Operation Strategy and Product Strategy

Let us try to understand the relationships between the operation strategy and product strategy. The product strategy decides the basic policy covering various factors like what type of services are to be provided for a particular product to what type of customers and in order to do so what should be the attributes and performances of this product. The logic similar to that of operation strategy can be used while setting up this product strategy.

In this way, the product strategy and operation strategy have considerable amount of common points. In this text book, most of the points deal with setting up of mainly the operation strategy, however, a major part of these points is certainly applicable to the product strategy also.

Though, there are many common points, the two have dissimilarities also. The biggest dissimilarities deal with the management resources and business system. The operation strategy includes the decision regarding what should be done about the business system. On the other hand, the business system forms a postulate or the given conditions in connection with the decision on product strategy. The product strategy is decided on the basis of given business system which in turn is decided by the operation strategy. From this point of view, it can be said that products strategy is a lower level strategy of operation strategy.

Further, the product strategy is again restricted on the basis of what type of appointed tasks have been fixed for the said product among the different products. These type of appointed tasks are normally decided in the operation strategy.

The fundamental topic of operational strategy is to make a business system. However, there are other decisions also which need to be carried out under the product strategy and these are, who should be targeted as customers for a particular product or service, what should be the attributes and performances of the product which has to be supplied to the customer and the worth and the other factors include secondary service, place of sales, advertisement and propaganda and the price etc.

Formulation of Operation Strategy

It was mentioned earlier that the operation strategy basically answers three question, viz. “to whom”, “what” and “how”. This requires various types of analysis and decisions. The various topics of the chapter include these factors and their explanations like what must be thought of under operation strategy and what type of analysis should be conducted through what types of methods etc.
In order to establish the operation the strategy, it is necessary to carry out the analysis and decisions on the following four aspects.

i. Decision regarding operation field (operation domain).
ii. Customer analysis.
iii. Competition analysis.
iv. Analysis of capability and system of one’s own company.

1. Deciding operation field
Definition of operation field (in other words the operation domain) is the first problem while setting up the operation strategy. This deals with deciding the place where one is fighting.

Generally, the operation field for setting up the operation strategy refers to an industry or a market field, where the independently decision making makes sense and it is possible to carry out the decision making regarding the operation independent of other operation fields. However, this does not mean that the operation field is decided unilaterally.

Let us try to study it further with the example of electrical appliances. The industry of electrical appliances can be classified as one operation field through a wider definition. However, it includes various market fields which can be considered independently for setting the operation strategy because of difference in characteristics like those of heavy duty domestic electrical appliances and electronic components etc. Further, even in the field of domestic electrical appliances, it covers the fields of audio-visual instruments and other may also have significant meaning. Further, the domestic electrical appliances field covers vacuum cleaner, washing machines, air-conditioner, micro-wave oven and various other such products. It is also possible to establish operation strategy for each product.

It is very difficult to decide the conditions, which can satisfy everybody while defining the criteria on suitability of level of operation field. The decision with regard to what needs to be defined as operation field depends upon the position of each enterprise, e.g. Matsushita Denki (National Panasonic) may decide product-wise detailed operation fields. Whereas Mistubishi Denki or Hitachi may take a broader view for the definition and pock up domestic electrical appliances as the unit for setting up the operation strategy. Considering the difference in the circumstances for each enterprise, it may not be possible to say that the method adopted by Matsushita is correct and the one adopted by Mistubishi or Hitachi is wrong.

Again, there is another problem related to the section from which the definition is arrived at. Depending upon the section, the understanding regarding the customer needs and the competition rivals will vary, e.g. an operation division dealing with piano or a piano manufacturer shall have the other piano manufacturing companies as the competition rivals, if the operation field is read in literal sense. However, if the piano manufacturing company or the division considers manufactures of musical instruments as well as electronic musical instruments shall form the rival group. The three dimensions of customer layer, customer functions and technology (or product) are the typical sections or the opening in the case. This three dimensional approach has been explained in detail under clause 3.2 of chapter 3 in this book.

Once the operation field (domain) is decided, the battle front also gets decided. The next topic is to decided about what type of customers have to be targeted (decisions regarding the customer) and with who else the customer has to deal with (decision regarding the competition rival).

2. Customer analysis
It is necessary to carry out the customer analysis in order to arrive at a decision for selecting the customers and type of values to be provided to the customer. When all the customers within a particular operation field are targeted to be satisfied, it always leaves some dissatisfaction for all the customers. The demands of customer will vary depending upon the targeted customers. For example, in the case of a travel agency dealing with airline service, a businessman may lay importance on the punctuality of time and cutting down the time requirement, whereas general tourists shall lay more importance on expenses.

Therefore it becomes necessary to divide the customers in a number of groups in order to analyses what exactly are the demands of different types of customers. The techniques for doing so is explained under clause 2.3 of this chapter.

3. Competition analysis
Some sort of competition always exists in the market. While making effort to create distinction vis-a-vis the competition rival, it becomes necessary to know about the competition rivals and what are their capabilities and systems. It order to know these factors, competition analysis plays a major role.

4.Analysis of capability and system one’s own company
It is necessary to attain a persistent and constant capability and establish a stabilised system in order to provide a constant value to the customer and to display a distinction vis-a-vis the competition rival. The resource for capability of any enterprise is the management resource. Further, it is necessary to establish and provide value in a stable and consistent way to the customers on a continuous basis.

The management resources and the tasks of operation as assigned and distributed by the head office are taken as a starting point and the 3WH viz. “to whom”, “what” and “how” are decided on the basis of above mentioned customer analysis, competition analysis and the analysis regarding capability and system of one’s own company.

Overall Company Strategy and the Operation Strategy

The operation strategy should be established in such a manner that it conforms with the overall company strategy.

The missions of various operations are decided on the basis of overall strategy in a rather diversified enterprise and it is very normal that its operation strategy is decided to accomplish these missions. The missions or the appointed tasks of operations are, e.g. “first of all strengthen the position in the market even if the issue of profit in this operation field has to be overlooked” or “increase the profit while restriction the investment” or “to become the main stay” etc.

In the case of failure to establish operation strategy through which the selected task of an operation can be accomplished, it becomes mandatory to study once again the validity of selected task itself. Consequently, the selected task of any operation in not to be decided from the top, i.e. through top down management. In most of the cases, it is decided through negotiation between the people, who decide the overall strategy for the company and those, who decide the operation strategy.

Further, the distribution of management resources is also decided by the head office along with the decision regarding the selected tasks of operations. The above mentioned PPMs works as a mean for arriving at this decision also. The resource distribution is also not decided unilaterally by the set of people to decide the overall strategy of the company. It is rather decided in most of the cases through discussion with those who establish the operation strategy.

Functions of Operation Strategy

(-) Operation Strategy

Operation strategy is the basic conception for carrying out the operations in a particular operation field. It can be described as an overall concept in concrete form which takes care of different aspects like what items of value needs to be supplied to what type of customers and what are the capabilities and system requirements for accomplishing the same.

Operation strategy is the lower level strategy of the overall company strategy. The basic problem of overall strategy of the company is to cope up with the structural changes in the environment and the conceptions of how to carry out activities in the operation structure to achieve the dream and vision of the company. The overall strategy of the company (strategy of operation structure) shall be taken up for learning in details in chapter 3 of this book.

In contrast, the topics regarding operation strategy include basically the type of customers to be targeted in a particular operation field and the type of products or the services (or the combinations of the two) to be provided in what manner. In other words, it deals with providing answers for “to whom”, “what” and “how”.

However there is one more additional item which is the competition. The competitive rival has also been making similar efforts to provide similar type of value to similar customers. While establishing the strategy for overall company, the competition is not the essential problem, whereas, it forms the most essential problem in the case of operation strategy. This is why operation strategy is sometimes called competition strategy.

In the operation strategy, creation of some difference somehow as compared to the competition rival becomes the essential problem. This is known as creation of distinction and “how” as described above means “how to create the difference”.

The establishment of operation strategy is normally carried out at the level of operation division (marketing). However, there are some companies which have used strategy operation unit extending over to the operation division as the unit for establishing operation strategy. As against this, the overall strategy of the company is decided by the head office.

Operation Strategy

The problem, which forms the core of the operation strategy, is the internal competition within various industries due to the different operation activities conducted by the contributing enterprises. It becomes necessary to formulate a fundamental policy for establishing distinctive pre-dominance against the rival enterprise, in order to win and survive in the industrial competition. In other words, the key concept is the competition strategy. From this point of view, it can also be said that competition concept is the most important factor of the operation strategy.

Earlier, the problem of competition strategy used to be discussed as the problem of strategy of marketing division. However, today the enterprise level competition is not limited to the marketing division. It is very much linked to different divisions of the enterprise. It is based on the cooperative actions taken by the people from different professions in the enterprise. Therefore, the problem of competition among the enterprises is looked upon as competition strategy from various view points, for example, the major contributing elements of the rival companies, strength and weakness of one’s own company, customer segment, industry and the market and decisions regarding the means of establishing competitive pre-dominance.

The strategy with regard to various products can be considered under the operation strategy. The products strategy has the theory similar to that of operation strategy. However, in the case of operation strategy the construction of basis set up for the competition forms the major topic, whereas in product strategy, stratification of products within the existing set up forms the major topic.

Let us try to learn about the operation strategy and products strategy in this chapter. The topics like similarities and dissimilarities between operation strategy and products strategy, the relationship between operation strategy and basic set up of competition (business system), the framework for competition analysis, basic similar models of competition strategy, life cycle of the industry etc. have been taken up in this posts.