Operations Strategy Formulation Process

An operations strategy aims at linking various short-term and longterm operations decisions to the corporate strategy and develops capabilities in which an organisation needs to be competitive. The operations strategy is formulated by following a process that defines the way of designing strategies.

Operations Strategy Formulation Process

It reflects what the operations managers should do and what they actually do in practice. The operations strategy formulation process can be understood with the help of a series of steps, which are shown in Figure:

Let us now discuss the steps involved in the operations strategy formulation process in detail:

• Understand the competitive dynamics at marketplace
  
• Identify order-qualifying and order-winning attributes
  
• Devise the overall corporate strategy
  
• Arrive at operations strategy

Understand the competitive dynamics at marketplace

The formulation of an operations strategy begins with scanning the marketplace and understanding its dynamics. This helps the organisation in understanding the issues that it must consider while formulating its operations strategies. It involves detailed analysis of current market structure, existing competitors and their offerings and the competition intensity level.

The analysis helps an organisation to identify which aspects of its products/services can provide it a competitive advantage over its competitors. For example, Tata Motors analysed the market and identified that there is a scope for the development of an affordable car that would appeal to many Indians who ride motorcycles. Market analysis led the company to launch the ‘Tata Nano’ car with a price of Rs 100,000.

While analysing the marketplace, the organisation must be aware of the dynamic expectations of customers that keep changing with time. Technological improvement and infrastructural growth may cause a shift in customer’s expectations about a product/ service. Thus, organisations should prioritise their alternatives in a manner that could help it to deal with the dynamic nature of the marketplace.

Identify order-qualifying and order-winning attributes

Analysis of the competitive dynamics leads the organisation to identify the order-qualifying and order-winning attributes for a product/service that it is offering. Order-qualifying attributes refer to the set of attributes that a customer expects in a product/ service while considering to purchase it. The absence of any of these attributes may make the customer not to buy the product/ service.

However, the mere presence of these attributes does not guarantee that the customer will buy the product/service. The order-qualifying attributes only indicate the qualifying level of a product/service for purchase consideration. Let us take the example of a smartphone. Internet and networking features are one of the basic order-qualifying attributes for a smartphone. You would not buy a smartphone if it does not provide these features. However, mere presence of these features may not guarantee that you would purchase the smartphone.

There should be some other attributes with potential to appeal customers to buy the product/service and provide a better value for money. Such attributes that motivate the customers to buy a product/service are called order-winning attributes. The presence of order-winning attributes helps customer’s to differentiate a product/service from competitor’s offerings.

In addition, it also favourably influences the customer’s buying decision in favour of the product/service. The more the number of such attributes in a product/service, the greater is the chance of a customer to buy the product/service. For example, speedy wireless connectivity; ubiquitous and automatic Wi-Fi; fingerprint sensor, optical- or voice-based security; inductive wireless charging; etc. are some order-winning attributes that may appeal you to buy a smartphone.

Identify strategic options for sustaining competitive advantage: At this stage, the organisation must identify the order-winning attributes of its products/services and try to sustain them for a competitive advantage. The order-qualifying and order-winning attributes give a set of strategic options that may help the organisation in sustaining a competitive advantage.

Strategic options are action-oriented responses to the external situation that an organisation faces. Organisations require to analyse and weigh each strategic option, and select the most suitable one to achieve the competitive advantage. With the help of these strategic options, the organisation may perform better and provide high-quality products/services to its customers.

Devise the overall corporate strategy

Organisations may not use all strategic options available to them. This could be due to the limited availability of resources and constraints. Thus, it is required to match available strategic options (for sustaining the competitive advantage) with available resources and constraints. This leads the organisation to select the most appropriate strategic option.

Based on the selected strategic option, the organisation should develop a strategic plan to fulfil organisational objectives by taking into consideration the strengths and weaknesses of the organisation. This results into the development of the overall corporate strategy. The corporate strategy specifies the business that the organisation will pursue; examines new opportunities and threats in the environment and identifies growth objectives. It provides an overall direction for carrying out all the organisation’s functions.

Arrive at operations strategy

Once the corporate strategy is developed, it serves the basis for the operations strategy. In other words, the operations strategy specifies the way through which operations implement the corporate strategy. Suppose, the corporate strategy of an organisation is to provide low-cost goods, the choices made as the operations strategy must be consistent with the overall corporate strategy.

To reduce cost, operations strategies may focus on producing in large capacities to exploit scale economies or designing the low-cost procurement and supply chain activities to get economy suppliers for continuous cost reduction of input materials.

The operations strategy may also focus on continuous cost-improvement, productivity maximisation and cost control by planning and control activities and thereby reducing the overall cost. Thus, operations strategy paves the way for achieving the corporate strategy. Arriving at an appropriate operations strategy can help an organisation to develop capabilities that the organisation needs to achieve its corporate strategies.

The process of operations strategy formulation helps in generating a specific course of actions for running the operations system and thereby, providing operational excellence and competitive advantage to an organisation. Besides the efficient operations strategy formulation, an organisation requires a strong support process for the effective implementation of operations strategies. The support process provides vital resources and input to support the core process (implementation of operations strategies).

The formulation and implementation of an operations strategy may get support from accounting, finance, human resource, marketing and Management Information Systems (MIS). The human resource function provides support processes by recruiting skilled workforce to properly execute their assigned responsibilities. The accounting function support process keeps track of the organisation’s financial resources.

The MIS support process helps in the processing and movement of information and data to make business decisions. The marketing support process performs market research, devices a marketing plan and involves product development. Thus, you can see that all of these support processes help in implementing the operations strategy to create value for the organisation and its customers.