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For most organizations, success will most likely not be a random occurrence. Instead, it’ll be a result of making a series of right decisions at the right moments. Meticulous planning, good preparation and flawless execution are factors that determine success for most businesses— and it all begins with defining the right business strategy. An organization’s business strategy is a set of clearly defined plans and actions that outline how it’ll perform in certain markets with the portfolio of services and products that it has. Organizations can rely on many strategies to achieve their goal and maintain their position in competitive markets. These strategies are both long and short-term and deal with a range of activities. It’s the business manager who’s responsible for converting the mission and vision articulated in a sophisticated corporate strategy into a sustainable business strategy so that it can act as a blueprint for the whole business.
An organization’s operations constitute several processes such as manufacturing, material acquisition and delivery. Activities related to operations fall under operational strategy as it caters to operational tasks for developing products such as product diversification, expansion and size and location of the facilities. To help managers make sound decisions related to operations, we’ll discuss operational strategy meaning and the types of operations strategy. The ideas will be clearly explained using operational strategy examples.
Operational Strategy Meaning
Operations or operational strategy refers to a system of decisions that shapes all long-term operational capabilities and their offering to the overall achievement of a strategy. Quite simply, it’s a series of decisions that can help an organization implement competitive and sustainable business strategies. It supports linking long and short-term operational-level decisions with corporate strategy. From a strategic viewpoint, this allows organizations to make key operations decisions and maintain consistency with its overall objectives.
From operations strategy examples, we see that it drives an organization’s operations — the part of the business responsible for producing and distributing services and goods. Along with a business strategy, it’s critical for a business to compete in dynamically shifting markets. Effective strategies enable operations management professionals to optimize the use of people, processes, technology and resources.
To develop a sound operational level strategy, we must consider two main elements — market requirement and operations resources. Market requirements consist of goals related to performance such as time, quality, cost, dependability and flexibility. Performance objectives are mainly influenced by factors like offerings to attract customers over competitors and addressing appropriate customer needs. Operations resources deal with an organization’s capabilities, assets and processes.
Types Of Operations Strategy
Organizations can examine and implement efficient and effective systems for using work processes, personnel and resources. Here are a few common types of operations strategy:
Customer-Driven Strategy
To meet the desires and needs of the target customers, an operations strategy must include customer-driven approaches. Organizations must continuously evaluate the changing business environment and adapt to it. This helps them enhance core competencies and develop new strengths regularly. Organizations must also monitor industry trends to avoid threats as well as create new opportunities. Good customer-driven strategies ensure more clients by improving the system of new and repeat customers by building loyalty and referral.
Product Strategy
A strategy for product development must aim to deliver a compelling product or service that resonates with customers. But the job involves more than releasing new products. Organizations also need to maintain and upgrade their existing products for those who won’t buy the new ones. For example, even though smartphone brands release new models every year, they continue to provide low-cost upgrades and free patches to improve their existing models.
Market Penetration Strategy
Market penetration is an operational level strategy that focuses on capturing a larger share of the target customer base in an industry. Managers can choose strategies to target new users who have no experience with the brand or lure customers away from industry rivals. They may use multiple geographical locations to target a demographic. Adding value to existing customers is also a great way to increase spending on products or on service upgrades.
Supply Chain Strategy
This operations strategy deals with the process of building superior delivery capabilities to create excellence. Organizations can take many paths, such as minimizing product costs by making bulk purchases or increasing customer value by offering product customizations while delivering goods more efficiently. Improving the efficiency of delivery operations can involve changing warehouse layout to reduce time and effort in fulfilling orders. For example, a warehouse manager may decide to bring all frequently bought products to the front and nearer the loading dock. This saves time for both customers and employees and saves on labor by expediting the process.
Service-oriented organizations use basic operations strategy to create an efficient management team and link short- and long-term corporate decisions.
Operations Strategy Examples
Let’s look at some examples of operations strategy to get a better idea of the concept:
McDonald’s
Apart from business expansion throughout the world, McDonald’s business strategy is concerned with preparing quality food for customers quickly and at comparatively lower rates than others. To achieve their goals, they control all their operational activities by developing strategies at the management level and implementing them across all branches. The operations managers at different branches are responsible for monitoring these activities and controlling a few of them. McDonald’s uses information technology to implement new ways of enhancing its operations. Using a stock control database system, they avoid unnecessary ordering and keep stocks updated at stores, spending less time. Their competitive priorities are –
- Quick service time: McDonald’s realized pretty early that if they meet the demand of providing fast delivery, they can attract a lot of customers and reduce costs. They invested in expensive machinery that could prepare food quickly, making their products ready to serve.
- Cost: To offer quality products at reasonable rates, McDonald’s had to adopt more than one operational level strategy to reduce the cost of its operations. They use efficient equipment that saves time and lights that consume less electricity. They directly purchase most of their vegetables, especially potatoes, from farmers. Along with a low-cost supply chain, McDonald’s has also implemented strategies to manage and reduce unnecessary storage and wastage.
- Quality: McDonald’s strategy is to focus on price, product, promotion, people and place. They don’t compromise on quality, have efficient employees to serve customers and their promotions are based on good marketing and activities to build trust. Their restaurants and outlets aim to offer comfort, hygiene, safety and modern amenities. They have quality centers in North America, Europe and Asia to make sure that training is proper and quality standards are maintained.
- Flexibility: McDonald’s offers a wide variety of products. They generate new ideas and implement them in producing products or making them attractive. By adjusting output levels, they’ve created an opportunity to tackle unexpected changes in product demand.
Dell had a distinct supply chain management model in its early years. They started selling customized PCs directly to customers to meet a rapidly increasing demand. Dell became a high-tech pioneer and industry leader with its innovative sales model, offering great value to its shareholders. (https://annalee.com/) They were a multinational enterprise that gained a competitive advantage by competently and flawlessly executing an unrivaled global strategy. Dell’s competitive priorities are –
- Inventory management: Competitors used market forecasts to pre-build standard machines and stuffed their inventories. Dell made machines as per order with a mere 12 days of inventory. They implemented the Just-In-Time (JIT) strategy to operate with low inventory levels in the market. Since the cost of electronic components depreciates by almost 1% every week, Dell managed to have a cost advantage due to no excess inventory.
- Direct selling: Direct selling was an important tool in Dell’s operational level strategy. It significantly reduced costs by taking intermediaries such as retailers and wholesalers out of the equation. With customization options for computers and a vast network of suppliers with real-time information, their services proved to be attractive and customer-centric.
- Manufacturing locations: Another reason for Dell’s competitive advantage was their choice of manufacturing locations. Manufacturing units were located close to regional markets to allow better market access, minimize shipping costs and improve delivery response. In places like India, setting up manufacturing units dramatically improved their sales as products didn’t have to be shipped from Malaysia and delivery times were reduced by 50%.
Operational strategy allows organizations to translate their product plans and competitive priorities into processes related to making decisions. Operation decisions help determine the different processes for producing volume and variety of products.
Arriving at the right strategy is a process of inquiry, reasoning and elimination. Ask the right questions to test assumptions and uncover new information. Harappa’s Select A Strategy program will teach you to seek, absorb and interpret information. You’ll be able to actively engage in cognitively challenging tasks and purposefully seek knowledge. You’ll also learn to make data-driven decisions after investigating all available options. Harappa’s Select A Strategy pathway is an overarching framework to get you where you want to be.
