing plan is an overview of all your marketing initiatives. This will include all the campaigns you intend to run over a set period of time, your goals and ambitions for the projects as a whole, and any research you have compiled to support these aims.
Marketing plans detail specific strategies to reach the company's goals, and contain the time tables for when certain marketing strategies will take place and details the logistics of marketing campaigns. The logistical details of executing your strategy include elements such as budgets, more detail time scales for objectives and goals, who in the organization will manage the various points in the strategy, the logistics of various distribution channels and their incumbent costs. etc.
- Organization Mission - Organization's purpose and reason for existing.
- Objectives - This resents the expectation of the organization with its marketing effort.
- Marketing strategy - This defines the most effective courses of action to fulfill the objectives. Generally, marketing strategy involves the accomplishment of marketing objectives through the determination of target markets, the setting of competitor targets and the creation of a competitive advantage. Some examples of marketing strategies that can be part of a marketing plan are: online advertising, email marketing, content marketing, social media management, events, etc.
- Tactics - The strategy must be explained in depth regarding the 4Ps (7Ps in the case of service marketing strategy) and the actions that will be taken in schedule time by particular individuals who implement the plan. Marketing strategy sets the stage for specific actions that will take place. Marketing procedure are the day-to-day actions that marketers take on and involve the major marketing decision areas.
- Implementation Activities - This is a list of the tasks to be performed to implement each marketing strategy.
- Marketing Budget - [TBD]
- Controls - The main intent of control systems is to appraise the results of the marketing plan so that corrective action can be taken if performance does not match objectives.
A marketing plan consists of all the strategies that a company will execute to reach its marketing goals over a period of time. Marketing plans usually outline marketing activities on a monthly, quarterly or annual basis.
Marketing plan is the framework from which all your marketing strategies are created. The marketing strategy is outlined in the marketing plan, which is a document that details the specific types of marketing activities a company conducts and contains timetables for rolling out various marketing initiatives. Marketing Initiatives are typically new ideas, campaigns, or solutions to solve either a new or previously existing problem.
The plan helps you connect each strategy back to the larger marketing operation and business goal. A marketing plan sums up the ideas for what a company wants to accomplish its objectives. The marketing plan is a more lively document than your strategy, and will need to be updated more frequently and adjusted to accommodate changes in costings, market conditions, economic conditions and other factors.
Marketing Campaigns
A marketing campaign is a focused tactical initiative to achieve a specific marketing goal. Campaign plan is a plan to achieve an objective, usually of a large-scale over an extended period of time. It usually coordinates many activities and uses of resources involving multiple organizations. A campaign plan could also have subordinate objectives or intermediate milestones and is often broken down by phases.
A campaign is typically focused on an event or particular asset. The process of campaign planning helps you organize your thoughts, identify appropriate target markets and craft effective messages to reach them. Campaign plans sit within your overall marketing strategy to promote specific products, performances, exhibitions or services. Marketing campaign types may include:
- Customer acquisition campaigns
- Conversion campaigns
- Retention and trust campaigns
- Brand awareness campaigns.
- Advertisement Campaigns
Most marketing campaigns focus directly on promoting a product. The choice of marketing media strategy is one important element of a successful marketing campaign. Combined with your messaging and the right creative for the channel, it can resonate with your ideal customers and encourage them to do business with you.
Marketing Programs
A marketing program is all the people, processes, technologies and activities involved in making connections and building relationships to achieve an end goal. In B2B and B2C markets, that end goal is to engage potential customers and improve sales of products and services. A program focuses engaging, nurturing, and converting buyers with relevant content that aligns to the needs and buying processes of the customer. A programmatic approach (unlike campaigns) does not start with the asset or tactics in mind. A programmatic approach is first built to be perpetual - always-on. This is in stark contrast to a one-and-done campaign.
Some examples of marketing programs include:
- Brand awareness - This is basically creating awareness; generating traffic, for example, to your site.
- Lead Generation - This is about sparking a relationship with the traffic created by awareness and capturing for instance email address.
- Customer Acquisition - Prospect for new customers
- Customer Retention
- Past customer reactivation
A program is a group of projects that are similar or related to one another, and which are often managed and coordinated as a group instead of independently. Programs are continuously optimized by analyzing key performance indicators (KPIs) and using the business intelligence, that is derived, to make mid-course adjustments that will improve the program's overall performance. A project is a temporary endeavor undertaken by a company or organization such as: the creation of a new service, goods, or result. A marketing program needs to be implemented and executed to be of any use, this requires some sort of framework. to help in execution of the plan
Marketing Projects
A marketing project is a series of related action plans (workflows) that further the implementation of your marketing strategies. A project has a clear beginning and end. For example, advertising takes place on a weekly or monthly basis, but developing the ads for the first quarter of the year is done once, and that woud be a marketing project. The first step in any marketing project is to determine the budget for the project.
For example, setting up an advertisement campaign consists of several projects, such as:
- Determining the most effective media outlets to place the ads in, is a project. The possible media channel may include TV, radio, News Papers, Magazines, and online venues .
- Determining the message of the ad and its graphics, design and size is another project.
- Developing a procedure to analyze the ads to see if they were effective as another project. ..
A campaign is typically focused on an event or particular asset.
Human Resource Management and Strategy
Human Resource Management (HRM) is defined in terms of the set of functions, and activities designed and performed in order to maximize both employee as well as organizational effectiveness. It is a management function that helps organization in recruiting, selecting, training, developing and managing its members. Human Resource Management functions include planning, organizing, leaning and controlling company's activities in recruiting, staffing, and effective utilizing of the organization's workforce. The scope of HRM include workforce planning, recruiting and hiring, performance management, and learning and development.
Human Resource Function
Human Resource is the function within an organization that focuses on developing the capability for planning, recruitment, management, and providing direction for the people who work in the organization. Human Resource function area business capabilities include:
A business capability is what a company needs to be able to do to execute its business strategy. Another way to think about capabilities is as a collection of people, process, and technology gathered for a specific purpose.
HR Management Goals and Objectives
The primary objective of resource management is to ensure seamless experience for the staff and other people associated to management and organizational goals. HRM objectives are basically influenced by organizational goals. Some of the main objectives of HR are:
HRM objectives are basically influenced by organizational goals, and encompass ensuring availability of resources, easy access to data, on-time payroll, ensuring compliance, on-time payroll, ensuring compliances, etc. And ensuring a stable work environment with data at one place and efficient operations.
HR Strategy
HR strategies are internally consistent bundles of human resource practices. HR strategies set out what the organization intends to do about the different aspects of its human resource management policies and practices. The purpose of HR strategies is to guide HRM development and implementation of programs. They provide a means of communicating to all concerned, the intentions of the organization about how its human resources will be managed. They provide the basis for strategic plans and enable the organization to measure progress and evaluate outcomes against objectives.
HR strategies provides a vision for the future, but are also vehicles that define the actions required and how the vision should be realized. Because all organizations are different, all HR strategies are are different. HR strategies however, can be categorized into two (2) types; overarching strategies and specific strategies.
Overarching Strategies Examples
These describe the general intentions of the organization about:
These strategies are likely to be expressed in broad statements of aims and purpose that set the scene for more specific strategies.
Specific Strategies
These relate to the different aspects of human resource management. They set our what the organization intends to do in decision areas such as:
They are concerned with the overall organizational effectiveness. - achieving human resource advantage by employing 'better people in the organization with better processes', developing high performance systems and generally, creating a great place to work.
Human Resource Management (HRM) is defined in terms of the set of functions, and activities designed and performed in order to maximize both employee as well as organizational effectiveness. It is a management function that helps organization in recruiting, selecting, training, developing and managing its members. Human Resource Management functions include planning, organizing, leaning and controlling company's activities in recruiting, staffing, and effective utilizing of the organization's workforce. The scope of HRM include workforce planning, recruiting and hiring, performance management, and learning and development.
Human Resource Function
Human Resource is the function within an organization that focuses on developing the capability for planning, recruitment, management, and providing direction for the people who work in the organization. Human Resource function area business capabilities include:
- HR Strategy and planning,
- Workforce management,
- Talent management,
- Learning and Development,
- Compensation and Benefits management,
- People Relationship Management,
- Recruitment and Hiring
- HR Analytics and Reports
A business capability is what a company needs to be able to do to execute its business strategy. Another way to think about capabilities is as a collection of people, process, and technology gathered for a specific purpose.
HR Management Goals and Objectives
The primary objective of resource management is to ensure seamless experience for the staff and other people associated to management and organizational goals. HRM objectives are basically influenced by organizational goals. Some of the main objectives of HR are:
- Achieve Organizational goals - To help the organization reach its goals. Fulfil organizational goals by utilizing human resources to achieve business goals. Organizational objectives include: workforce handling, staff requirements like hiring and onboarding, payroll management and retirement.
- Work Culture - Foster better work culture through automation of activities like leave approvals, reimbursement request acknowledgement to help create positive vibes in the work place. Developing good team culture through developing and maintaining healthy and transparent relations among team members and teams.
- Team integration - Ensuring teams coordinate efficiently through better communication.
- Training and development - To provide the organization with well-trained and well-motivated employees. Ensure effective utilization and maximum development of human resource. Enhance employee’s capabilities to perform the present job.
- Employee Motivation - To increase to the fullest the employee’s job satisfaction and self- actualization. Attend to employee needs to keep them motivated ; keep them on the right path and keep distractions and negative vibes away.
- Workforce Empowerment - Empowering the workforce improves employee morale, motivation and ensures workforce engagement.
- Retention - To achieve and maintain high moral among employees.
- Data and Compliance - Managing company and employee data, and managing compliance. Managing payroll compliance and keeping the company out of any penalties or fines.
HRM objectives are basically influenced by organizational goals, and encompass ensuring availability of resources, easy access to data, on-time payroll, ensuring compliance, on-time payroll, ensuring compliances, etc. And ensuring a stable work environment with data at one place and efficient operations.
HR Strategy
HR strategies are internally consistent bundles of human resource practices. HR strategies set out what the organization intends to do about the different aspects of its human resource management policies and practices. The purpose of HR strategies is to guide HRM development and implementation of programs. They provide a means of communicating to all concerned, the intentions of the organization about how its human resources will be managed. They provide the basis for strategic plans and enable the organization to measure progress and evaluate outcomes against objectives.
HR strategies provides a vision for the future, but are also vehicles that define the actions required and how the vision should be realized. Because all organizations are different, all HR strategies are are different. HR strategies however, can be categorized into two (2) types; overarching strategies and specific strategies.
Overarching Strategies Examples
These describe the general intentions of the organization about:
- How people should be managed and developed,
- What steps should be taken to ensure that HRM processes of the organization can attract and retain the people it needs, and ensure as far as possible that,
- Employees are committed, motivated and engaged.
These strategies are likely to be expressed in broad statements of aims and purpose that set the scene for more specific strategies.
Specific Strategies
These relate to the different aspects of human resource management. They set our what the organization intends to do in decision areas such as:
- Talent Management - How the organization intends to win the war for talent,
- Continuous Improvement - Providing for focused and continuous incremental innovation sustained over a period of time,
- Knowledge Management - Creating, acquiring, capturing, sharing and using knowledge to enhance learning and performance,
- Resourcing - Attracting and retaining high quality people,
- Learning and Development - Providing an environment in which employees are encouraged to learn and develop,
- Reward - Defining what the organization wants to do in the longer term to develop and implement reward policies, practices and processes that will further the achievement of its business goals and meet the needs of its stakeholders,
- Employee Relations - Defining the intentions of the organization about what needs to be done and what needs to be changed in the ways in which the organization manages its relationships with employees and their trade unions.
They are concerned with the overall organizational effectiveness. - achieving human resource advantage by employing 'better people in the organization with better processes', developing high performance systems and generally, creating a great place to work.
Finance Management and Strategy
S.C. Kushal defines financial management as: “Financial Management deals with procurement of funds and their effective utilization in the business”. Financial management is an area in financial decision-making, harmonizing individual motives, and enterprise goals. Financial Management is the activity concerned with the control and planning of financial resources. Financial management entails the process of planning, organizing, monitoring, and also controlling the financial resources of an organization. It controls every single thing regarding the company’s financial activities which includes the procurement of funds, use of funds, payments, accounting, risk assessment, and other things that are related to finances.
Financial Management functions include:
Successful financial management contributes to and supports the reason for establishing a company, i.e., make a profit and thrive (run for many years).
Finance Function
The Finance Function is a part of financial management. In a business, the finance function involves the accounting and utilization of funds necessary for efficient operations. The financial function is concerned with two sets of activities;
The accounting aspects of finance function brings business to life, and passes through every part of the firm's operations. It is the operational activities of business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.
Finance function can be classified into the following categories:
The finance function is important in helping establish the business and run the business.
The objectives of the finance function are:
[TBD]
Financial Management Goals and Objectives
The main focus of financial management must be set up to follow the best practices, use the required financial management tools, and also deploy the right strategies to minimize cost, and ensure production or business activities function smoothly.
Financial Management Goals
The goals of the financial function includes:
[TBD]
Financial Management Objectives
There are objectives or reasons firms implement these management strategies to grow their business.
[TBD]
Financial Strategy
Financial strategy is concerned with the choices and commitments regarding acquisition of financial resources, analyzing cost structure, estimating profit potential, allocation of financial capital, dividend policy, or accounting functions in managing investment/working capital/cash flow. Most businesses require substantial amount of capital to both develop and operate; and therefore, cost and availability of capital have an enormous impact on the business. When demand is high, large amounts of cash is generated, and when demands drops cash gets used up very quickly. Financial strategies concern objectives in key results areas such as: profitability, liquidity and cash management, leverage and capital management, asset management, investment ratios, and financial planning and control.
Businesses respond to and operate under a variety of financial strategy options. Strategy selection is influenced by the company's overall goals, objectives, and mission statement.
Finance and accounting operations implement strategies to reduce functional and operational complexity, streamline processes, optimize the use of technology, and efficiently use resources to deliver cost effective, high quality services.
Return on On Investment Capital
The following financial strategy options can b mixed to achieve various business objectives such as accelerate growth, minimize investment, and improve returns and the timeliness of those returns. For example, for business objective such as Return on Investment, the mix of financial strategy options include:
Improve Return on Investment Capital (ROIC) involves the following financial strategy options:
Cash Generation
Understanding how to generate cash in relationship to your business' time horizon is essential to survival. The fastest way to generate cash is to rollover an asset. The longest time to generate cash is to develop a concept - opening an operating business model that is successful and worthy of franchise investment - and then providing for the marketing of the franchise.
S.C. Kushal defines financial management as: “Financial Management deals with procurement of funds and their effective utilization in the business”. Financial management is an area in financial decision-making, harmonizing individual motives, and enterprise goals. Financial Management is the activity concerned with the control and planning of financial resources. Financial management entails the process of planning, organizing, monitoring, and also controlling the financial resources of an organization. It controls every single thing regarding the company’s financial activities which includes the procurement of funds, use of funds, payments, accounting, risk assessment, and other things that are related to finances.
Financial Management functions include:
- Financial Planning and Forecasting
- Determination of capital composition - Decide the capital structure after planning and forecast has been made.
- Fund investment - Ensure funds made available to the business are used adequately to grow the business.
- Maintain proper liquidity - Cash is the best source for maintaining liquidity.
- Disposal of surplus - Increase the ROCE.
- Financial Controls - This is the analysis of a company's actual results, compared to its short, medium, and long-term objectives and business plans.
Successful financial management contributes to and supports the reason for establishing a company, i.e., make a profit and thrive (run for many years).
Finance Function
The Finance Function is a part of financial management. In a business, the finance function involves the accounting and utilization of funds necessary for efficient operations. The financial function is concerned with two sets of activities;
- Strategic management - Acquiring funds to meet the organization's current and future financial needs, and
- Operations management - recording, monitoring, and controlling the financial results of the organization's operations.
The accounting aspects of finance function brings business to life, and passes through every part of the firm's operations. It is the operational activities of business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.
Finance function can be classified into the following categories:
- Long-Term Finance - Acquiring funds to meet the organization's current and future financial needs, Sources may include owner capital, share capital, etc.
- Medium-Term Finance - Acquiring funds to meet the organization's current and medium term needs. Sources may be bank loans and institutions.
- Short Term Finance - Finance needed with a year; sources may be bank overdrafts, commercial paper, trade credit, etc.
The finance function is important in helping establish the business and run the business.
The objectives of the finance function are:
- Investment Decisions - Decisions on where to put the company's funds. These decisions relate to the management of working capital, capital budgeting decisions, management of mergers, buying or leasing assets, etc. Investment decisions should create revenue, profits, and save costs.
- Financing Decisions - Where to raise funds from.
- Dividends Decisions - Decisions on how much, how frequently, and in what form to return cash to owners.
- Liquidity Decisions - Liquidity means that a firm has enough money to pay its bills when they are due and have sufficient cash reserves to meet unforeseen emergencies. This decision involves the management of the current assets so you don’t become insolvent or fail to make payments.
[TBD]
Financial Management Goals and Objectives
The main focus of financial management must be set up to follow the best practices, use the required financial management tools, and also deploy the right strategies to minimize cost, and ensure production or business activities function smoothly.
Financial Management Goals
The goals of the financial function includes:
- Strategic Budgeting - The goal is to create and monitor the overall company budget, and the variety of functional departments' budgets. Budgeting requires research to estimate revenue levels based on demand forecasting. Using annual budget projections, the accounting staff can help you set targets for profit goals and for overhead and production spending levels. Overhead includes costs such as phones, rent, and marketing; while production costs are those related to making your product. Create monthly or quarterly budget variance analyses to see if you are on track with your revenues and spending or if you need to make changes before expenses get out of hand.
- Cost Containment - To ensure you get the best quality at the lowest price for materials, supplies, and services, make purchasing management one of the duties of the finance department. Require that employees get multiple bids or present some justification for large purchases; and have vendors, suppliers and contractors rebid their contracts every year. Look for trends in spending lvels to determine where you can cut costs without sacrificing quality.
- Cash Flow Management - Cash flow management is about knowing when your bills are due and when you can expect payment from your customers, or other sales revenues; and its critical to your financial health. Its not enough to show a profit on paper, the financial function to should help you manage your working capital and credit to ensure you have enough to pay your bills at all times. Make receivables management a key role of the financial department.
- Debt Service - Keep an eye on credit use, including interest amounts you are generating, the scheduling of your payments and the status of credit report and scores.
- Tax Planning - Use proactive strategies to lower your tax burden, such as deprecisting assets, and offering voluntary benefits to employees that help you lower payroll taxes.
- Accurate Record Keeping - The most important objective of any finance department is to keep accurate financial records. This includes you meet your legal requirements and ensuring you don't spend more than you have by accident. Consider audits to prevent fraud and institute policies and procedures for controlling contacts and payments.
[TBD]
Financial Management Objectives
There are objectives or reasons firms implement these management strategies to grow their business.
- Profit Maximization - Maximize profit while managing the finances of the company. Ensure the company is making sufficient profit to survive and grow.
- Proper Mobilization of Finance - Collection of funds to run the business. Securing the required amount of funds needed/estimated for the business process.
- The Company's Survival - Make adequate financial decisions to ensure the company is successful.
- Proper Coordination - Proper understanding and cooperation among various departments.
- Lowers cost of Capital - Reduce the cost of capital; ensure money borrowed attracts little interest rates so the company can maximize profits.
[TBD]
Financial Strategy
Financial strategy is concerned with the choices and commitments regarding acquisition of financial resources, analyzing cost structure, estimating profit potential, allocation of financial capital, dividend policy, or accounting functions in managing investment/working capital/cash flow. Most businesses require substantial amount of capital to both develop and operate; and therefore, cost and availability of capital have an enormous impact on the business. When demand is high, large amounts of cash is generated, and when demands drops cash gets used up very quickly. Financial strategies concern objectives in key results areas such as: profitability, liquidity and cash management, leverage and capital management, asset management, investment ratios, and financial planning and control.
Businesses respond to and operate under a variety of financial strategy options. Strategy selection is influenced by the company's overall goals, objectives, and mission statement.
Finance and accounting operations implement strategies to reduce functional and operational complexity, streamline processes, optimize the use of technology, and efficiently use resources to deliver cost effective, high quality services.
Return on On Investment Capital
The following financial strategy options can b mixed to achieve various business objectives such as accelerate growth, minimize investment, and improve returns and the timeliness of those returns. For example, for business objective such as Return on Investment, the mix of financial strategy options include:
- Manage Contracts
- Rollover Asset
- Additional Capacity
- Franchises
- Management contract with limited equity investment
- Buy out of negative leases
- Acquisitions
- Joint Ventures
- Management contract with major equity investment
- Ownership (Construction)
Improve Return on Investment Capital (ROIC) involves the following financial strategy options:
- Rollover Asset (sale)
- Manage Contracts
- Additional Capacity (assumes demand is high)
- Buy out of negative leases
- Buy in to joint ventures with management contracts.
Cash Generation
Understanding how to generate cash in relationship to your business' time horizon is essential to survival. The fastest way to generate cash is to rollover an asset. The longest time to generate cash is to develop a concept - opening an operating business model that is successful and worthy of franchise investment - and then providing for the marketing of the franchise.
- Rollover of an Asset
- Ownership
- Acquisitions
- Manage Contract
- Franchise
Operations Management and Operations Strategy
Operations management has both strategic and operational aspects. Strategically, operations management is concerned with determining operations approaches and capabilities needed to achieve the desired competitive position of the company as a whole, and operational goals. It is concerned with the design, implementation, management and improvement of operations infrastructure - the systems that create the organization's goods and services. The strategic aspects of operations management involves determining the systems, tasks and technology needed to fulfill strategic objectives, deciding how to acquire the resources and design the facilities these tasks require, and measuring service delivery to gauge the ability of the operations to reach intended targets.
A company's operations are the core activities that produce and deliver products and services. Business operations constitute many processes, such as material acquisition, manufacturing, inventory management, delivery, etc. Hence, operations strategy focuses on reducing process costs and improving profits for the entire business. Operations has important roles it can play in strengthening the firm's overall strategy. The two (2) options include:
The firm's operations strategy must be conducive to developing a set of policies in both process choice and infrastructure design (controls, procedures, and systems, etc.) that are consistent with the firm's distinctive competency.
Operations Management Perspectives on Operations Strategy
Operations management perspective on operations strategy is a devise for defining the pressures on operations strategy in a way so that it can be operationalized. Operations management perspectives on operations strategy consists of all the strategic decisions, policies, plans, and culture (values) relating to operations. Slac et. al. (2009, pp. 19-22) classify these into four (4) perspectives, namely:
These operations management perspectives or viewpoints on operations strategy help management examine and implement effective and efficient systems to achieve corporate and business objectives. This viewpoint model provides a framework for conceptualizing and formulating an organization's operations strategy.
Operations Management Strategic Decisions
Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others. Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities. Strategic decisions deal with the range of organizational activities. Strategic decisions in operations management may be organized around decisions areas, such as:
The ten (10) decisions described above are organized around decision areas of operations management that address various activities that contribute to organization success. For example, a company's product design process may directly relate to the design of goods and services decision area, as well as other decision areas of operations management, such as quality management (how to keep the product’s quality consistent) and job design and human resources (how to ensure the sufficiency of human resources for production). By addressing these ten (10) decision areas of operations management, a company can maintain effective and efficient operations that fulfill profitability objectives.
Operations Strategy
Operations strategy is a whole system of decisions that are aimed at shaping both the long-term capabilities of operations regardless of the type of operations and their contribution to overall achievement of organizational strategy. Operations strategy consists of a series of decisions that organizations make in order to effectively implement and execute their business and competitive strategies. Operations strategy decisions are the actual decisions that are taken over time and shape the operations strategy of a company. The realized operations strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall business strategy.
Operations strategy supports a company's overall business strategy in order to maximize profits, and drives a company's operations function. Operations strategy is a guiding principle used to plan, analyze and execute a company's operations. Operations strategy guides operations management decisions on the design of operations functions. Operations strategy informs an organization's choices and answers to key strategic issues and questions strategic relevance, such as:
These choices and specific market needs influence the type of operations strategy developed and employed by a business. Operations strategy focuses on maximizing the efficiency and effectiveness of production of service or goods while minimizing operating costs. Operations strategy comprises specific actions management wants to take to achieve a specific aspect of a company's operations.
Operations strategy binds the various operations decisions and actions into a cohesive consistent response to competitive forces by linking policies, programs, systems, and actions into a systematic response to projected demand products and services resulting from the strategic priorities chosen and communicated by the corporate or business strategy. An effective operations strategy considers a company's long-term objectives and creates steps that cohesively bond business plans with resources, capacity, time, location, and competition.
Operations strategy is concerned more with the total transformation process, that is the whole business, and less with individual processes, and how the competitive environment is changing and what the operation has to do in order to meet current and future challenges. Operations strategy is concerned, for the long-term, with how to best determine and develop the firm's major operations resources so that there is a high degree of compatibility between those resources and the business strategy.
The role of operations strategy is to provide a plan for the operations function so that it can make the best use of its resources. Operations strategy has a vertical relationship with overall corporate/business strategy, and has a horizontal relationship with other functional strategies.
Common Types of Operations Strategies
Businesses and organizations use operations strategy to identify and implement cost-effective processes that give them competitive advantage in creating and distributing goods and services. Operations strategy can be broken down into categories - types of decision/issue areas - that must be addressed. Some common types of operations strategies include:
Each organization strategy requires a tailored operations strategy. These are some common operations strategies an organization can use to enhance efficiency, boost capabilities and improve competitive advantage. Operations strategies help companies examine and implement effective and efficient systems to achieve corporate and business objectives.
Key Elements/Components of Operations Strategy
Operations strategy comprises specific actions management wants to take to achieve a specific aspect of a company's operations. Some of the key elements that go into a company's operations strategy include:
Operations strategies connect the firm's programs, policies, guidelines and workforce in a way that allows each function/branch/department to support the others in achieving a common goal.
Operations Strategy Development - Formulation and Implementation
Operations strategy development encompasses strategy formulation and implementation. Operations strategy development involves refining and specifying a company's business strategy and developing strategic initiatives and operational plans aimed at enabling departments and business units to successfully implement and execute the overall business strategy. By developing operations strategies, a company can examine and implement effective and efficient systems for using resources, personnel and work processes. In service-oriented companies, basic operations strategies can be used to link long-term and short-term corporate decisions and create an effective management team. When developing operations strategy management should give due consideration to the strategic positioning of the firm i.e. the requirements mandated by corporate and business strategy, market requirements, as well as competitive priorities and how you will handle them by the types of operations strategy employed. Once business strategy has been developed, an operations strategy must be formulated.
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To develop the strategy consider the following factors:
Operations Strategy Formulation
Operations strategy formulation is a decision making process that shapes an organization's long-term plans to achieve the objective of its mission statement. Operations strategy formulation is the practical process of articulating the various objectives and decisions that make up the operations strategy. Operations strategy formulation involves comprehensive analysis of the operations capability from the perspective of operations. This provides a plan for the design and management of the operations function in ways that support the business strategy.
The strategy formulation steps include:
Operations strategy is formulated by first determining the competitive priorities of the firm (market requirements view), then translating these priorities into production requirements (performance objectives) related to the structure and infrastructure of the firm. The operations strategy must then be aligned with the company's business strategy (top-down view) and enable the company to achieve its long-term plan. It is essentially, about the different ways of aligning plans, activities, and objectives.
Operations Strategy Implementation
Tactically, operations management is concerned with the daily tasks and tactics that transform materials or actions into a product or service. Tactical execution involves the day-to-day activities required to function and support the goods/service strategy. Included are capacity management, facility location, inventory management, facility layout, supplier selection, operations scheduling, staffing, and productivity improvement.
The operations strategy describes how the firm's different functions (marketing, finance, and operations) will support the service concept. If the firm's order winning competitive priority is quality, what will operations do to ensure quality of the service and how will marketing promote this characteristic?
Operations strategy guides the change and evolution of operational capabilities needed to achieve the desired competitive position of the organization as a whole.
Operations strategy specifies the policies and plans for using the organization's resources to support its long-term competitive strategy.
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Planning Decision Areas
Operations management decisions encompasses decisions in the management process functions areas such as planning (manpower planning, capacity planning, production planning), action implementation and execution - supervision of the production of goods and services. The types of planning decisions include:
These capabilities are called competitive priorities. By excelling in one of these capabilities, a company can become a winner in the marketplace.
Factors Influencing Operations Strategy
Operations strategy relates the business strategy to the operations function. The operations strategy focuses on specific capabilities of the operations function that give the company a competitive edge/advantage. The factors that have to be taken into consideration when making operations strategy design decisions include:
Performance Objectives
Performance objectives are broad performance measures that provide a device for understanding market requirements. Performance objectives are the main device used to understand market requirements. These objective measures represent the various aspects of performance in which the market requirements can be expressed. A performance objective is a specific end result that contributes to the success of the unit or organization, and that an employee is expected to accomplish or produce. Performance objectives are a set of broad performance measures that have some meaning to the operations function. The performance objectives include:
Each of the performance objectives can be thought of as bundles of issues that will need separating out. Some of these objectives will be more important for some operations than others. One method for distinguishing between performance objectives involves classifying them as order winners and order qualifiers. Marketing requirements are translated into performance objectives which provides operations view of the marketing professionals view of the market.
Competitive Priorities in Operations Management
Competitive priorities are the ways in which the operations management function focuses on the characteristics of cost, quality, flexibility, delivery/speed, and service in creating value for customers. Competitive priorities signify a strategic focus on building specific manufacturing/production capabilities that can improve a company's product/service position in the marketplace.
In operations management, competitive priorities are crucial a decision variable for operations managers. Competitive priorities operationalize the organization's competitive strategy. The two (2) generic strategies/advantages - cost and differentiation - are operationalized in terms of cost, quality, flexibility, and speed.
Competitive priorities are the dimensions a firms production systems must possess to support the demands of the markets in which the firm wishes to compete. The firm's customers will determine which of the competitive priorities are emphasized. Operations managers must work closely with marketing in order to understand the competitive situation in the company's market, before they can determine which competitive priorities are important. We have to make trade-offs within competitive priorities in a competitive market. In fact, the strength of an operations strategy is dependent on the level of consistency between emphasized competitive priorities and matching decisions concerning operational structure and infrastructure. The purpose of the priorities is to assist in the mission of positioning an organization with an advantage vs its rivals/competitors. Fitting a plant’s practices to the competitive priorities is important to developing operations as a competitive advantage.
As a way to prioritize among the list of competitive priorities, the idea of order winners and order qualifiers may be utilized. Order-winners for a product, for example, are the qualities which make an organization receive a new order. Order-qualifiers, in contrast, are required to be able to compete in a marketplace. Identifying order-winners and order-qualifiers is not a one time activity, but needs to be done regularly, because market demands change as time passes and along with that the order-winners and order-qualifiers.
The main objective of analyzing a company’s order-winners and order-qualifiers is to establish a basis for the manufacturing strategy. Understanding how to create or add value to customers is key to developing effective production strategy. Specially, value is added through the competitive priority or priorities that are selected to support a given strategy. To develop a manageable strategy, the priorities must be split up into decision categories.
Structural and Infrastructure Decisions
One way of categorizing the various decisions that typically comprise an operations strategy is to consider those that are structural, in that they define the overall tangible shape and architecture (e.g., capacity, technology type) of the operation, and those that are infrastructural, in that they relate to the people, systems, and culture that tie together the operations activities.
Structural decisions:
Structural decisions define the overall tangible shape and architecture (e.g., capacity, technology type) of the operation. Structural elements decisions are grouped as capacity, location, integration/networking, and technology.
Infrastructure Decisions:
These are divided into four categories; planning & control, inventory management, capacity management, and supply chain management. Examples include:
Strategic decisions in operations management are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two.
Distinctive Competencies
Distinctive competencies are defined as the dimensions that a firm's production system must possess to support the demands of the markets in which the firm wishes to compete. This type of operations strategy is based on a company developing operations processes in order to distinguish their product or service from competitors. By identifying competitive priorities within a specific economy businesses can tailor their operations strategy toward gaining competitive advantage whether that's in higher-quality product or service, or faster lead time during production.
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On a "high level" competitive priorities can represent a manufacturing/production strategy.
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An organization makes a decision regarding its positioning in its target markets and the customers it intends to target. The organization's market positioning is one in which its performance enables it to attract customers to its products/services in a more successful manner than its competitors.
Operations Systems
The Operations System, for an organization, is the joint configuration of resources and processes such that its resulting competencies are aligned with the organization's desired competitive position. An organization's Operations System provides the best match (fit) of supply (of tangible resources) with customer demand for the mix of products and services.
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Operations Goals and Objectives
Operational goals are the workflow methods that bring the strategy to fruition, and exist at all levels of the organization, from CEO down to part-time employees. Operational goals are the short-term tactics designed to achieve the company's long-term strategy. Operational goals lay out increments called benchmarks; they streamline the day-to-day activities of the business. They measure daily, weekly, and monthly benchmarks. For example, the monthly budget report shows if a company's financial goals are on track. Manufacturing examines production reports to ensure the number of units produced meets production goals with minimum waste.
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Operations strategy specifies the policies and plans for using the organization's resources to support its long-term competitive strategy.
The objectives of operations strategy-makers, is to try new ways to achieve the operating goals and objectives that have been assigned to operations such as unit cost, product quality, etc.
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Performance and Productivity - This factor accounts for your ability to deliver to your customers what you've promised. Are your customers satisfied? Are you offering them value? Performance also involves things like quality, how you compete in the market place, and whether or not your goals are being achieved.
Achieving the Decision Area Strategies is accomplished through the development of detailed Tactical Programs for each area.
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Strategic positioning involves first defining the firm's target market. In other words, what is the set of customers the firm seek to serve. Next, the firm must determine its core competence or what will distinguish it from other service firms, i.e., cost leadership, differentiation, or focus. At this point, the firm then must make decisions regarding its mission and high-level goals and objectives.
Operations Management Strategic Decision Areas
Operations management decisions areas include:
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Operational Action Planning and Plans
Operational action planning involves defining and outlining the actions individuals will take to support the plans and objectives of the executive management team. The operational planning process describes milestones, conditions for success and explains how, or what portion of a strategic plan will be put into operation during a given operational period, in the case of commercial application, a fiscal year or another given budgetary term. Operations teams plan continuous optimizations and improvements to processes and practices in order to meet objectives in areas such as: efficiency, productivity, turnaround time, waste reduction, cost reduction, quality, customer satisfaction, and sustainability.
Operational Plans
An operational plan is a blueprint that details how the organization will achieve long-term strategic goals. It specifies how finances, employees, and other resources will be utilized on a day-to-day basis, while also mapping interim target objectives. The operational plan is the basis for and justification of an annual operating budget request. Anoperational plan is a plan to establish, expand, or improve the day-to-day processes and practices of a business. Some examples of operational plan include:
Operational plans should establish the activities and budgets for each part of the organization for the next 1–3 years. They link the strategic plan with the activities the organization will deliver and the resources required to deliver them. An operational plan addresses four questions:[citation needed]
Operational plans should contain:[citation needed]
Scope of Operations Planning
Operations planning is the process of establishing, expanding, or improving the core day-to-day processes and practices of the business.
This requires planning and the development of operations plans.
The scope of operations planning may encompass:
Operational decisions are made to execute the short-term processes with the aim of achieving the long- and medium-term goals that the strategic and tactical level decisions have adopted.
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Tactical Execution
Finally, the firm approaches tactical execution issues. Tactical execution involves the day-to-day activities required to function and support the service strategy. Included are
capacity management,
facility location,
inventory management,
facility layout,
supplier selection,
operations scheduling,
staffing, and
productivity improvement.
Decisions that are made in the above strategic planning process are heavily influenced by their position on Marc McCluskey's service maturity model. This model divides service maturity into four stages:
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Trade-offs in operations are the ways we are willing to sacrifice one performance objective to achieve excellence in another.This involves competing on one (1) or two (2) distinctive competencies at the necessary expense of the others. Analyzing markets starts with executive opinion of market order-winners and order-qualifiers, and then testing them with data showing actual demands for different customers, orders and products.
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Market-Based Approach to Operations Strategy Development
In this approach, an organization makes a decision regarding its positioning in the markets and the customers within those markets it intends to target. The organizations market position is one in which its performance enables it to attract customers to its products and services in a more successful manner than its competitors. Market requirements are translated into performance objectives.
Resource-Based View of Operations Strategy
Resource-based operations strategy looks at how a firm develops and leverages its unique operations resources to achieve manufacturing objectives with the support of operations capabilities deeply anchored within business processes and organisational routines
The resource-based view (RBV) is a managerial framework used to determine the strategic resources a firm can exploit to achieve sustainable competitive advantage. Barney's 1991 article "Firm Resources and Sustained Competitive Advantage"
The Resource based view (RBV) analyzes and interpret internal resources of the organizations and emphasizes resources and capabilities in formulating strategy to achieve sustainable competitive advantages. Resources may be considered as inputs that enable firms to carry out its activities.
Operations management has both strategic and operational aspects. Strategically, operations management is concerned with determining operations approaches and capabilities needed to achieve the desired competitive position of the company as a whole, and operational goals. It is concerned with the design, implementation, management and improvement of operations infrastructure - the systems that create the organization's goods and services. The strategic aspects of operations management involves determining the systems, tasks and technology needed to fulfill strategic objectives, deciding how to acquire the resources and design the facilities these tasks require, and measuring service delivery to gauge the ability of the operations to reach intended targets.
A company's operations are the core activities that produce and deliver products and services. Business operations constitute many processes, such as material acquisition, manufacturing, inventory management, delivery, etc. Hence, operations strategy focuses on reducing process costs and improving profits for the entire business. Operations has important roles it can play in strengthening the firm's overall strategy. The two (2) options include:
- To provide processes that give the firm a distinct advantage in the marketplace. Operations will provide a marketing edge through distinct, unique technology developments in processes that competitors can't match.
- To provide coordinated support for the essential ways in which the firm's products with orders over their competitors, also known as distinctive competencies.
The firm's operations strategy must be conducive to developing a set of policies in both process choice and infrastructure design (controls, procedures, and systems, etc.) that are consistent with the firm's distinctive competency.
Operations Management Perspectives on Operations Strategy
Operations management perspective on operations strategy is a devise for defining the pressures on operations strategy in a way so that it can be operationalized. Operations management perspectives on operations strategy consists of all the strategic decisions, policies, plans, and culture (values) relating to operations. Slac et. al. (2009, pp. 19-22) classify these into four (4) perspectives, namely:
- Top-Down Perspective - What the business wants operations to do. This perspective focuses on the holistic objectives of the whole organization. This perspective is concerned with corporate mandates which as translated into competitive priorities.
- Market Requirements Perspective - What the market position requires operations to do. Market requirements are an essential pressure point on operations strategy, and are better understood as performance objectives. The performance objectives are a "translation", into operations terms, of a marketing requirements - marketing professionals view of the market. Performance objectives may include: cost, quality, speed, dependability, and flexibility.
- Operations Resources Perspective - What operations resources can do; builds capabilities, knowledge, etc. This is a resource-based view approach which involves moving from a broad understanding of what resources, processes, and capabilities an operation may possess within its resources through to an identification of the key decisions that operations managers will need to take in order to exploit, build on, and develop these capabilities. These decisions can be categorized into the following: Capacity - amount, timing, and type; Facilities - Size, location, and specialization; Technology - equipment and process; Vertical Integration - Direction, extent, and balance; Workforce - Skill levels, wage policies, employment security; Quality - Defect prevention, monitoring, and intervention; Production Planning/Materials Control - Sourcing policies, centralization, decision rules; Organization - Structure, control/reward systems, roles.
- Bottom-up Perspective - What day-to-day experience and learning suggests operations should do. This perspective is how the company encounters emerging strategies from its day-to-day experiences in its operations processes. It shapes the company's strategic operations. Operations strategy is a bottom-up activity where operations improvements cumulatively build strategy.
These operations management perspectives or viewpoints on operations strategy help management examine and implement effective and efficient systems to achieve corporate and business objectives. This viewpoint model provides a framework for conceptualizing and formulating an organization's operations strategy.
Operations Management Strategic Decisions
Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others. Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities. Strategic decisions deal with the range of organizational activities. Strategic decisions in operations management may be organized around decisions areas, such as:
- Design of Goods and Services - The actual design of the product or service will have the largest impact on the cost to produce and the quality to achieve.
- Quality - The way in which the organization will ensure that the product specifications are met. This may include use of statistical process control, total quality management, or Six Sigma.
- Process and Capacity Design - The type of product along with its volume and variety will have a major impact on which type of process is chosen.
- Location - Location decisions are concerned with howmany locations and where to locate them.
- Layout Design and Strategy - Consider the placement of work centers, movement of goods, people, and information. How materials are delivered and used.
- Human Resources and Job Design - Decisions regarding training for employees (workers), how to motivate employees/workers to achieve operational success.
- Supply Chain Decisions - Decisions regarding where suppliers are located and the level of supplier collaboration; these decisions have major impact on cost and delivery speed.
- Inventory - How will inventories be used and controlled in the business and the supply chain?
- Scheduling - Considerations and decisions on how to schedule production, resources and employees/workers in order to be efficient and effective in meeting commitments to customers.
- Maintenance - Decisions about maintaining manufacturing equipment machinery as well as keeping quality high and processes stable.
The ten (10) decisions described above are organized around decision areas of operations management that address various activities that contribute to organization success. For example, a company's product design process may directly relate to the design of goods and services decision area, as well as other decision areas of operations management, such as quality management (how to keep the product’s quality consistent) and job design and human resources (how to ensure the sufficiency of human resources for production). By addressing these ten (10) decision areas of operations management, a company can maintain effective and efficient operations that fulfill profitability objectives.
Operations Strategy
Operations strategy is a whole system of decisions that are aimed at shaping both the long-term capabilities of operations regardless of the type of operations and their contribution to overall achievement of organizational strategy. Operations strategy consists of a series of decisions that organizations make in order to effectively implement and execute their business and competitive strategies. Operations strategy decisions are the actual decisions that are taken over time and shape the operations strategy of a company. The realized operations strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall business strategy.
Operations strategy supports a company's overall business strategy in order to maximize profits, and drives a company's operations function. Operations strategy is a guiding principle used to plan, analyze and execute a company's operations. Operations strategy guides operations management decisions on the design of operations functions. Operations strategy informs an organization's choices and answers to key strategic issues and questions strategic relevance, such as:
- Which capabilities need to be created or enhanced?
- Which processes need improvement or complete redesign?
- Do we have the people we need and do they have the right skills sets? (Example,, Talent retention plans through strategic learning and development programs).
These choices and specific market needs influence the type of operations strategy developed and employed by a business. Operations strategy focuses on maximizing the efficiency and effectiveness of production of service or goods while minimizing operating costs. Operations strategy comprises specific actions management wants to take to achieve a specific aspect of a company's operations.
Operations strategy binds the various operations decisions and actions into a cohesive consistent response to competitive forces by linking policies, programs, systems, and actions into a systematic response to projected demand products and services resulting from the strategic priorities chosen and communicated by the corporate or business strategy. An effective operations strategy considers a company's long-term objectives and creates steps that cohesively bond business plans with resources, capacity, time, location, and competition.
Operations strategy is concerned more with the total transformation process, that is the whole business, and less with individual processes, and how the competitive environment is changing and what the operation has to do in order to meet current and future challenges. Operations strategy is concerned, for the long-term, with how to best determine and develop the firm's major operations resources so that there is a high degree of compatibility between those resources and the business strategy.
The role of operations strategy is to provide a plan for the operations function so that it can make the best use of its resources. Operations strategy has a vertical relationship with overall corporate/business strategy, and has a horizontal relationship with other functional strategies.
Common Types of Operations Strategies
Businesses and organizations use operations strategy to identify and implement cost-effective processes that give them competitive advantage in creating and distributing goods and services. Operations strategy can be broken down into categories - types of decision/issue areas - that must be addressed. Some common types of operations strategies include:
- Customer-Driven Strategies - Operations strategies to meet the needs of a targeted customer segment. These are market based strategies that enable the organization to meet the needs and desires of a target market. These strategies must allow a company to evaluate and adapt to changing environments, continuously enhancing core competencies, and developing new strengths on an ongoing basis. This type of operations strategy aligns with sales and marketing strategies to manage and fulfill customer expectations. Companies using this type of strategy make operations decisions based on the customer experience.
- Customer engagement strategy - The focus of this strategy is to improve customer-centricity. In this strategy the company aspires to improve existing operations system for both new and repeat clients. The better this service process is, the higher the company's customer satisfaction rating will be. This builds loyalty and referral business. An example is, a car rental company that eliminate long lines.
- Core Competencies - Strategies to develop the company's key strengths and resources. Core competencies are the strengths and resources within a company. Core competency based strategies are resource-based strategies, and may include having well-trained staff, optimal business locations, and marketing and financial strengths. By identifying its core competencies a company can develop processes such as customer satisfaction, product development, and building professional relationships with stakeholders. This type of operations strategy revolves around the main strengths of a company's business model. By identifying the best core business processes within an organization, this type of operations strategy focuses on leveraging existing strengths to maximize profitability.
- Product and Service Development - Strategies behind the development of products - goods and service - should consider design, innovation, and added value. When developing a product - good or service - a company should consider the wants and needs of its customers, how it stands against the competition, and how its technical measures relate to its customers' needs. Companies should consider packaging services with immediately observable and psychological benefits and support services. This type of operations strategy resolves around the quality control of existing products or services as well as the development of new products and services. Businesses using this model often determine their operations strategies based on research and ideas from product managers. This operations strategy is focused on developing compelling products or services that resonate with the firms customers. It goes beyond the developing and delivering new products by providing additional ancilliary services in support of products and services.
- Market penetration strategy - This focuses on capturing larger segments of the target customer market. This refers to. developing an operations strategy for market penetration - capture a large share of the market. It has several potential focus areas: A business can decide to attract customers away from competitors; It can attract nonusers that have no experience with your business or with a competitor. Another strategy might employ one or more geographic locations, centered around a target demographic. Businesses can also try to add more value to existing clients, thereby enticing increased spending on product or service upgrades. An insurance company might define market penetration success by the number of new automobile policies gained.
- Corporate Strategy - Overall company strategy, driving the company mission and interconnected departments/functions. This type of operations strategy adhere to a company's mission statement and aligns itself to a larger corporate strategy. Businesses using this type of operations strategy develop production initiatives, key performance indicators, and decision-making processes based on strategic plan determined by company's leadership and stakeholders.
- Supply chain strategy - This strategy refers to the process of creating excellence through superior delivery capabilities.
Each organization strategy requires a tailored operations strategy. These are some common operations strategies an organization can use to enhance efficiency, boost capabilities and improve competitive advantage. Operations strategies help companies examine and implement effective and efficient systems to achieve corporate and business objectives.
Key Elements/Components of Operations Strategy
Operations strategy comprises specific actions management wants to take to achieve a specific aspect of a company's operations. Some of the key elements that go into a company's operations strategy include:
- Design of Production Systems - An organization's production system determines the short-term and long-term planning for how resources are turned/transformed into marketable products and services. Once the general specification of a production system have been agreed upon, including precise definitions of needed resources and output expectations, three (3) important decisions remain: (1) Choice and design of technology to be used; (2) Determining the capacity of the production system;(3) Decisions on the adaptability of production system volume to meet the inevitable fluctuations in market demand that the firm will experience. A comprehensive production system includes clear work flows, quality control benchmarks, and supply chain management strategies.
- The capacity of the system is designed to be a function of the amount of available capital, the demand forecast for the output of the facility, and many other minor factors.
- Decisions on the adaptability of production system volume to meet the inevitable fluctuations in market demand that the firm will experience. Capacity in most production systems is adjusted by hiring or firing workers, by scheduling overtime, or cutting back on work hours, by adding or shutting down machines or whole departments, or areas of the facility, or by changing the rate of production within reasonable limits.
- Facilities for Production and Services - The size and number of production facilities influence operational capabilities. To function properly facilities require achievable production goals, clear safety procedures, and inventory management systems. Certain specialization in production allows the firm to provide customers with products of lower cost, faster deliver, on-time delivery, high product quality, and flexibility.
- Product or Service Design and Development - Managing product or service quality is one of the important elements of operations strategy. This involves generating the idea, creating the feasibility reports, designing the prototype and testing, preparing a production model, evaluating the economies of scale for production, testing the product in the market, obtaining feedback, and creating the final design and starting the production.
- Technology Selection and Process Development - Operations strategy increasingly depends on new technological developments such as: machine leaning, production line automation, real-time metrics, and market forecasting tools. The decisions on choice and design of technology to be used include the choice of equipment and tooling, the layout of plant space and facilities, the selection of workers and work procedures, and many aspects of process design. These choices must be handled carefully; mistakes at this stage can result in business loosing its competitiveness, or the ability to sustain a profitable position in the market.
- Allocation of Resources - Operations strategy should take into account the total operations resources available to the organization including location, mechanical and human resources.
- Facility, Capacity, and Layout Planning - The location, layout and capacity creation for the production are critical decision aeeas for operations management.
Operations strategies connect the firm's programs, policies, guidelines and workforce in a way that allows each function/branch/department to support the others in achieving a common goal.
Operations Strategy Development - Formulation and Implementation
Operations strategy development encompasses strategy formulation and implementation. Operations strategy development involves refining and specifying a company's business strategy and developing strategic initiatives and operational plans aimed at enabling departments and business units to successfully implement and execute the overall business strategy. By developing operations strategies, a company can examine and implement effective and efficient systems for using resources, personnel and work processes. In service-oriented companies, basic operations strategies can be used to link long-term and short-term corporate decisions and create an effective management team. When developing operations strategy management should give due consideration to the strategic positioning of the firm i.e. the requirements mandated by corporate and business strategy, market requirements, as well as competitive priorities and how you will handle them by the types of operations strategy employed. Once business strategy has been developed, an operations strategy must be formulated.
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To develop the strategy consider the following factors:
- Business/corporate strategy,
- Market/need analysis,
- Competitive priorities of cost, quality, time and flexibility - and how you will handle them,
- Order qualifiers and winners.
Operations Strategy Formulation
Operations strategy formulation is a decision making process that shapes an organization's long-term plans to achieve the objective of its mission statement. Operations strategy formulation is the practical process of articulating the various objectives and decisions that make up the operations strategy. Operations strategy formulation involves comprehensive analysis of the operations capability from the perspective of operations. This provides a plan for the design and management of the operations function in ways that support the business strategy.
The strategy formulation steps include:
- Defining corporate objectives - This involves establishing corporate objectives to provide direction for the organization and performance indicators that allow progress in achieving those objectives to be measured. The objectives will be dependent on the needs of stakeholders (both external and internal); they will include financial measures such as profits and growth rates, employee practices such as skills development and appropriate environmental policies.
- Marketing strategies to meet those objectives,
- Assess how different products win orders against competitors - to develop a manageable strategy, the competitive priorities must be split up into decision categories, such as based on the idea order qualifiers and order winners. A qualifier is a competitive characteristic a firm or product must be able to exhibit to be a viable competitor in the marketplace. An order winner is a competitive characteristic of a product (good or service) that causes a customer to choose this firm's product rather than that of a competitor.
- Establishing the most appropriate mode (structure) to deliver the set of products and services. This involves putting the processes and resources in place which provide the required performance as defined by the performance objectives. It involves delivery system choices which concern aspects of the organization's physical resources such as service delivery systems, and capacity provisioning.
- Provide infrastructure required to support operations. This involves putting the systems, policies and procedures, and practices in place which provides the required performance as defined by the performance objectives; and determine how the structural elements are managed.
Operations strategy is formulated by first determining the competitive priorities of the firm (market requirements view), then translating these priorities into production requirements (performance objectives) related to the structure and infrastructure of the firm. The operations strategy must then be aligned with the company's business strategy (top-down view) and enable the company to achieve its long-term plan. It is essentially, about the different ways of aligning plans, activities, and objectives.
Operations Strategy Implementation
Tactically, operations management is concerned with the daily tasks and tactics that transform materials or actions into a product or service. Tactical execution involves the day-to-day activities required to function and support the goods/service strategy. Included are capacity management, facility location, inventory management, facility layout, supplier selection, operations scheduling, staffing, and productivity improvement.
The operations strategy describes how the firm's different functions (marketing, finance, and operations) will support the service concept. If the firm's order winning competitive priority is quality, what will operations do to ensure quality of the service and how will marketing promote this characteristic?
Operations strategy guides the change and evolution of operational capabilities needed to achieve the desired competitive position of the organization as a whole.
Operations strategy specifies the policies and plans for using the organization's resources to support its long-term competitive strategy.
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Planning Decision Areas
Operations management decisions encompasses decisions in the management process functions areas such as planning (manpower planning, capacity planning, production planning), action implementation and execution - supervision of the production of goods and services. The types of planning decisions include:
- Planning the Production Process - These decisions have long range implications. Before making these decisions about operations processes, managers must consider the goals set by business and marketing managers. For example, does the company intend to compete on low cost? Or does the company intend to compete on quality and differentiation? Market performance requirements such as cost, quality, delivery, flexibility, etc. With these factors in mind managers can make specific type of decisions in the production planning process area such as: production methods, site selection, facility layout, and components and materials management.
- Capacity Planning - Now that you know where you’re going to locate, you have to decide on the quantity of products that you’ll produce. You begin by forecasting demand for your product. To estimate the number of units that you’re likely to sell over a given period, you have to understand the industry that you’re in and estimate your likely share of the market by reviewing industry data and conducting other forms of research. Once you’ve forecast the demand for your product, you can calculate the capacity requirements of your production facility—the maximum number of goods that it can produce over a given time under normal working conditions. In turn, having calculated your capacity requirements, you’re ready to determine how much investment in plant and equipment you’ll have to make, as well as the number of labor hours required for the plant to produce at capacity.
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These capabilities are called competitive priorities. By excelling in one of these capabilities, a company can become a winner in the marketplace.
Factors Influencing Operations Strategy
Operations strategy relates the business strategy to the operations function. The operations strategy focuses on specific capabilities of the operations function that give the company a competitive edge/advantage. The factors that have to be taken into consideration when making operations strategy design decisions include:
- Performance Objectives
- Competitive priorities
- Core Competencies
- Structure and Infrastructure
Performance Objectives
Performance objectives are broad performance measures that provide a device for understanding market requirements. Performance objectives are the main device used to understand market requirements. These objective measures represent the various aspects of performance in which the market requirements can be expressed. A performance objective is a specific end result that contributes to the success of the unit or organization, and that an employee is expected to accomplish or produce. Performance objectives are a set of broad performance measures that have some meaning to the operations function. The performance objectives include:
- Quality - The quality objective is considered to measure how well a product conforms to certain specifications. It is also how desirable the features of the product are; how reliable the product is; how durable it is; how easily it can be serviced; how well it performs its intended function; and how much the customer believes in its value.
- Speed - The speed objective measures how fast a company can deliver its products and generate sales quotes. The objective will be concerned with such issues as: the time that it takes to produce one or more products of the company or the time that it takes to research a new product and develop it.
- Dependability - This objective is a measure of company dependability and/or product dependability. Organization dependability objective is measure of how dependable the company is when it comes to timely delivery of products to customers, in accordance with planned prices and costs. Product dependability objective is a measure of the product's ability to function in an intended way consistently over a reasonable period of time. "Dependability" could also mean a proportion of services or goods delivered late, average lateness, proportion delivered early, etc.
- Flexibility - The flexible operations objective is a measure of operations that can configure their product lines to deal with various requirements and to also adjust these product lines quickly to new requirements. The latter is also closely related to the speed objective.
- Cost - The variation in costs objective looks at how much variation exists in the unit ost of a product as measured by changes in a variety of factors including: the volume and the variety of products.
Each of the performance objectives can be thought of as bundles of issues that will need separating out. Some of these objectives will be more important for some operations than others. One method for distinguishing between performance objectives involves classifying them as order winners and order qualifiers. Marketing requirements are translated into performance objectives which provides operations view of the marketing professionals view of the market.
Competitive Priorities in Operations Management
Competitive priorities are the ways in which the operations management function focuses on the characteristics of cost, quality, flexibility, delivery/speed, and service in creating value for customers. Competitive priorities signify a strategic focus on building specific manufacturing/production capabilities that can improve a company's product/service position in the marketplace.
In operations management, competitive priorities are crucial a decision variable for operations managers. Competitive priorities operationalize the organization's competitive strategy. The two (2) generic strategies/advantages - cost and differentiation - are operationalized in terms of cost, quality, flexibility, and speed.
- Cost - A firm competing on a cost/price basis is able to provide consumers with an in-demand product/service at a price that is competitively lower than that offered by firms producing the same or similar product/service. In order to compete on a price/cost basis, the firm must be able to produce the product at a lesser cost, or be wiling to accept a smaller profit margin.
- Quality - Firms competing on the basis of quality, offer products/services that are superior to that of competitors in one or more of quality dimensions such as: performance, conformance, features/options, durability, reliability, serviceability, aesthetics, and perceived quality. Firms competing on this basis offer products or services that are superior to the competition on one or more of the eight (8) quality dimensions. Quality can be categorized as product quality and process quality. The level of quality in the product design will vary as to the particular market that it is aimed to serve. The higher quality products command higher prices in the market place. The proper level of quality is established to focus n the requirements of the customer. Process quality is critical in every market segment and its goal is to produce defect-free products.
- Flexibility - This refers to the ability of a company to offer a wide variety of [products to its customers. It is also a measure of how fast a company can convert its processes from making an old line of products to producing a new product line. Firms may compete on their ability to provide either flexibility of the product or volume. Firms that can easily accept engineering changes (changes to the product) offer a strategic advantage to their customers. This can also apply to services.
- Delivery Speed - This relates to the speed and reliability of products to customers. It is an important determinant in the purchasing decision. The ability of a firm to produce consistent and fast delivery allows it to charge a premium price for the product. Products should be delivered to customers with minimum variance in delivery times.
- Service - This competency can be defined in a number of ways. Superior service can be characterized by the term "customer service", or it could mean rapid and reliable delivery of goods, stock availability, on-time delivery, or convenient location.
Competitive priorities are the dimensions a firms production systems must possess to support the demands of the markets in which the firm wishes to compete. The firm's customers will determine which of the competitive priorities are emphasized. Operations managers must work closely with marketing in order to understand the competitive situation in the company's market, before they can determine which competitive priorities are important. We have to make trade-offs within competitive priorities in a competitive market. In fact, the strength of an operations strategy is dependent on the level of consistency between emphasized competitive priorities and matching decisions concerning operational structure and infrastructure. The purpose of the priorities is to assist in the mission of positioning an organization with an advantage vs its rivals/competitors. Fitting a plant’s practices to the competitive priorities is important to developing operations as a competitive advantage.
As a way to prioritize among the list of competitive priorities, the idea of order winners and order qualifiers may be utilized. Order-winners for a product, for example, are the qualities which make an organization receive a new order. Order-qualifiers, in contrast, are required to be able to compete in a marketplace. Identifying order-winners and order-qualifiers is not a one time activity, but needs to be done regularly, because market demands change as time passes and along with that the order-winners and order-qualifiers.
The main objective of analyzing a company’s order-winners and order-qualifiers is to establish a basis for the manufacturing strategy. Understanding how to create or add value to customers is key to developing effective production strategy. Specially, value is added through the competitive priority or priorities that are selected to support a given strategy. To develop a manageable strategy, the priorities must be split up into decision categories.
Structural and Infrastructure Decisions
One way of categorizing the various decisions that typically comprise an operations strategy is to consider those that are structural, in that they define the overall tangible shape and architecture (e.g., capacity, technology type) of the operation, and those that are infrastructural, in that they relate to the people, systems, and culture that tie together the operations activities.
Structural decisions:
Structural decisions define the overall tangible shape and architecture (e.g., capacity, technology type) of the operation. Structural elements decisions are grouped as capacity, location, integration/networking, and technology.
- Facility Location Strategy - This related to decisions as to how near the company and its products should be to the consumers, suppliers, and talent while taking into consideration costs, infrastructure, logistics, and government.
- Layout Strategy - This relates to integrating capacity needs, personnel levels, inventory requirements, and technology in order to ensure that material, people, and information efficiently flow through the company.
- Capacity - It relates to decisions about the capacity of the company's facilities, production demands, and personnel that are necessary in order to maintain a reliable and stable production process.
- Process Technology - This defines how the product - good or service - is produced (i.e., the production processes utilized and the specific technology, quality, human resource, and capital investments that the management will undertaken order to determine majority of the company's basic cost structure. These involve decisions concerning the type of process, technology, measuring and performance.
- Supply Chain Management - This relates to decisions on how to integrate supply chain into the company's operations and strategy It includes decisions on what will be purchased when it will be purchased, whom it will be purchased from and the conditions for such purchases. Procurement is the process of getting the goods and materials your company needs.
Infrastructure Decisions:
These are divided into four categories; planning & control, inventory management, capacity management, and supply chain management. Examples include:
- Product Design - This involves designing the products and services to be offered . For instance, product designs normally determine the lowest volume of costs and higher grade of quality as well as other features such as sustainability and human resources required.
- Quality Management - This defines the expected quality from the consumers view point as well as established policies and procedures that the company intends to adopt towards attaining such quality levels. What quality system should we use? What impact does quality have on our organization? These decisions are concerned with: the aims, tools and programs for ensuring customer satisfaction.
- Human Resources and Job Design - This relates to decisions on how to recruit, motivate and retain the staff with necessary skills and talents.
- Forecasting and Capacity Planning - What does the short-term and long-term schedules look like? How much can we make in what period of time?
- Inventory Management - This relates to decisions about inventory ordering and holding, and how to optimize the process in order to ensure consumers' satisfaction, enhanced supplier capabilities and effective production schedule.
- Scheduling - This relates to the decisions on how to determine and implement both intermediate and short-term schedules that can be utilized effectively and efficiently by both the personnel and facilities in the course of meeting consumers' demands.
Strategic decisions in operations management are the decisions that are concerned with whole environment in which the firm operates, the entire resources and the people who form the company and the interface between the two.
Distinctive Competencies
Distinctive competencies are defined as the dimensions that a firm's production system must possess to support the demands of the markets in which the firm wishes to compete. This type of operations strategy is based on a company developing operations processes in order to distinguish their product or service from competitors. By identifying competitive priorities within a specific economy businesses can tailor their operations strategy toward gaining competitive advantage whether that's in higher-quality product or service, or faster lead time during production.
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On a "high level" competitive priorities can represent a manufacturing/production strategy.
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An organization makes a decision regarding its positioning in its target markets and the customers it intends to target. The organization's market positioning is one in which its performance enables it to attract customers to its products/services in a more successful manner than its competitors.
Operations Systems
The Operations System, for an organization, is the joint configuration of resources and processes such that its resulting competencies are aligned with the organization's desired competitive position. An organization's Operations System provides the best match (fit) of supply (of tangible resources) with customer demand for the mix of products and services.
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Operations Goals and Objectives
Operational goals are the workflow methods that bring the strategy to fruition, and exist at all levels of the organization, from CEO down to part-time employees. Operational goals are the short-term tactics designed to achieve the company's long-term strategy. Operational goals lay out increments called benchmarks; they streamline the day-to-day activities of the business. They measure daily, weekly, and monthly benchmarks. For example, the monthly budget report shows if a company's financial goals are on track. Manufacturing examines production reports to ensure the number of units produced meets production goals with minimum waste.
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Operations strategy specifies the policies and plans for using the organization's resources to support its long-term competitive strategy.
The objectives of operations strategy-makers, is to try new ways to achieve the operating goals and objectives that have been assigned to operations such as unit cost, product quality, etc.
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Performance and Productivity - This factor accounts for your ability to deliver to your customers what you've promised. Are your customers satisfied? Are you offering them value? Performance also involves things like quality, how you compete in the market place, and whether or not your goals are being achieved.
Achieving the Decision Area Strategies is accomplished through the development of detailed Tactical Programs for each area.
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Strategic positioning involves first defining the firm's target market. In other words, what is the set of customers the firm seek to serve. Next, the firm must determine its core competence or what will distinguish it from other service firms, i.e., cost leadership, differentiation, or focus. At this point, the firm then must make decisions regarding its mission and high-level goals and objectives.
Operations Management Strategic Decision Areas
Operations management decisions areas include:
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- Operating Decisions - Decisions about relevant functional areas ....
- Technology Decisions - []
- Resource Planning - []
- Production Plans - []
- Process Decisions - []
- Quality Decisions - []
- Outsourcing - Should we outsource or manufacture inhouse?
- Product Plans - What goods and services to offer and the design of them? These are product development decisions concerned with: types of products, innovation, breath of range, new product development, and flexibility.
- Providing better products - goods and services - at affordable prices
- Improving/optimizing organization's supply chain,
- Reducing costs such as labor, taxes, tariffs, etc.,
- Learning to improve operations,
- Understanding markets - This can help your organization plot a course for the future; helps with diversification of product lines, add production flexibility to smooth out a business cycle.
- Employing top talent - Create opportunities to attract top talent to the organization.
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- Provide better goods and services
- Improve the organization supply chain
- Reduce costs , such as: labor, taxes, etc.
- Learn to improve operations
- Understand markets
- Employ top-of-the-line talent
- Low direct cost per unit
- Low investment intensity
- High capacity utilization
- High product quality
- High operations efficiency
- Supply or Sourcing Decisions - Supply chain management is the process of transforming those goods into products and distributing them to customers as efficiently as possible. These decisions specify which activities are performed internally, and which activities are outsourced, and how to manage suppliers. Decisions involve defining the process boundaries and interfaces. It includes strategic sourcing decisions, vertical integration, and supply network configuration.
- Demand Forecast Decisions - These decisions specify how to match demand to available supply. These decisions characterize the interfaces and relationships with customers and include demand planning and forecasting, as well as tactical capacity allocation and order management. Demand management is an important driver in inflexible supply processes that cannot quickly adapt to changes in demand such as the core processes in airlines, hotels, hospital wards, and car rental companies, It also relates to service and customer relationship management.
- Improvements and Innovation Decisions - These are decisions on characterizing the processes and incentives to improve and innovate products and processes.
- Market penetration Strategy - This refers to capturing a larger piece of the target market. An insurance company might define market penetration success by the number of new automobile policies gained. Developing an operations strategy for market penetration has several potential focus areas. A business can decide to attract customers away from competitors. It can attract nonusers that have no experience with your business or with a competitor. Another strategy might employ one or more geographic locations, centered around a target demographic. Businesses can also try to add more value to existing clients, thereby enticing increased spending on product or service upgrades.
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Operational Action Planning and Plans
Operational action planning involves defining and outlining the actions individuals will take to support the plans and objectives of the executive management team. The operational planning process describes milestones, conditions for success and explains how, or what portion of a strategic plan will be put into operation during a given operational period, in the case of commercial application, a fiscal year or another given budgetary term. Operations teams plan continuous optimizations and improvements to processes and practices in order to meet objectives in areas such as: efficiency, productivity, turnaround time, waste reduction, cost reduction, quality, customer satisfaction, and sustainability.
Operational Plans
An operational plan is a blueprint that details how the organization will achieve long-term strategic goals. It specifies how finances, employees, and other resources will be utilized on a day-to-day basis, while also mapping interim target objectives. The operational plan is the basis for and justification of an annual operating budget request. Anoperational plan is a plan to establish, expand, or improve the day-to-day processes and practices of a business. Some examples of operational plan include:
- To cut costs 10% - Single-Use or Ongoing.Continuing Plan[Strategy: Reduce Cost]
- Acquire faster or more efficient machinery and equipment - Single-use plan
- Reduce inventory levels - Single-use plan
- Reduce production waste - Single-use plan [Strategy
- Improve material handling procedures - Single-use plan.
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Operational plans should establish the activities and budgets for each part of the organization for the next 1–3 years. They link the strategic plan with the activities the organization will deliver and the resources required to deliver them. An operational plan addresses four questions:[citation needed]
- Where are we now?
- Where do we want to be?
- How do we get there?
- How do we measure our progress?
Operational plans should contain:[citation needed]
- clear objectives of the initiatives that supports the strategic goals and objectives.
- activities to be delivered
- quality standards
- desired outcomes
- staffing and resource requirements
- implementation timetables
- a process for monitoring progress
Scope of Operations Planning
Operations planning is the process of establishing, expanding, or improving the core day-to-day processes and practices of the business.
This requires planning and the development of operations plans.
The scope of operations planning may encompass:
- Business Plans - The operations plan section of a business plan includes details on how you will make proposed products - goods and services - a reality. This tends to be broad and may include elements of human resources, information technology (IT), manufacturing, supply chain, distribution and customer service.
- Go-To-Market Strategy - This is a marketing plan usually formulated in coordination with operations to launch a new product - good or service. For example, a hotel that launches a new pool side cafe requires an operations plan to detail how supplies will be procured, food prepared, and customer service provided.
- Risk Management - Risk management related planning such as carried out by a transportation company that has a goal to reduce accidents and incidents with improvement in its operations processes and infrastructure (systems and people).
- Budget - Budgeting planning for operations management may include Capex (capital investments) related budgets, or Opex budgets for the day-to-day costs of running the business.
- Maintenance Planning - This is a schedule plan for maintaining capital assets used in creating value for customers.
- Sales and Operations Planning - This is the planning process of aligning sales forecasts with production.
- Production Planning - Production planning is the process of planning the output of an organization. The focus is on utilizing capital assets and labor efficiently in producing goods and services that can be sold at a profitable level.
- Projects - Project planning for operations related projects.
- Improvements - This is planned in terms of targets for management accounting metrics in areas such as costs, quality, business volumes, and turn around times.
- Capability Planning - Capability planning in operations is the process of identifying what your business does and establishing a road map for improving and expanding these capabilities. Operational capabilities are firm-specific sets of skills, processes, and routines, developed within the operations management system, that are regularly used in solving its problems through configuring its operational resources.
- Quality Management - Planning for quality management involves establishing targets for quality metrics, and developing actionable plans to achieve those metrics. For example, a hotel may have a target to improve customer satisfaction with improvements to housekeeping services through quality control inspection to ensure rooms are spotlessly cleaned.
- Asset Management - Planning for asset management includes maintenance, evaluation of assets, and plans to retire aging assets.
- Procurement - This involves planning for the identification, selection, and management of suppliers and contractors.
- Supply Chain - Supply chain planning involves planning for the warehousing and transportation of material and parts for production, as well as the finished products..
- Distribution - Distribution planning is a process of planning on how to reach the customer to deliver your products - goods and services.
Operational decisions are made to execute the short-term processes with the aim of achieving the long- and medium-term goals that the strategic and tactical level decisions have adopted.
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Tactical Execution
Finally, the firm approaches tactical execution issues. Tactical execution involves the day-to-day activities required to function and support the service strategy. Included are
capacity management,
facility location,
inventory management,
facility layout,
supplier selection,
operations scheduling,
staffing, and
productivity improvement.
Decisions that are made in the above strategic planning process are heavily influenced by their position on Marc McCluskey's service maturity model. This model divides service maturity into four stages:
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- Price/Cost - A firm competing on price basis (i.e., customers value low price) is able to provide consumers with an in-demand product/service at a price that is competitively lower than that offered by firms producing the same or similar goods/services.
- Quality - A firm competing on quality basis (i.e., customers value high quality) offer goods or services that are superior to the competitors on one or more dimensions such as: Performance - a product's primary operating characteristics; Conformance - the degree to which a product's design and operating characteristics meet predetermined standards; Features - the bells and whistles of a product; Durability - mean time until replacement (how long does the product last before it is worn out); Reliability - a product's mean time until failure or between failure; Serviceability - the speed, courtesy, competence, and ease of repair; Aesthetics - a product's looks, feel, smell, sound, or taste are aesthetic qualities; Perceived Quality - this is usually inferred from various tangible and intangible aspects of the product.
- Service -A firm competing on Service basis can define this in a number of ways such as: Superior Customer Service; Convenient Location.
- Fast Delivery - A firm competing on the basis of fast delivery (i.e., customers value fast delivery) would need to excel at speed.
- Reliable Delivery - A firm competing on reliable delivery basis (i.e., customers value on-time delivery) would need to excel at dependability.
- Flexibility - A firm competing on flexibility basis depends on their ability to provide flexibility of product - goods and services if the customers value innovative goods or services; or flexibility of mix, if the customers value wide range of goods or services; or flexibility of volume and/or delivery, if the customers value the ability to change the timing or quantity of goods or services.
Trade-offs in operations are the ways we are willing to sacrifice one performance objective to achieve excellence in another.This involves competing on one (1) or two (2) distinctive competencies at the necessary expense of the others. Analyzing markets starts with executive opinion of market order-winners and order-qualifiers, and then testing them with data showing actual demands for different customers, orders and products.
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Market-Based Approach to Operations Strategy Development
In this approach, an organization makes a decision regarding its positioning in the markets and the customers within those markets it intends to target. The organizations market position is one in which its performance enables it to attract customers to its products and services in a more successful manner than its competitors. Market requirements are translated into performance objectives.
Resource-Based View of Operations Strategy
Resource-based operations strategy looks at how a firm develops and leverages its unique operations resources to achieve manufacturing objectives with the support of operations capabilities deeply anchored within business processes and organisational routines
The resource-based view (RBV) is a managerial framework used to determine the strategic resources a firm can exploit to achieve sustainable competitive advantage. Barney's 1991 article "Firm Resources and Sustained Competitive Advantage"
The Resource based view (RBV) analyzes and interpret internal resources of the organizations and emphasizes resources and capabilities in formulating strategy to achieve sustainable competitive advantages. Resources may be considered as inputs that enable firms to carry out its activities.
- Choice and design of technology to be used - These decisions include the choice of equipment and tooling, the layout of plant space and facilities, the selection of workers and work procedures, and many aspects of process design. These choices must be handled carefully; mistakes at this stage can result in business loosing its competitiveness, or the ability to sustain a profitable position in the market.
- Determining the capacity of the production system is the next decision after choice of technology. The capacity of the system is designed to be a function of the amount of available capital, the demand forecast for the output of the facility, and many other minor factors. Establishing to much capacity, too soon, can burden a company with excess costs and inefficient operations.Too little capacity can make it difficult and expensive to increase output later.
- Decisions on the adaptability of production system volume to meet the inevitable fluctuations in market demand that the firm will experience. Capacity in most production systems is adjusted by hiring or firing workers, by scheduling overtime, or cutting back on work hours, by adding or shutting down machines or whole departments, or areas of the facility, or by changing the rate of production within reasonable limits.
Sales Management and Strategy
The Sales function/department advises the marketing department based on its feedback with customers and focuses on customer contact to drive sales. Sales operations is about supporting and enabling front line sales teams to sell more efficiently and effectively by providing strategic direction and reducing friction in the sales process. To do this, sales operations fulfills both strategic and tactical functions. Sales operations teams accomplish their goals through a variety of roles and function including: strategy, data analysis, hiring and training, forecasting, territory design, and sales process optimization.
Sales Management Function
Sales management is instrumental in charting the course of future operations. The activity provides top management with informed estimates and facts for making marketing decisions and for setting sales and profit goals. Sales management and the financial results of a company are related.
There are three general objectives of sales management viz-
Objectives often get translated into more specific goals by breaking down and restating as definite goals. Planning precedes goal setting. In planning, sales executives provide estimates on market and sales potentials the capabilities of the sales force and middlemen.
Sales Capabilities
Sales capabilities is a collection of behaviors and skills across the selling process that needs to be honed and mastered. Each of these capabilities falls into one of four categories: create, win, negotiate, and grow. These four segments represent the areas in which sales professionals need to be proficient throughout the sales cycle.
Sales Strategy
Sales strategy is a plan to achieve a sales goal and is what directs the selling activities of any business. Selling is crucial to the success of any business, but it must be orchestrated to deliver success, which is what the sales strategy does. The sales strategy describes how a business will win, retain, and develop customers. Sales strategy is different from marketing strategy - an overall approach to marketing products (it is how you build sustainable competitive advantage for the company's products) through positioning, and differentiation by managing the marketing mix of the 7Ps - .Product, Price, Promotion, Place, Packaging, Positioning, and People.
A sales strategy is particularly important in addressing business challenges such as:
When creating a sales strategy be clear as to which challenge(s) you are addressing.
Key Building Blocks of a Sales Strategy
A winning sales strategy has a number of elements/building blocks including:
Sales Objectives
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The Sales function/department advises the marketing department based on its feedback with customers and focuses on customer contact to drive sales. Sales operations is about supporting and enabling front line sales teams to sell more efficiently and effectively by providing strategic direction and reducing friction in the sales process. To do this, sales operations fulfills both strategic and tactical functions. Sales operations teams accomplish their goals through a variety of roles and function including: strategy, data analysis, hiring and training, forecasting, territory design, and sales process optimization.
Sales Management Function
Sales management is instrumental in charting the course of future operations. The activity provides top management with informed estimates and facts for making marketing decisions and for setting sales and profit goals. Sales management and the financial results of a company are related.
There are three general objectives of sales management viz-
- Sales volume - Increase units sold by 10% or more.
- Contribution to profits - Increase profit margins by 10% or more.
- Continuing growth.
- Revenue Generation - One of the main objectives of sales management is to generate revenue for the organization. The sales department is solely responsible to bring in the money.
- Increase Sales Volume - Through efficient sales management, the organization wishes to increase the number of units sold. This will ensure that the production facilities do not remain idle and are utilized to the fullest.
- Sustained Profits - Sales management has an objective of improving the profits of the organization through effective planning, coordination and control. Sales management strives to increase sales and reducing costs, this ensures good profits for the organization.
- Organization Growth - With the sustained and continuous sales management techniques, the organization tends to gain market share and results in growth of the organization.
- Market Leadership - With increased sales volumes and profits, ‘sales management’ enables an organization to become the market leader.
- Converting Prospects to Customers - Getting prospects to become customers is an art and a science, it requires good planning and sustained efforts. This is accomplished through sales management.
- Motivate the Sales Force - One of the core objectives of sales management is to motivate the sales force. Selling is a very stressful task, achieving sales targets can become very challenging. Therefore, the sales management task is to ensure that the sales force is continuously motivated through proper incentives and reward systems.
- Compliment Marketing Activities - Sales management’s task is to support the marketing functions of the organization. Marketing and sales need to go hand in hand to achieve the desired results.
Objectives often get translated into more specific goals by breaking down and restating as definite goals. Planning precedes goal setting. In planning, sales executives provide estimates on market and sales potentials the capabilities of the sales force and middlemen.
Sales Capabilities
Sales capabilities is a collection of behaviors and skills across the selling process that needs to be honed and mastered. Each of these capabilities falls into one of four categories: create, win, negotiate, and grow. These four segments represent the areas in which sales professionals need to be proficient throughout the sales cycle.
Sales Strategy
Sales strategy is a plan to achieve a sales goal and is what directs the selling activities of any business. Selling is crucial to the success of any business, but it must be orchestrated to deliver success, which is what the sales strategy does. The sales strategy describes how a business will win, retain, and develop customers. Sales strategy is different from marketing strategy - an overall approach to marketing products (it is how you build sustainable competitive advantage for the company's products) through positioning, and differentiation by managing the marketing mix of the 7Ps - .Product, Price, Promotion, Place, Packaging, Positioning, and People.
A sales strategy is particularly important in addressing business challenges such as:
- Stagnant sales revenues - Flat/declining sales
- Merger of Sales Forces - A need to align sales teams and have them pursue common objective.
- Start-up of new Venture - A need to get sales started and realizing the ambition of the founders and investors.
- New Product Introduction - A need to deliver the expectations set by management.
- Launch by a new competitor - A need to counter the threat from new competitors.
- Expansion to new markets - When a company is diversifying and expanding.
When creating a sales strategy be clear as to which challenge(s) you are addressing.
Key Building Blocks of a Sales Strategy
A winning sales strategy has a number of elements/building blocks including:
- Goal and Objectives - An effective sales strategy requires you know the goal of your business, i.e., what your overall aim for the business is.
- Target Market - You need to decide who will buy your products and services. The Target Market is defined in the Marketing Plan; each plan sets out to determine the effect of the plan on a target market.
- Product and Services - Building the best products and services that meet the needs of their target markets.
- "What are the competitive advantages?" - This requires identifying the "strengths" and "weaknesses" of competitors that you will need to sell against and exploit.
- Route to market - How do you reach and sell to your customers?
- Selling Process - [TBD]
Sales Objectives
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- Increasing your monthly and annual revenue
- Reducing customer churn - Keeping your customers is synonymous with keeping the company afloat. Customer churn is the number of customers that leave your business within some specified period e.g., 3 months. This is an account management function that is taken on by the sales team.
- Increase units sold/profit margins by 10% or more.
- Boost customer lifetime value - This involves the cash value a customer contributes to the company over a specified period, e.g., one year.
- Increase number of leads qualified - []
- Increase win rates
- Lower customer acquisition costs
- Reduce cycle times
- Track sales time per week
- Set activity goals - Increase number of cold calls/scheduled video.
Production Management and Strategy
Production is an act of producing a product or service. Products/goods production is the process of either manufacturing or mining, or growing of goods (commodities) generally in bulk for trade. Service production is the process of delivering a service to customers. Production management involves establishing performance objectives and goals, that trying to achieve them through planning, organizing and directing execution of production plans.
[TBD]
Competitive Priorities Implications in Manufacturing
We have to make trade-offs within competitive priorities. In a competitive market, no business can normally be on top in all aspects. The purpose of the priorities is to assist in the mission of positioning an organization with an advantage vs its rivals.
[TBD]
Service Production Management
Service production management is the management of processes involved in service activities, including planning, organizing, staffing and controlling tasks. Service production management is influenced by a number of common characteristics that most services share. These include: degree of contact with the customer, customer participation, and simultaneous production and consumption. Services have a high degree of customer contact throughout the service production process, with the customer frequently participating in the process itself. Customer participation within the process means that there is simultaneous production and consumption; thus, the service cannot be stored for later use, possibly as a buffer to absorb fluctuations in demand.
Although many of the principles of good management in a manufacturing goods production environment also apply in organizations that provide service, such as service businesses like banking, professional firms of accountants, etc. Services have a number of distinctive features which have implications on how they are managed, these include:
A service design is the activity of planning and organizing a business's resources (people, infrastructure, lrocesses, communication and material) in order to (1) improve the employee's (or service provider's) experience, and (2) indirectly, the customer's experience. The goal of service design is to improve service quality, and the interaction between the service provider and its consumers.
Production Systems and Types
It is a system of processes responsible for making, harvesting or creating something, or the amount of something that was made or harvested for consumers. It is a system that puts intangible inputs (such as ideas, creativity, research, knowledge, wisdom, etc.) in use or action. And, a system that transforms (converts) tangible inputs like raw materials, semi-finished goods, and unassembled goods into finished goods or commodities.
Production systems can be classified as:
An example of production is the creation of furniture, or harvesting corn to eat, or the amount of corn produced.
Goods Production Systems
Goods Production systems are manufacturing systems that transform material (including parts and products) into finished goods/products delivered to customers. The production systems for manufacturing of physical goods is comprised of transformation processes of tangible goods. Manufacturing operations means a process in which materials are changed, converted, or transformed into a different state or form from which they previously existed. This includes refining materials, assembling parts, and preparing raw materials and parts by mixing, measuring, blending, or otherwise committing such materials or parts to the manufacturing process.
Manufacturing processes create and deliver products and/or parts that are delivered to customers. Goods production (Manufacturing) work centers are augmented with WIP inventory stores that act as buffers to bottleneck resources and work centers that constrain the flow of products through the system.
Services Production Systems
Services are economic activities that produce time, place, form, or physiological/psychological utility. For example, A meal in a fast food restaurant saves time. A meal with a date in an elegant restaurant with superior service provides a psychological boost. Wal-Mart attracts millions of customers because they can find department store merchandise, groceries, gasoline, auto service, dry cleaning, movie rental, hair styling, eyeglasses and optical services, and nursery items all in one place.
A service is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially, intangible concerns of its purchaser. A service is intangible, yet provides satisfaction to the customer. It is performed by people, or machines; and may or may not be tied to tangible goods. A service involves the application of specialized competencies (knowledge skills) through deeds, processes, and performances for the benefit of another entity itself.
A Service production system is comprised a set of interactions between service providers and consumers within a service production unit. of processes - structured, recurrent activities - that transform inputs into outputs (products). The service production activities involves transformation of inputs into finished goods and/or services using processes that are actually present in the organization. The service production system is the equipment, layout, and procedures used to provide the service and maintain quality and delivery standards. Service production units - work centers - are augmented with Waiting areas/rooms that act as buffers to bottleneck resources and work centers that constrain the flow of patients (customers) through the system.
A service is designed based on the concept of a Service Package. A Service package is defined as a bundle of goods and services with information that is provided in some environment. The bundle consists of five elements:
All these features are experienced by the customer, and forms the basis of the his/her perception of the service. The total experience - the image defined by the service package features - offered to the customer should be consistent with the desired service package.
A service package is a bundle of explicit and implicit benefits performed with a supporting facility and using facilitated goods. When you eat at a fast food restaurant (supporting facility), you may purchase a hamburger (facilitating good) that someone else cooked for you (service).
Take for example, a budget hotel; the supporting facility is a concrete block building with austere finishing; facilitation goods are reduced to the minimum soap, towels, and tissue paper; information is the room availability used to book reservation; the explicit service is a comfortable bed in a clean room; and the implicit service might include a friendly desk clerk and the security of a well-lighted parking area.
[TBD]
The capacity of these systems is defined in terms of the output of products/parts per some specified interval. Production work centers are augmented with work-in-process (WIP) inventory stores that act as buffers to bottleneck resources and work centers that constrain the flow of products through the system.
Production Strategy
Production strategy is a broad long-term action plan made for achieving the main objectives of an organization. Production strategies tell us what the production function/department must do to achieve the top aim of the organization. Production strategy deals with decisions/choices about how and where the products or services will be manufactured or delivered, technology to be used, management of resources, plus purchasing and relationships with suppliers.
Manufacturing Operations Strategies
Manufacturing operations is concerned with the design of manufacturing system that provides significant benefits in your ability to satisfy customer demand, in your ability to bring new products to market, and your ability to apply improvements and new technologies to your manufacturing processes. The focus in manufacturing operations on meeting competitive challenges are in the following areas:
With the help of operations strategy, an organization can translate its competitive priorities and product plans into processes related to decision-making. Decisions related to operations help in determining different processes for producing variety and volume of products.
A manufacturer can achieve competitive advantage, which is an advantage over other companies that operate in the same industry, by achieving operational performance objectives for its production and storage processes. Such objectives can be categorized as:
However, each performance goal in these categories, as well as the logistics performance objectives category, is defined for an individual business process. As Jan Olhage writes in “Advances in Production Systems,” a manufacturer can define specific objectives for the procurement, production and distribution logistics processes in particular.
Service Operations Strategy
At the service strategy level, the service firm must define its service concept, operating system and service delivery system. The service strategy links the firm's strategic position with tactical execution. The firm begins by determining its competitive priorities, and its order winners and order qualifiers. Competitive priorities are the characteristics of the firm or things that it does better than other service firms (e.g., low cost, quality, service, or flexibility). The firm's competitive priority(s) must be both an order qualifier and an order winner. The order qualifier is a characteristic that the service must possess in order to compete in the market. If the firm lacks this then the consumer will not even consider purchasing the firm's service. The order winner is the characteristic that will cause the consumer to purchase the firm's service over its competitors. The service concept then is the set of competitive priorities that the target market values.
The service delivery system defines the components of the system necessary to execute the service concept. Examples of the needed variables are capacity requirements, quality management systems, and management policies. Each of these should support the firm's competitive priorities so that the firm is clearly distinct from its competitors.
The operations management structure describes how the firm's different functions (marketing, finance, and operations) will support the service concept. For example, if the firm's order winning competitive priority is quality, what will operations do to ensure quality of the service and how will marketing promote this characteristic?
The service delivery system defines the components of the system necessary to execute the service concept. Examples of the needed variables are capacity requirements, quality management systems, and management policies. Each of these should support the firm's competitive priorities so that the firm is clearly distinct from its competitors.
Production is an act of producing a product or service. Products/goods production is the process of either manufacturing or mining, or growing of goods (commodities) generally in bulk for trade. Service production is the process of delivering a service to customers. Production management involves establishing performance objectives and goals, that trying to achieve them through planning, organizing and directing execution of production plans.
[TBD]
Competitive Priorities Implications in Manufacturing
We have to make trade-offs within competitive priorities. In a competitive market, no business can normally be on top in all aspects. The purpose of the priorities is to assist in the mission of positioning an organization with an advantage vs its rivals.
- Cost - Monitoring costs and distribute it effectively on the different products.
- Quality - Making sure the product and its processes perform and comply to specification.
- Flexibility - Capability to manage volume and product mix changes, equipment and workforce-related.
- Delivery performance - Reliable and quick delivery of goods, stock availability.
- Innovativeness - Time-to-market, how quickly new products and processes can be implemented.
[TBD]
Service Production Management
Service production management is the management of processes involved in service activities, including planning, organizing, staffing and controlling tasks. Service production management is influenced by a number of common characteristics that most services share. These include: degree of contact with the customer, customer participation, and simultaneous production and consumption. Services have a high degree of customer contact throughout the service production process, with the customer frequently participating in the process itself. Customer participation within the process means that there is simultaneous production and consumption; thus, the service cannot be stored for later use, possibly as a buffer to absorb fluctuations in demand.
Although many of the principles of good management in a manufacturing goods production environment also apply in organizations that provide service, such as service businesses like banking, professional firms of accountants, etc. Services have a number of distinctive features which have implications on how they are managed, these include:
- Standardization - Services are less easily standardized than goods and so service quality tends to be more variable. This makes human resource management and motivation more critical.
- Tangibility - Services are often intangible and multi-dimensional; this can make attracting customers more difficult as it often depends on promoting an intangible item.
- Simultaneity - Services are produced and consumed simultaneously; this means the service provider and customer will interact during the service delivery process. The amount of interaction is termed the degree of customer contact.
- Storage - Unlike manufactured goods, services cannot be stored, but must be consumed as they are produced or they are wasted. This creates additional problems matching productive capacity with customer demand. This is reflected in for example, in the marginal cost to fill empty seats - a plane flying empty to New York is a service provided but wasted.
- Service Costs - Ascertaining the cost of individual services is often also problematic, as the cost structure of many services business is such that costs are often shared among different services. This makes pricing and analysis of profitability of different services more difficult.
A service design is the activity of planning and organizing a business's resources (people, infrastructure, lrocesses, communication and material) in order to (1) improve the employee's (or service provider's) experience, and (2) indirectly, the customer's experience. The goal of service design is to improve service quality, and the interaction between the service provider and its consumers.
Production Systems and Types
It is a system of processes responsible for making, harvesting or creating something, or the amount of something that was made or harvested for consumers. It is a system that puts intangible inputs (such as ideas, creativity, research, knowledge, wisdom, etc.) in use or action. And, a system that transforms (converts) tangible inputs like raw materials, semi-finished goods, and unassembled goods into finished goods or commodities.
Production systems can be classified as:
- Job Production - where items are made individually and each item is finished before the next one is started. Designer dresses are made using the job production method. This system type may include: construction, product development, software development, performing arts, healthcare delivery, etc.
- Batch Production - where groups of items are made together. Each batch is finished before starting the next block of goods. For example, a baker first produces a batch of 50 white loaves. Only after they are completed will they start baking 50 loaves of brown bread.
- Flow Production - where identical, standardized items are produced on an assembly line. Most cars are mass-produced in large factories using conveyor belts and expensive machinery such as robot arms. Workers have specialized jobs, for instance, fitting wheels.
An example of production is the creation of furniture, or harvesting corn to eat, or the amount of corn produced.
Goods Production Systems
Goods Production systems are manufacturing systems that transform material (including parts and products) into finished goods/products delivered to customers. The production systems for manufacturing of physical goods is comprised of transformation processes of tangible goods. Manufacturing operations means a process in which materials are changed, converted, or transformed into a different state or form from which they previously existed. This includes refining materials, assembling parts, and preparing raw materials and parts by mixing, measuring, blending, or otherwise committing such materials or parts to the manufacturing process.
Manufacturing processes create and deliver products and/or parts that are delivered to customers. Goods production (Manufacturing) work centers are augmented with WIP inventory stores that act as buffers to bottleneck resources and work centers that constrain the flow of products through the system.
Services Production Systems
Services are economic activities that produce time, place, form, or physiological/psychological utility. For example, A meal in a fast food restaurant saves time. A meal with a date in an elegant restaurant with superior service provides a psychological boost. Wal-Mart attracts millions of customers because they can find department store merchandise, groceries, gasoline, auto service, dry cleaning, movie rental, hair styling, eyeglasses and optical services, and nursery items all in one place.
A service is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially, intangible concerns of its purchaser. A service is intangible, yet provides satisfaction to the customer. It is performed by people, or machines; and may or may not be tied to tangible goods. A service involves the application of specialized competencies (knowledge skills) through deeds, processes, and performances for the benefit of another entity itself.
A Service production system is comprised a set of interactions between service providers and consumers within a service production unit. of processes - structured, recurrent activities - that transform inputs into outputs (products). The service production activities involves transformation of inputs into finished goods and/or services using processes that are actually present in the organization. The service production system is the equipment, layout, and procedures used to provide the service and maintain quality and delivery standards. Service production units - work centers - are augmented with Waiting areas/rooms that act as buffers to bottleneck resources and work centers that constrain the flow of patients (customers) through the system.
A service is designed based on the concept of a Service Package. A Service package is defined as a bundle of goods and services with information that is provided in some environment. The bundle consists of five elements:
- Supporting Facility - The physical resources that must be in place before a service can be offered. Examples are golf course, barbershop, restaurant, etc.
- Facilitating Goods - The material purchased or consumed by the buyer, or the items provided by the customer. Examples are golf clubs, skis, food items, replacement auto parts, legal documents and medical supplies.
- Information - Data that is available from the customer or provider to enable efficient and customized service. Examples include electronic patient medical records, airline web site showing seats available on a flight, customer preferences from previous visits, etc.
- Explicit Services - The benefits that are readily observable by the senses and that consist of the essential or intrinsic features of the service. Examples are the absence of pain after a tooth is repaired, a smooth running car after a tune up, ell shaped hair style and clean appearance after a visit to your barber, response time of a fire department, etc.
- Implicit Services - Psychological benefits that the customer may sense only vaguely or extrinsic features of the service. Examples are the status of a degree from an Ivy League school, worry free auto repair, etc.
All these features are experienced by the customer, and forms the basis of the his/her perception of the service. The total experience - the image defined by the service package features - offered to the customer should be consistent with the desired service package.
A service package is a bundle of explicit and implicit benefits performed with a supporting facility and using facilitated goods. When you eat at a fast food restaurant (supporting facility), you may purchase a hamburger (facilitating good) that someone else cooked for you (service).
Take for example, a budget hotel; the supporting facility is a concrete block building with austere finishing; facilitation goods are reduced to the minimum soap, towels, and tissue paper; information is the room availability used to book reservation; the explicit service is a comfortable bed in a clean room; and the implicit service might include a friendly desk clerk and the security of a well-lighted parking area.
[TBD]
The capacity of these systems is defined in terms of the output of products/parts per some specified interval. Production work centers are augmented with work-in-process (WIP) inventory stores that act as buffers to bottleneck resources and work centers that constrain the flow of products through the system.
Production Strategy
Production strategy is a broad long-term action plan made for achieving the main objectives of an organization. Production strategies tell us what the production function/department must do to achieve the top aim of the organization. Production strategy deals with decisions/choices about how and where the products or services will be manufactured or delivered, technology to be used, management of resources, plus purchasing and relationships with suppliers.
Manufacturing Operations Strategies
Manufacturing operations is concerned with the design of manufacturing system that provides significant benefits in your ability to satisfy customer demand, in your ability to bring new products to market, and your ability to apply improvements and new technologies to your manufacturing processes. The focus in manufacturing operations on meeting competitive challenges are in the following areas:
- Total Productive Maintenance - TPM targets zero downtime, zero defects and zero accidents through improved equipment reliability and employee involvement.
- Lean Manufacturing - Lean addresses quality, cost and delivery issues by redesigning manufacturing systems to reduce lead times and increase flexibility.
- Six Sigma - Six Sigma addresses quality issues through projects to reduce variation and improve process capability.
- Manufacturing Leadership Development - focuses on the important role of the team leader or supervisor in managing and motivating the production teams to achieve their objectives.
With the help of operations strategy, an organization can translate its competitive priorities and product plans into processes related to decision-making. Decisions related to operations help in determining different processes for producing variety and volume of products.
A manufacturer can achieve competitive advantage, which is an advantage over other companies that operate in the same industry, by achieving operational performance objectives for its production and storage processes. Such objectives can be categorized as:
- Functional Performance Objectives - functional performance can be gauged according to the total dollars spent for such items as warehousing of materials, transportation and order processing as well as the number of complete orders delivered to the customer and the average number of days between order receipt and product delivery.
- Customer Accommodation Performance Objectives - customer accommodation performance criteria include the number of perfect orders and the level of customer satisfaction achieved by logistics processes.
- Logistics Performance Objectives - [].
However, each performance goal in these categories, as well as the logistics performance objectives category, is defined for an individual business process. As Jan Olhage writes in “Advances in Production Systems,” a manufacturer can define specific objectives for the procurement, production and distribution logistics processes in particular.
Service Operations Strategy
At the service strategy level, the service firm must define its service concept, operating system and service delivery system. The service strategy links the firm's strategic position with tactical execution. The firm begins by determining its competitive priorities, and its order winners and order qualifiers. Competitive priorities are the characteristics of the firm or things that it does better than other service firms (e.g., low cost, quality, service, or flexibility). The firm's competitive priority(s) must be both an order qualifier and an order winner. The order qualifier is a characteristic that the service must possess in order to compete in the market. If the firm lacks this then the consumer will not even consider purchasing the firm's service. The order winner is the characteristic that will cause the consumer to purchase the firm's service over its competitors. The service concept then is the set of competitive priorities that the target market values.
The service delivery system defines the components of the system necessary to execute the service concept. Examples of the needed variables are capacity requirements, quality management systems, and management policies. Each of these should support the firm's competitive priorities so that the firm is clearly distinct from its competitors.
The operations management structure describes how the firm's different functions (marketing, finance, and operations) will support the service concept. For example, if the firm's order winning competitive priority is quality, what will operations do to ensure quality of the service and how will marketing promote this characteristic?
The service delivery system defines the components of the system necessary to execute the service concept. Examples of the needed variables are capacity requirements, quality management systems, and management policies. Each of these should support the firm's competitive priorities so that the firm is clearly distinct from its competitors.
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