Trends Affecting Operations Strategy Decisions
Two major trends that have significantly impacted the role of operations strategy within an organization are an increasing trend towards the globalization of business and advances in technology especially information technology.
As we saw in the first chapter the world is quickly becoming a global village caused in large part by technology As a result competition in most industries has intensified significantly in recent years and this trend towards hyper-competition is expected to continue. At the same time globalization provides new opportunities for companies in the form of new
previously.untapped markets for their products a well a new sources for raw materials and components at significantly lower costs. This movement towards a single world economy has occurred for several reasons including (a) continued advances in information technology that facilitate the rapid transfer of data across vast distances (b) the growing trend to lower trade barrier as evidenced by Ana and the formation of the European Union. (cl the trend toward lower transportation
costs and Cd) the emergence of high-growth markets with associated high-profit margin in newly industrialized countries (NIC).3 These new markets can be compared to the saturated markets and shrinking profit margins that are being experienced in the more highly developed countries. For example McDonald's growth in the United States between
1984 and 1994 was 6.4 percent annually while its international sales grew 19.0 percent annually during this same time period." As a result of this globalization of business managers must extend their visions beyond their own national borders when developing operations strategies. This include the location of manufacturing plants in Southeast Asia because of low labor rates or the establishment of call centers in Ireland because of a combination of inexpensive labor. an educated workforce. and the necessary technology infrastructure that exists. In addition to structural strategy decisions such as where to locate a new plant structural issues also must be evaluated when looking to expand a company's operation. strategy globally. Here the education level of the workforce the language and the impact of local laws and customs must be taken into consideration. For example a major attraction for locating in Ireland is its highly educated workforce. As an another illustration employees in Germany can work up to 70 hours in some weeks without being paid overtime and then work as little as 30 hours or less in other weeks as long as the total hours worked over a given time period (such as 6 or 12 months) meets an agreed-upon amount.
Stan Davis and Chris Meyer in their book entitled Blur identify three factors that are significantly affecting the way in which business is being conducted: (a) connectivity (b) speed and (c) intangibility. They suggest that the combination of all three is causing changes to occur in business at such a rate that managers can only view business today as a blur hence the title of the book All three factors are directly related to advances in technology. Connectivity refers to the fact that virtually everyone is connected low electronically be it through e-mail the Internet the telephone or the fax. At the same time firms with these connected networks in many cases provide' services that are now available 24/7 (24 hours a day seven days a week) in place of the more traditional hours of nine to five Monday through Friday Examples here include banking services stock exchange transactions and airline and hotel reservations. As a result of this connectivity information is transmitted in a matter of seconds or minutes instead of hours or days (or even weeks) which was the previous norm. The combination of connectivity and speed suggests that firms are now focusing on the intangible aspects of their business in order to gain a competitive advantage in the marketplace which translates into providing better and more innovative services. As we shall see shortly technology also has dramatically affected one of the basic concepts in operations strategy: that of making trade-offs between priorities. With advances in technology managers no longer have to make pure trade-offs between competitive priorities as they once did Instead today's technology allows firms to compete on several priorities simultaneously resulting in shifts to superior performance curves (which are described later in the chapter).