MANAGEMENT PROCESSES CAT a) Discuss with use of examples the strategic role of information technology.

Over the last decade there has been an unprecedented growth in technological capability. Technology has enabled companies to share real-time information across the globe, to improve the speed and quality of their processed and to design products in innovative ways. Companies can use technology to help them gain an advantage over their competitors. Studies have shown that companies that invest in new technologies tend to improve their financial position over those that do not. There are three main types of technology. They are differentiated based upon their application.

Product technology which is any new technology developed by a firm. Product technology is important as companies must regularly update their processes to produce the latest types of products. Examples of new products are flash disks and TFT monitors.

Process technology which is the technology used to improve process of creating goods and services. Examples would be Computer Aided Design (CAD) and computer-aided manufacturing (CAM). These technologies are used to assist engineers in the way in which they design and manufacture products. Process technology is important since it enables tasks to be accomplished more efficiently.

Information technology which enables communication, processing and storage of information. The internet has enabled electronic commerce and the creation of virtual marketplace and has linked customers and buyers. Another example of information technology is enterprise resource planning (ERP) which functions via large software programs used for planning and coordinating all resources throughout the entire enterprise. This has enabled companies to reduce costs and improve responsiveness.

Technology can also be used as a tool for competitive advantage. It can be acquired to improve processes and maintain up-to-date standards. Technology can also be used to gain a competitive advantage e.g. by acquiring technology a company can improve quality, reduce costs and improve product delivery. This can provide an advantage over the competition and help gain market share.
1 Management Processes CAT| Institute of Advanced Technology/Maseno University

Globalization of business operations As the industry becomes more global in its procurement, manufacturing and marketing operations, it requires greater use of information technology to reduce time and space barriers. Global business operations require that both time and distance barriers be eliminated or reduced between the organization, suppliers, customers and shareholders. This calls for online or just in time communications, coordination and control of physical, finance and human resource. Services such as FAX, data network, personal computer terminals and private lines have been growing rapidly around the world. An example of global business operations is investment banking. Benefits include global marketing, global resources, global procurement and global economy. Organizational changes With constant reorganization as well as increased mergers and acquisition top management recognizes the need for flexibility through compatible information technologies. Reorganization helps in cost efficiency through consolidation and automation of functions. Also as major industries mature and competition intensifies, they are reorganised to become market driven. Other benefits are mergers and acquisition, down sizing and consolidation, security and crisis management, market driven reorganisation.

a) The operations strategy focuses on developing specific capabilities called competitive priorities. Indentify four competitive priorities. Competitive advantage Capabilities that the operation functions can develop in order to give a company a competitive advantage in its market.

i)

Cost A competitive priority focussing on low cost. Cost competing based on cost means offering a product at a low price relative to the prices of competing products. The need for this type of competition emerges from the business strategy. It should be noted that a low-cost strategy can result in a higher profit margin, even at a competitive price. Also a low-cost strategy doesnt imply low quality. To develop this competitive priority, the operations
2 Management Processes CAT| Institute of Advanced Technology/Maseno University

function must focus primarily on cutting costs in the system such as costs of labor, materials and facilities and companies that compete based on cost study their operations system carefully to eliminate waste. ii) Quality importance A competitive priority focussing on the quality of goods and services When companies focus on quality as a competitive priority, they are focusing on the dimensions of quality that are considered important by their customers. Quality as a competitive priority has two dimensions: High performance design which means that the operations function will be designed to focus on aspects of quality such as superior features, close tolerance, high durability and excellent customer service. Good and service consistency which assures how often the goods or services meet the exact design specifications Another aspect is process quality which deals with designing a process to produce error free products; this includes focusing on equipment, workers, materials and every other aspect of the operation to make sure it works the way it is supposed to.

i)

Time This is a competitive priority focussing on speed and on-time delivery. Companies in all industries are competing to deliver high-quality products in as short a time as possible. Todays customers dont want to wait, and companies that can meet their need for fast service are becoming leaders in their industries. Making time a competitive priority means competing based on all time-related issues such as rapid delivery (how quick order is received) and on-time delivery (the number of time delivery are made on time).

ii)

Flexibility This is a competitive priority focusing on offering a variety of goods or services. A companys environment changes rapidly including customer needs and expectations, the ability to readily accommodate these changes can be a winning strategy. There are two dimensions of flexibility. One is Product flexibility which

Management Processes CAT| Institute of Advanced Technology/Maseno University

is the ability to offer a wide variety of goods or services and customize them to the unique needs of customers. Volume flexibility is the ability to increase or decrease the amount produced in order to accommodate changes in the demand. Flexibility can quickly add new products that may be important to customers or easily drop a product that is not doing well.

a) Explain the role of Operations Strategy in the Organization

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. Operation strategies specify the policies and plan for using the organizations resources to support its long-term competitive strategy. Since the operations function is responsible for managing the resources needed to produce the companys goods and services, operations strategy is the plan that specifies the design and use of resources to support the business strategy. This includes the location, size and type of facilities available, workers skills and talents required; use of technology, special processes needed, special equipment and quality control methods. The operation strategy should therefore be aligned with the companys business strategy and enable the company to achieve its long-term plan. For example the business strategy of FedEx, the worlds largest provider of expedited delivery services is to complete on time and dependability of deliveries. The operations strategy of FedEx developed a plan for resources to support its business strategy. To provide speed of delivery, FedEx acquired its own fleet of airplanes and to provide dependability of deliveries, FedEx invested in a sophisticated bar code technology to track all packages. Operations strategies also offer competitive advantage to companies, for example in 1970s and 1980s Japanese companies began offering products of superior quality at lower cost, and U.S companies lost market shares to their Japanese counterparts thus Japanese companies became more competitive because of their operations strategy that is all their resources were specifically designed to directly support the companys overall strategic plan.
4 Management Processes CAT| Institute of Advanced Technology/Maseno University

b) Explain the relationship between business strategy and operations strategy. Business strategy defines long range plans for companies and operation strategy is a long range plan for the operations functions that specifies the design and use of resources to support the business strategy. A business strategy is developed after its managers have considered many factors and have made some strategic decisions including what business the company is in (the companys mission), analyzing and developing an understanding of the market (environment scanning), and identifying the companys strengths (core competencies) An operations strategy on the other hand will provide a plan for the design and management of operations functions in ways that support the business strategy. The operations strategy relates the business strategy to the operation functions; it focuses on specific capabilities (competitive priorities) of the operation that gives the company a competitive edge.

References
1. Fine, Charles H. Clock speed, winning Industry control in the Age of Temporary

Advantage. New York: Perseus Books, 1998

2. Gagnon, S. Resource Based Competition and the New operations strategy,

International Journal of Operations and production management 19, 2, 1999, 135 138
3. Gordon, Benjamin H. The changing Face of Third Party Logistics Supply chain

Management Review, March/April 2003, 50-57

Competitive through manufacturing. New York: John Wiley & Sons, 1984
5. Hill, Terry. Manufacturing strategy Text and cases, Irwin McGraw. Hill, 2000

6. Kendall, Ken E. The significance of Information systems. Research on Emerging Technologies, Decision Sciences, 28,4,1997, 775 - 792

Management Processes CAT| Institute of Advanced Technology/Maseno University