The Crimson Press Curriculum Center

First Page and the Assignment Questions:
To be successful, an organization needs a strategy, which is simply a carefully developed long-range plan for achieving specific desired results. A good strategy defines how an organization will compete in the marketplace. It incorporates how the organization will obtain funding (debt, equity, external sources, internal sources), with whom the organization will compete and who its customers will be. Strategy also determines along which dimensions the organization will compete. The “classic” competitive dimensions are cost (low price), quality (high quality), flexibility (ability to respond to changes in demand volume and product mix) and delivery (speed of service). During the last decade or so, service has been added to these competitive priorities

At one time, managers believed that organizations only needed to excel at one of these competitive priorities. However, due to both increased competition and advances in technology, customers expect excellence in several dimensions - and many firms have risen to the challenge.

In order to excel at any of the competitive priorities, a firm must determine its critical success factors: the activities, conditions, or other deliverables that are necessary for the firm to achieve its business goals - in other words, the things the organization must get right. For example, if the goal of a bank is to achieve a certain percentage of Internet-based transactions, a critical success factor will be a user-friendly website that encourages customers to bank on-line rather than at an ATM or at a teller window.

Once the critical success factors have been identified, the firm must develop a set of distinctive competencies. A distinctive competency is an exceptional capability that creates a preference for a firm and its products or services in the marketplace, enabling it to achieve a leadership position over time. From a strategic perspective, particularly in services, which are relatively easy to copy, it is critical for firms to develop some capabilities into distinctive competencies that are difficult for other firms to replicate. (Note: the terms distinctive competency and core competency are often used interchangeably. If there is a difference between the two, it is probably a perspective difference. Distinctive competencies are perceived by the customer and hence relate directly to the firm's success in the marketplace. For example, the ability to offer stylish haircuts at a low price may be the distinctive competency perceived by the customer. Core competencies may not be perceived by the directly by the customer, but they relate to what the customer perceives as distinctive competencies. For example, the distinctive competency of stylish haircuts at a low price may be related to the hair salon chain's ability to attract and retain well-trained young stylists.)

In large organizations strategy can be viewed from a number of levels. Corporate strategy is determined by how the organization will be financed, its financial performance expectations, and who its competitors are. Each strategic business unit within a corporation will have its own strategy based on who its customers are. Corporate and business unit strategies determine the organization's competitive priorities. The competitive priorities, in turn, determine what decisions are made within each business function within the strategic business unit.

Strategic Operations Decisions

The strategic decisions in operations have been classified into two categories: structural decisions, which relate to bricks-and-mortar issues, and infrastructure decisions, which relate to less tangible issues.

Structural Decisions

Structural operations strategy decisions include (a) location, (b) capacity, (c) vertical integration and (d) process technology.

Location. For services that deal directly with the customer, the location decision is driven by where the customers are. Manufacturing organizations and low contact services locate where labor and other operating costs are lower. For the production of some goods it is may also be important to consider nearness to materials and suppliers and shipping distances when determining a plant's location.