Strategic Operations Management in the IT Market - Case Study Example

Strategic Operations Management Strategic Operations Management is the management of strategic operations or operations which define business goals and help to achieve business objectives. It involves taking steps to develop plans and procedure which will enable an organization to gain a competitive edge in the market. The net result from strategic operations management is that the company is able to come up with a plan which gives the direction in which the company is heading in the years to come ( for example, the next five years). If strategic management has to be effective, it is very important for a company to assess where their position is, in terms of their profits and their competitors and where they see themselves going because this is the foundation in which strategic management is based. Another aspect which influences strategic management is the level of realism an organization adopts in understanding their current position and what they want to achieve in the future. For example, a company which has just entered into a competitive market segment such as the IT market, cannot expect to rise to the level of leading organization in the IT market, in say a five year period. In order to do this they need more time and input for growth and development. Strategic operation management operates on different time scales. A company can undertake short-term strategies, which help it to manage the market situation for the present or it can take-up long term strategies wherein it makes plans ion how to implement future business objectives. Understanding the concept of strategy What is the concept of strategy? Strategy is a concept which was adopted from the military and in business strategies (as in the military) help to bridge the gap between what is business policy and business tactics. That is to say strategy and tactics bridge the gap between ends and means. In short strategy can be described as combination of ideas, insights, experiences, thoughts, memories, perceptions, goals and expertise which all put together guide actions taken to achieve particular ends. It is the course charted by an organization, towards achieving it’s goals. Thus, strategy can be understood as the means for an organization to achieve competitive advantage, by delivering a unique value added product or service to the customer. This implies that the organization must have a clear and precise view of how to position themselves uniquely in their industry. This can be seen in example such as the way in which Southwest Airlines positions itself in the airline industry and IKEA in furniture retailing. ( Michael Porter, 1996). Strategies have a set of characteristics. Following are some general characteristics attributed to strategies: Strategy is a concept which has been borrowed from the military and adapted for business use. Strategy defines the means by which an organization can go about attaining their business goals and objectives. Strategy is concerned with business objective and aim can be accomplished and not really what those aims are or ought to be, or how they are established. Strategy is one part of a four-part structure, wherein the first part seeks to meet goals, the second part looks into the strategies for obtaining them and the ways in which resources should be use for that purpose, the third part is about tactics, or the ways in which resources which are deployed are actually used and fourth is about the resources themselves. Thus strategy and tactics bridge the gap between ends and means. Strategies constantly adapt according to circumstances and they evolve according to what is required to obtain the goals or business objectives. Operations strategy is a strategy which encompasses the total pattern of decisions taken to shape the long-term capabilities of any type of operations and this is done through the reconciliation of market requirements with operations resources. Operations management is management of processes which produce and distribute products and services. These processes include activities such as purchases, inventory control, quality control, storage, logistics and evaluations and operations management greatly emphasises on carrying out these operations efficiently and effectively. Operations management includes making a substantial measurement and analysis of internal processes and how it is carried out largely depends on the nature of products or services in the organization. If an operational strategist has to be successful in managing an organization’s operations, they must posses a combination of the skills of a good business strategist and have a deep appreciation of operational issues. Thus, operations management is that area of business which is concerned with the production of goods and services and it involves taking the responsibility to ensure that business operations are efficient and effective. If business operations are to be carried out efficiently, then it is important for the operations strategist to use the process of strategic management. This is because successful operations management largely depends on having the right strategies in place. These strategies should combine both manufacturing and service areas into an overall customer offering. What is implies is that strategic relations must be established with other players in the business arena and that operations management is no longer a firm-specific matter. 'Strategic Operations Management' combines four themes which include strategy, services, innovation and management of relationships both in the organization’s supply chain and with other areas of the business environment. Thus, it does not consider just one aspect of the business it consider how all business activities contribute to the achievement of business objective and strategies are implemented accordingly. Brief look at strategic management and how it is applicable in formulating strategies for effective operations management Strategic management helps an organization to determine it’s mission statement, values, goals, objectives, roles, responsibilities and schedules for work delivery. In doing so, it sets out areas on which management must make key decisions to gain an edge over their competitors. In order to survive and prosper in the new millennium, it is necessary for organizations to build and sustain a competitive advantage (David Fred,2005) Strategic management enables an organization to build it’s vision on values, makes it acknowledge it’s accountability to the members of the community. Strategic management decision are based on quality data without it management ceases to be effective. Thus, strategic management can be defined as a management approach which focuses on positioning the organization for success for the present as well as in the future.(Florida International University, 2001). The process involved in formulating an effective strategy is a three step one which includes: Making a situational analysis, which take into account the organization’s, micro-environment and macro-environment. In the case of an organization’s operation management activities, its micro-environment is the process which help to carry out production of goods and services and it’s macro-environment are it’s competitors and consumers. Situational analysis will help it to determine how to map its internal activities according to the influences of external factors. Setting objectives according to the influences in the micro-environment and macro-environment. In the case of any operations management activity such as quality control, the organization can sets its objectives, on what is to be achieved by quality control. This is in turn determined its’ future aspirations, mission statements, overall corporate objectives, strategic business unit objectives and tactical objectives. Devise a strategic plan to implement these objectives. This involves making a strategic plan which enables the organization to achieve its operation management objectives, such as implementing more efficinet work processes and so on. What is strategy formulation and strategy implementation? There are two main concepts in strategic management, which are strategy formulation and strategy implementation. Strategy formulation starts out with making an analysis of the conditions existing within the organization and the condition which exists outside the organization.( analysis of the micro-environment and macro-environment). Business objectives are established on the basis of such analysis. In laying down business objective, the organization’s mission statements, vision statement, strategic business unit objectives (both financial and strategic), and tactical objectives are also laid out. In laying down these objectives, a strategic plan is established which helps the organization to achieve these objectives. The process of strategy formulation enables an organization to determine where they are now, determining where they want to go, and then determining how to get there. Strategy implementation involves taking steps to put the strategy plan into action. This involves allocating resources such as financial, personnel, time, and computer system support and so on to put the strategy into effect. The plan has to be implemented which means responsibilities and roles must be assigned to concerned staff on how to achieve business objective through the chartered strategy. This is to be followed with monitoring of results. The results must be compared to benchmarks and best practices for the purpose of evaluating the efficacy and efficiency of the process, controlling variances, and making adjustments to the process as necessary. In the case of implementing some specific program such as bringing out a new product into the existing market, strategy implementation involves developing the process of bringing out the new product, training, process testing, documentation, and integration with (and/or conversion from) legacy processes, which a re processes by which the company had carried out it’s operations thus far. Both aspects of strategic management which is strategy formation and strategy implementation are an on-going one and continuous one. From time to time the strategy has to be reassessed and it has to be changed according to market situation or situation within the organization. In looking into how strategy formulation and strategy implementation is applicable to operations management, formulating strategies to achieve short term operations target ensure smooth and efficient achievement of such targets within an estimated time-frame. Implementing effective strategies in inventory control ensures that inventory is maintained at the correct levels and there is not over-stocking or under stocking. However, the formulation of effective strategies is an outcome of strategy planning. Strategy planning The strength of effective strategic management is the strategic plan. Strategic planning is ht process of identifying business strategies and taking necessary decisions on allocating resources which ensure that this plan is put into action. Thus strategic planning is the process of identifying where you want to go, your values, factors that will affect your success, and how to get where you are going, within a long time frame. Strategic planning can follows a three steps process as in the situation- target-path process. In this process, the current situation is evaluated, targets are identified and the path the goal is mapped out. It can follow a four-step process as in draw- see- think- and plan. In this process, the organization draw out its objectives, see or analyses the current situation and assesses how much of a gap exist between ideal targets and current status. If the gap is wide an analysis is made into why this has occurred. The next steps is to think out the steps to be taken to close the gap between what is needed and what is currently happening in terms of achieving business objectives. This is followed by making a plan to allocate the resources necessary to achieve these objectives. Strategic planning can follow a five-step process which is vision-swot-formulate-implement and control. In this process the organization first defines their vision or the objectives they seek to achieve in the future. They then carry out a SWOT analysis to understand the strength and weaknesses involved, which is followed by formulating a plan of action to attain their goals keeping in mind the results of the SWOT analysis. The plan is them implemented and tasks monitoring to find out if the results match with the requirements. This process roughly follows the pattern of the process of strategy formulation and during implementation it gets into the process of strategy implementation. In any areas of operations management strategy planning plays a key issue. Taking for example, the area of procurement of raw materials, a plan which minimises the time needed to get raw materials will help to reduce the objective of cutting cost of raw materials. It will increase productivity as raw materials are made available on time. This will in turn lead to achieving the organization’s overall business goals of producing a specified quantity of their product in a particular year. Brief review of SWOT analysis One part of strategic management is making a SWOT analysis. SWOT analysis is a methodology which involves examining potential strategies based on an analysis of an organizational strengths, weaknesses, opportunities and threats (SWOT).  The combination of different elements and the extensive data collected as a result of the analysis brings about new discussions on key issues which need to be addressed to gain a competitive advantage, refinement of current strategies or generation of new strategies to reach this goal. SWOT analysis set a framework which generates strategic alternative base don situational analysis (Internet centre for Management and Business administration, 2006). The objective of SWOT analysis is to find out the key internal and external factors that are important which influence the achievement of business objectives. Analysis of the internal factors, look into the organization’s internal 'strengths' and 'weaknesses', while an analysis of the External factors, gives an understanding of the 'opportunities' and 'threats' posed by the organization’s external environment in achieving goals and objectives. When looking into an organizations’ internal factors such a the 4P’s, personnel, finance, manufacturing capabilities, and so on, the strength of one objective can be a weakness for another objective. This is also the case with external factors such as macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or competitive position. If a SWOT analysis were made on the area of inventory management, it would reveal the strengths and opportunities available to this part of business operations. Looking into the drawback and threats it faces, the problem of over-stocking under-stocking, poor quality control may arise, which need to be removed through an effective strategy plan. How to effectively implement a strategy Strategy-making processes (SMP) are basically organizational-level phenomena which involves key decisions made on behalf of the entire organization (Michael A. Hitt., Micheal., Freeman., R. Edward Freeman., Harrison, Jeffrey, 2001). If a company wants to implement it’ business strategies, it need resources. Such resources can be in the form of cash, equipment and people. If such resource must be available to an organization in order to implement a strategy, it need to give top priority to maintaining the healthy operations of their existing business. Having participated in the planning process, the individual managers on the team can use their understanding of what the organizations long-term strategies and goals are in order to make to make appropriate resource decisions everyday. For example, if the organizations objective is exercise proper inventory control by cutting inventory cost by a10% in the following year, managers can look into those work process which will help to achieve this objective and allocate resources to these work process accordingly. By effectively monitoring inventory control everyday, the organizations can achieve the 10% cut in inventory costs caused by inefficient work processes. Thus by taking decisions on how to use resources to achieve short-term objectives such as cutting inventory cost by 10% the organization will be able to achieve it’s long-term business objectives. By prioritizing it’s objectives, it can eliminate some “Urgent but Unimportant” activities and this will free up the resources needed for attacking business objectives. Is it possible for strategic management to fail? Yes there is the probability of a strategic management failing to help an organization in achieving it’s business goals. This happens when the strategy planned is not effective and ha been based on unrealistic expectations or is not formed on sound analysis of micro- and macro environments. Following are some reason as to why strategies fail. Failure to understand the requirements of the customers due to inadequate marketing research. Unable to accurately predict external reaction such as attitude of competitors or the problem of price wars, government interference. The ability of resources such as staff, equipment and processes which need to be used are not properly estimated. Lack of co-ordination between staff members and lack of proper allocation of roles and responsibilities between staff members, Failure in getting commitment from senior management and or employee in implementing the strategy. Underestimation of the time needed to accomplish objectives. Unable to comprehend new dynamic in the market place when making a strategy plan. Improper communication whereby information required is not distributed and spread out across the organization at the right time. Failure to focus on the objective and make decision according to objectives. Conclusion An effective strategy is one which helps to achieving business objective because it has made a realistic assessment of the organization’s micro and macro-environment. Strategies and tactics go together in bridging the gap between the ends and means. Strategies provide the general framework which guide actions to be taken and, at the same time, it is also is shaped by the actions taken. Formulating a strategy involves three steps. In the first step a situation analysis is performed. In this process, an assessment is made on the influence of both the internal and external environment of the organizations, that is both the micro-environmental(immediate environment) and macro-environmental(the society at large) are taken into account before making a strategy. In the second step an assessment is made of the business objectives to be achieved, keeping in mind, the influence of the organization’s micro and macro environments. In this process, vision statements (it’s view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (this includes both financial and strategic), strategic business unit objectives (this includes both financial and strategic), and tactical objectives are charted out. The final step involves taking making a strategic plan. A strategic plan is one which offers details on how to achieve business objectives. This three-step strategy formulation process is also denoted by the phrases ‘where you are now, determining where you want to go, and then determining how to get there’ and they form the basis of SWOT Analysis as well. This process of strategic planning can be followed in any area of operations management. In doing so it will make the process of operations management more efficient as inherent strengths and weakness will be ascertained. The objective of operations management is to about managing operations which are key to running the day-to-day activities of the business which are vital for it’s survival as much as the laying down of long-term business plans. It involves taking steps to analyse internal processes and in doing this SWOT analyse can help tremendously. Successful operations management involves a skilful blend of managing an organization’s operations and having good business acumen to achieve long-term business goals and objective through efficient management of business operations. Key to doing is effective strategic management which involves strategy formulation and strategy implementation all of which depend on the effectiveness of the strategy plan. Thus strategic management is the process of designing the means and methods by which a company can differentiate what it offers to the market, in such a way that their customers can clearly perceive the difference and, therefore, continue to patronise that company. References: Dobson, Paul., (2004)., Strategic Management Issues and Cases David, Fred R., (2005)., Strategic Management: Concepts And Cases Eden Cohen., Ackerman, Frances., (1998)., Making Strategy: Journey of Strategic Management Harrision Mike, (1993), Operations Management Strategy Michael A. 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