Implementing operations strategies in manufacturing systems

Manufacturing strategy must be linked to the larger scope of corporate strategy, which is commonly characterized as a mission. The mission can usually be described in a few words that describe the nature of the target markets. Although we have stated that corporate success often depends on manufacturing strategy; it should be clear that the tail cannot wag the dog – manufacturing strategy must be congruent with corporate strategy.

The elements of manufacturing strategy may be extremely important in a competitive struggle, as with the battle between Bowmar and Texas Instruments (TI) in pocket calculators. Bowmar was first in the field and had initially established a strong position. A major difference in the manufacturing strategies of the two had to do with the components in the value added stream in which each participated. An important element in the value added stream for pocket calculators was the integrated circuit chip – the heart of the product. Bowmar had no manufacturing position in chips; they were an outside supply item. TI, on the other hand, was a major producer of chips. Furthermore, it was far down the experience curve in the production of chips, and it used them in other consumer products besides pocket calculators. TI sold chips to other producers of consumer electronic products, including Bowmar, and could put on price pressure in calculator markets in parts because of its low cost position in chips, Bowmar finally went bankrupt because it was unable to match TI’s low prices and still be profitable.

Generic Strategies and Manufacturing Missions:

The three generic strategies discussed are broad generalizations. For example, two firms could be following market segmentation strategies, but on closer examination, their strategies may not be the same. Their target markets could be quite different and their manufacturing missions could be very different.

One of the classic comparisons is the one made between Hewlett Packard (HP) and Texas Instruments (TI) in the calculator, instrument, and microcomputer markets (Buffa, 1984). Both hi-tech firms emphasize new product introductions as the center piece of their corporate strategies. But HP concentrates on market segments in which new products introduction are focused on product performance and technology. These new products provide larger margins initially. When these markets begin to draw tough price competition and lower margins, HP goes on to other innovations, leaving its competitors to fight for the larger volume, lower margins business,. HP focuses on the leading edge of technology, and to be congruent its manufacturing strategy must provide facilities, organization and systems that are flexible in accommodating product design changes and the need for high quality.

Texas Instruments also produces many new hi-tech products but wit the objective of exploiting the potentially large volume markets that may follow new product introductions. Thus, from the inception of a new product, TI is interested in production design as well as product performance. It intends to follow the product through the several stages of its cycle, exploiting the high volume, lower margin markets. For such a product, TI will have accumulated a great deal of experience and can be price competitive and profitable. To be congruent with TI’s corporate mission, manufacturing must design a broader range of strategies that deal with the requirements of new product introductions on the one hand and with product standardization, rapid productivity improvements, consistent quality and product availability (to stock) on the other hand.

Thus the term overall cost leader does not adequately describe TI in terms that are useful for implementing manufacturing strategy. Neither do the terms market segmentation or differentiation adequately describe HP’s corporate strategy in terms that re meaningful for manufacturing strategy.

Richardson, Taylor and Gordon (1985) have developed six categories of corporate missions to which manufacturing strategy implementation can be related. We will use their six corporate mission characteristics as framework for describing how a number of firms have implemented their manufacturing strategies. These six corporate missions are:

1) Technology frontiersman
2) Technology exploiters
3) Technological serviceman
4) Customizers
5) Cost minimizing customizers
6) Cost minimizers.

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However, as with most strategic decisions, the issue is more complex than it first appears.