Boeing 787 Dreamliner Strategy and Operations Quiz

A Global View of Operations and Supply Chains

• The global economy is experiencing significant change.
• Technological advancements, communication, and transportation advancements are driving this change.
• Firms increasingly find customers and suppliers located worldwide.
• Companies are extending their distribution channels and supply chains globally.
• This includes firms competing with the talent in their global supply chain.
• International trade, global capital markets, and the movement of people are increasing.

Reasons for International Operations

• Companies are engaging in international operations to enhance supply chains.
• This includes sourcing unique resources like expertise, low-cost labor, and raw materials.
• Globalization is transforming the landscape of business operations.
• The global market demands companies to adjust to a shrinking world.
• Companies are seeking to reduce costs and minimize exchange rate vulnerabilities.
• Improved operations, deeper market understanding, and product enhancements are key reasons for internationalization.
• Attracting and retaining skilled global talent is a driving force behind international operations.

International Operations

• Perfume manufacturers seek a presence in Grasse, France, known for its production of perfume essences from Mediterranean flowers.
• International operations strive to reduce risks associated with fluctuating currency values (exchange rates) and lower direct costs.

Reducing Costs and Exchange Rate Risk

• The text highlights the example of U.S. cartoon production shifting to Manila, Philippines, illustrating how outsourcing low-skilled jobs can reduce costs and free up skilled workers for more valuable tasks.
• This relocation allows for savings to be invested in product and facility improvements, as well as worker retraining, in the home location.
• Having facilities in countries with different currencies provides companies the opportunity to manage currency risk and costs.
• The example illustrates the cost comparison of cartoon production in the United States, Korea, and the Philippines, showcasing the significant cost savings achieved by outsourcing to the Philippines.

Maquiladoras

• The text mentions Maquiladoras, free trade zones along the U.S.-Mexico border, which enable manufacturers to minimize costs by only paying for the value added by Mexican workers.
• In this setup, tariffs are levied only on the value added in Mexico, reducing the overall cost of manufacturing.

World Trade Organization (WTO)

• The WTO has played a crucial role in reducing tariffs globally, from 40% in 1940 to less than 3% today.

Free Trade Agreements

• The North American Free Trade Agreement (NAFTA) aims to eliminate trade and tariff barriers between Canada, Mexico, and the United States.
• Other agreements, such as APEC (Pacific Rim countries), SEATO (Australia, New Zealand, Japan, Hong Kong, South Korea, New Guinea, and Chile), MERCOSUR (Argentina, Brazil, Paraguay, and Uruguay), and CAFTA (Central America, Dominican Republic, and United States), are accelerating global trade.

European Union (EU)

• The EU has reduced trade barriers among member nations through standardization and a unified currency, the euro.
• Despite these efforts, the EU imposes stringent conditions on products sold within its borders, encompassing aspects like recycling standards, automotive components, and hormone-free farm products.

Improving Operations

• Companies learn from international management practices, such as improved inventory management from Japan, the use of robots in Germany, and ergonomic improvements from Scandinavia.
• International operations reduce response time to meet dynamic customer product and service requirements.
• Establishing facilities in a customer's home country facilitates faster and better service.

Understanding Markets

• International operations foster engagement with foreign customers, suppliers, and competitors, providing insights into new product and service opportunities.
• Firms gain a deeper understanding of market trends and can diversify their customer base, enhancing production flexibility and smoothing out the business cycle.
• International operations allow companies to extend the product lifecycle of established products in new markets.

Improving Products

• Collaboration and knowledge sharing between international firms drive innovation and product improvement.
• The text highlights partnerships between Toyota and BMW, and Samsung and Robert Bosch, emphasizing how these collaborations benefit both companies in terms of shared research and development, cost reductions, and access to cutting-edge technologies.

Attracting and Retaining Global Talent

• Global organizations have the advantage of offering more employment opportunities, fostering greater growth prospects for employees.
• Their worldwide presence allows them to recruit and retain skilled talent while providing a buffer against economic downturns.

Cultural and Ethical Issues

• Navigating cultural and ethical differences presents a significant challenge for companies operating internationally.
• The text emphasizes the importance of understanding and respecting cultural norms, giving the example of management styles varying across countries.
• The WTO encourages ethical conduct by establishing guidelines and safeguards for both governments and industries to protect themselves from unethical practices by foreign companies.

Developing Missions and Strategies

• An organization's mission defines its purpose and establishes a framework for its activities.
• Each functional area within a company, such as marketing, finance, and production, should develop specific missions that align with the overall mission and strategy of the company.
• Strategies are action plans designed to achieve the organization's mission.

Strategic Approaches to Competitive Advantage

• Organizations strive to achieve competitive advantage by differentiating themselves from competitors, offering cost leadership, or being more responsive to customer needs.
• Operations management translates these strategic objectives into actionable tasks and processes to deliver goods and services that are either superior, cheaper, or more responsive.
• The text emphasizes that companies can opt for a singular or a combined approach to achieve a unique competitive advantage and differentiate themselves in the market.

Company Missions

• PepsiCo's mission is to be the world's premier consumer products company focused on convenient foods and beverages
• PepsiCo aims to provide opportunities for growth and enrichment to its employees, business partners, and communities it operates in. They also aim to be honest and fair.
• Arnold Palmer Hospital for Children aims to provide state-of-the-art family-centered healthcare, focusing on restoring the joy of childhood.

Competitive Advantages

• Firms can achieve a competitive advantage by differentiating their products, offering a low cost, or providing a superior response, like speed or flexibility
• Differentiation involves offering products that are unique and valued by customers, often including aspects like convenience, product features, or accompanying services.
• Experience differentiation focuses on engaging the customer's senses to create an immersive experience for them.
• Low-cost strategies focus on minimizing expenses while maintaining customer satisfaction and value.
• Low-cost leadership involves optimizing each of the Ten Operations Decisions to minimize costs without reducing the product's value to the customer.
• Response strategies aim to satisfy customer expectations with timely product development and delivery, reliable scheduling, and flexible performance.
• Companies can achieve a competitive advantage through a combination of differentiation, low-cost, and response by effectively implementing the Ten Operations Decisions, which include Product Design, Quality Management, Process Design, Location, Layout Design, Human Resources, Supply-Chain Management, Inventory Management, Scheduling, and Maintenance.

Successful Examples

• Safeskin Corporation differentiates itself by producing innovative latex gloves that fulfill customer needs, such as hypoallergenic gloves or gloves with increased texture.
• Hard Rock Cafe provides an immersive "dining experience" by using music, memorabilia, and staff who can tell stories related to the rock and roll theme.
• Southwest Airlines implements a low-cost strategy by using smaller airports, prioritizing efficiency, and maintaining a single type of airplane for the entire fleet to reduce maintenance and operational costs.
• Walmart uses its superstores to achieve low overhead and inventory costs, while Franz Colruyt, a Belgian discount food retailer, minimizes overhead by operating in affordable locations and forgoing unnecessary expenses like background music or shopping bags.
• Hewlett-Packard has successfully adapted to the volatile personal computer market by consistently adapting to changing product designs and market demands.
• German machine manufacturers prioritize reliable response with carefully planned schedules communicated to customers to ensure timely delivery of products.
• Johnson Electric Holdings Ltd., a motor manufacturing company, thrives on speed in product development, production, and delivery.
• Super Fast Pizza utilizes a responsive system with preheated pizzas, wireless ordering, and efficient delivery to provide fast pizza delivery.

Operations Strategy

• Resource View: A strategy that takes into account the available financial, physical, human, and technological resources and ensures they align with the chosen strategy.

• Value-Chain Analysis: A method to identify activities that add unique value, such as product research, design, human resources, supply-chain management, process innovation, or quality management.

• Porter's Five Forces Model: Analyzes competitive forces, including:

  • Immediate Rivals: Direct competitors in the same market
  • Potential Entrants: New companies that could enter the market
  • Customers: The buying power of customers
  • Suppliers: The influence of suppliers on the cost of resources
  • Substitute Products: Alternatives that can replace the company's offerings

• External Factors: External factors, such as economic, legal, and cultural influences, impact strategy development and execution.

• Internal Changes: Factors within a company undergoing change, such as resources, technology, and product life cycles.

• Product Life Cycle: Products go through stages of introduction, growth, maturity, and decline, requiring adjustments in strategy.

Strategy Development and Implementation

• SWOT Analysis: A formal analysis of the firm's internal strengths and weaknesses, and external opportunities and threats. The goal is to capitalize on opportunities and minimize threats while maximizing strengths and minimizing weaknesses.

Key Success Factors and Core Competencies

• Key Success Factors (KSFs): Activities critical to a firm's survival. For example, McDonald's drive-through and efficient kitchen are KSFs.

• Core Competencies: Unique skills, talents, and capabilities that a firm excels at. Core competencies differentiate a firm and create a competitive advantage. An example is Honda's expertise in designing and manufacturing gas-powered engines.

• Identifying Key Success Factors (KSFs) and Core Competencies:

  • Determine tasks critical to a strategy's success.
  • Identify activities that provide a competitive advantage.
  • Determine areas with a high likelihood of failure and areas requiring additional resources.

• Sustainable Competitive Advantage: Achieved by identifying and strengthening KSFs and core competencies.

Operations Strategy in a Global Environment

• Operations strategy aligns with an organization's overall business strategy to achieve competitive advantage.
• Key Success Factors (KSFs) are elements essential for achieving competitive advantage in a specific industry.
• Core competencies are the strengths that differentiate an organization from its competitors.
• The 10 Strategic Operations Management (OM) decisions are:
  • Product
  • Quality
  • Process
  • Location
  • Layout
  • Human Resources
  • Supply Chain
  • Inventory
  • Scheduling
  • Maintenance
• An activity map illustrates the connection between competitive advantage, KSFs, and supporting activities.
• Southwest Airlines' competitive advantage is low cost, achieved through factors like:
  • High aircraft utilization
  • Standardized Boeing 737 fleet
  • Frequent and reliable schedules
  • Automated ticketing machines
  • "Bags fly free" policy
  • No seat assignments
  • Limited passenger service
  • Short-haul, point-to-point routes
  • High employee compensation
  • Employee ownership
  • Empowered employees
• Outsourcing involves transferring internal activities to external suppliers.
• The expansion of outsourcing is driven by factors like:
  • Cost reduction
  • Increased flexibility
  • Access to specialized skills
  • Focus on core competencies
• Brand Name Drugs, Inc. uses a product differentiation strategy, emphasizing R&D, high-quality standards, and specialized production processes.
• Generic Drug Corp. employs a low-cost strategy, prioritizing cost efficiency through lower R&D investment, meeting regulatory requirements, and using general production processes.

Operations Strategy in a Global Environment

• Operations strategy is a plan for the use of resources to achieve company goals, focused on improving efficiency, quality, and responsiveness.
• Operations management decisions are influenced by the company's mission, goals, and competitive advantage.
• Competitive advantage can be achieved through differentiation, low cost, or responsiveness.
• Differentiation involves providing unique products or services, for example, Hard Rock Cafe's immersive dining experience.
• Low cost strategies focus on minimizing production expenses, which are often important for a company's profitability, for example, Franz-Colruyt's warehouse-type stores.
• Response strategies focus on delivering products or services quickly and reliably, for example, FedEx's "absolutely, positively on time" delivery service.
• Key Success Factors (KSFs) are essential requirements for success in a specific industry, for example, layout is a KSF for fast food restaurants like McDonald's.
• Core competencies are unique skills, abilities, or talents that allow a firm to differentiate itself from its competitors.
• Strategic OM Decisions are operational activities that are based on corporate strategy and can be used to achieve a competitive advantage.
• Outsourcing can be an effective strategy for non-core activities, which are activities that are not part of a company's core competencies.

The Global Nature of Business

• Boeing partnered with over 300 suppliers in over a dozen countries to build the Dreamliner.
• The Dreamliner's global range and worldwide supply chain are setting new levels of operational efficiency.
• Japanese companies manufacture over 35% of the Dreamliner, and Italy's Alenia Aeronautica produces an additional 10%.
• The Dreamliner is the fastest-selling commercial jet in history with over 1,100 planes sold.
• Globalization and a global supply chain are key components of successful businesses in the 21st century.

Strategic Approaches to Competitive Advantage

• Operations managers deliver goods and services that are better, cheaper, or more responsive.
• Differentiation delivers better products or services.
• Cost Leadership delivers cheaper products or services.
• Response delivers more responsive products or services.

Competitive Advantage via Operations

• Companies can use ten operations decisions to achieve competitive advantage.
• The ten decisions: product, quality, process, location, layout, human resources, supply-chain management, inventory, scheduling, and maintenance.
• Companies use the ten decisions to implement a combination of differentiation, cost leadership, and response.

Strategy Development Process

• Analyze the Environment: Identify strengths, weaknesses, opportunities, and threats. Companies must understand their environment, customers, industry, and competitors.
• Determine the Corporate Mission: State the reason for the firm's existence and identify the value it wishes to create.
• Form a Strategy: Build a competitive advantage through low price, design or volume flexibility, quality, quick delivery, dependability, after-sale services, or broad product lines.
• Identify Key Success Factors (KSFs) and Core Competencies:
  • KSFs: Necessary, but not sufficient for competitive advantage. (e.g., layout for McDonald's)
  • Core Competencies: Unique skills, talents, and capabilities that set a firm apart. (e.g., consistency and quality for McDonald's).

Competitive Advantage Examples

• HP: institutionalized the ability to change products and volume, responding to dramatic changes in product design and costs.
• German Machine Industry: Maintains competitiveness despite high labor costs through reliable response and scheduling.
• Johnson Electric Holdings, Ltd.: Achieves a competitive advantage through speed: speed in product development, production, and delivery.