Case 1

Case Analysis 1 Hightone Electronics, Inc. Identification Information This show window analysis is from chapter 1 of our text book, Operations Management. It is found on page 25 and titled, Hightone Electronics, Inc. Summary of the Facts of the Case Hightone Electronics, Inc. (HEI) is an electronic components supply association founded over 50 twelvemonths ago. The comp any has a reputation for high quality and returns. HEIs simple crinkle of supplying radio repair shops with parts has gr birth to include home base delivery, and larger customers much(prenominal) as technical schools, universities, and nearly-known corporations.The telephoner stocks and sells over 22,000 different items and most customers receive their order at heart 48 hours. George Gonzales is the operations coach for HEI. He has been tasked with making operations vigilance decisions necessary to make HEI a masteryful Internet-based business. Mr. Gonzales agrees that this is an important step for the fu ture success of the company hardly believes there is more to solving the problems of the transition to web-based than the board thinks. Case Questions 1.Explain why operations have sexment is critical to the success of a business. Operations management (OM) is critical to the success of a business for several reasons. OM is responsible for the decision-making and leadership process that creates the w are or service the business appropriates. The role of OM is to take inputs such as, labor, raw materials, and technology, and change shape them into finished estimables or services. Other functions of the business, such as marketing, atomic get along 18 also important. But, without OM, there would not be a product/service to market to consumers. Reid, 2-23) why would developing an Internet-based business require different operations consideration for HEI? A traditional catalog-order business and an Internet-based catalog-order business would be very similar in widely distrib uted appearance. A transition to web-based ordering though, would require changes. First, the company would need to upgrade its technology. Either through outsourcing or internal servers, the company would need to create a website. The website would need to be able to handle the customer traffic without crashing.Also, the website would need to be user-friendly so as not to frustrate and turn outside potential customer. Customer hold out personnel would need to be trained to guide customers with questions slightly the website. Second, and more important than the actual website, is coordinating orders so that put across goods are shipped to the proper customer. Each order transaction lead not be entered by a person. Therefore, all of the reading gathered by the website will need to be converted to orders easily understood by warehouse personnel.Is George Gonzales correct in his assessment that this would not be business as popular? Yes. The core functions of the physical locati ons of the catalog-order business will remain mostly the same as before. They will receive orders, and ship out goods. However, the methods of obtaining orders, customer feedback, return orders, special orders, and many opposite less notable but still necessary functions will change drastically. If done properly, it will most likely streamline the business, but the initial transition will be severe. . Recall that HEI wishes to continue its reputation of high quality and service. Identify key operations management decisions that need to be considered. * Will we receive more/less orders? * If demand increases, can HEI supply the demand? * If demand decreases, can HEI weather the storm until demand rebounds? * What new-fashioned personnel will be required? * Can current employees be trained? * Do new, more technically-advanced employees need to be hired? * Can stock be reduced and operations made more lean? * Should stock be increased?How different will these decisions be for the In ternet business? The major end will be that with a lot of the web-based area of the business, pretend will be handled electronically and not in a physical location. This will communicate the need for large call centers and central records keeping locations. A few servers could hold all the information once held by an entire department such as sales, accounting, customer service, etc. This also changes the focus from managing many low-skilled employees to fewer moderate-to-high-skilled employees.Case 1chapter 2 CHARTING A COMPANYS DIRECTION peck AND MISSION, OBJECTIVES, AND STRATEGY McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. LO1 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head and why. LO2 Understand the importance of setting some(prenominal) strategic and financial objectives. LO3 Understand why the strategic initiatives taken at various organisational levels must be ti ghtly coordinated to achieve companywide bring aboutance targets.LO4 Become aware of what a company must do to achieve operating(a) integrity and to execute its scheme proficiently. LO5 Become aware of the role and responsibility of a companys board of directors in overseeing the strategic management process. 2-2 What Does the Strategy-Making, Strategy-Executing make for stand for? 1. 2. 3. 4. Developing a strategic vision Setting objectives Crafting a strategy Implementing and executing the chosen strategy 5. Monitoring developments, evaluating performance, and initiating corrective adjustments 2-3 FIGURE 2. 1 The Strategy-Making, Strategy-Executing Process 2-4 put over 2. Factors Shaping Decisions in the Strategy-Making, Strategy-Executing Process Internal Considerations Does the company have an appealing customer value proposition? What are the companys competitively important resources and capabilities and are they potent enough to produce a sustainable competitive valu e? Does the company have sufficient business and competitive efficacy to seize market opportunities and nullify external threats? Are the companys prices and costs competitive with those of key rivals? Is the company competitively stronger or weaker than key rivals? immaterial ConsiderationsDoes sticking with the companys present strategic course present attractive opportunities for growth and profitability? What kind of competitive forces are industry members veneering and are they acting to enhance or weaken the companys prospects for growth and profitability? What factors are driving industry change and what impact on the companys prospects will they have? How are industry rivals positioned and what strategic moves are they likely to make abutting? What are the key factors of future competitive success and does the industry offer good prospects for attractive profits for companies possessing those capabilities? 2-5Factors Shaping strategic Decisions External Considerations Wh at are the industrys economic characteristics? How strong are the competitive forces at play? What forces are driving change in the industry? What market positions do rivals occupy and what moves are they likely to make next? What are the key factors for future competitive success? What are the companys external opportunities? 2-6 Factors Shaping strategic Decisions Internal Considerations How well is the present strategy working? What are the companys competitively valuable resources, capabilities, and internal weaknesses? Are the companys prices and costs competitive?Is the company competitively stronger or weaker than key rivals? 2-7 Stage 1 Developing a Strategic Vision, a representation, and Core Values Strategic Vision Is top managements views about the firms direction and future product-market-customer-technology focus Provides a panoramic view of where we are going Is distinctive and ad hoc to a particular nerve Avoids use of innocuous uninspiring language that could appl y to most any firm Definitively states how the companys leaders intend to position the firm beyond where it is today 2-8 Characteristics of Effectively Worded Vision Statements GraphicPaints a picture of the kind of firm that management is trying to create Flexible Is not so focused that it makes it difficult to adjust Feasible Is within the realm of what is possible Directional Is forth looking to change Desirable Indicates why the directional path makes sense cogitate Is specific enough to provide guidance in decision making Easy to Communicate Can be explained in simple terms 2-9 TABLE 2. 2 Characteristics of Effectively Worded Vision Statements Paints a picture of the kind of company that management is trying to create and the market position(s) the company is striving to stake out.Is off looking describes the strategic course that management has charted and the kinds of product-market-customer-technology changes that will help the company prepare for the future. Is specific enough to provide managers with guidance in making decisions and allocating resources. Is not so focused that it makes it difficult for management to adjust to changing circumstances in markets, customer preferences, or technology. Is within the realm of what the company can middling expect to achieve. Indicates why the directional path makes good business sense.Is explainable in 5 to 10 minutes and, ideally, can be reduced to a simple, memorable slogan Graphic Directional Focused Flexible Feasible Desirable Easy to communicate 2-10 TABLE 2. 3 Common Shortcomings in caller-up Vision Statements Short on specifics about where the company is headed or what the company is doing to prepare for the future. Doesnt indicate whether or how management intends to alter the companys current product-market-customer-technology focus. So all-inclusive that the company could head in most any direction, pursue most any opportunity, or enter most any business.Lacks the power to motivate company per sonnel or inspire shareholder confidence about the companys direction. Provides no unique company identicalness could apply to firms in any of several industries (including rivals operating in the same market arena). Doesnt say anything specific about the companys strategic course beyond the pursuit of such distinctions as being a recognized leader, a global or worldwide leader, or the first pick of customers. Vague or incomplete Not forward looking Too broad Bland or uninspiring Not distinctive Too dependent on superlatives 2-11Concepts and Connections 2. 1 Examples of Strategic VisionsHow Well Do They Measure Up? 2-12 Concepts and Connections 2. 1 Examples of Strategic VisionsHow Well Do They Measure Up? 2-13 Examples of Vision Statements To be the global leader in customer value. Provide a global trading platform where practically anyone can trade practically anything. Red palpebra To extend our position as the most trusted Linux and open source provider through a complete r ange of enterprise software, a puissant Internet platform, and associated support and services. 2-14 Core Concept Strategic Inflection PointsA change in vision is required when it becomes evident to management that the industry has changed in a significant way that renders the companys current vision obsolete. 2-15 The Importance of Communicating the Strategic Vision An engaging, inspirational vision Challenges and motivates the workforce Articulates a stimulate case for where we are going and why Evokes positive support and excitement Arouses a committed organizational effort to move in a putting green direction 2-16 Expressing the Essence of the Vision in a Slogan Nike To bring innovation and inspiration to every athlete in the world The Mayo ClinicThe vanquish care to every patient every day Greenpeace To halt environmental abuse and promote environmental solutions. 2-17 Why a Sound, Well-Communicated Strategic Vision Matters 1. It crystallizes aged(a) executives own views a bout the firms long-term direction. 2. It reduces the risk of rudderless decision making by management at all levels. 3. It is a dickhead for winning the support of employees to help make the vision a reality. 4. It provides a beacon for lower-level managers in forming departmental missions. 5. It helps an organization prepare for the future. 2-18 Strategic Vision versus Mission StatementA strategic vision concerns a firms future business pathwhere we are going Markets to be pursued Future product/ market/customer/ technology focus The mission statement of a firm focuses on its present business purposewho we are and what we do Current product and service offerings Customer needs being served 2-19 Developing a Company Mission Statement Ideally, a company mission statement is sufficiently descriptive to Identify the companys products or services. Specify the grease ones palmser needs it seeks to satisfy. Specify the customer groups or markets it is endeavoring to serve.Specify its a pproach to pleasing customers. Give the company its own identity. 2-20 Example of a Mission Statement The mission of Trader Joes is to give our customers the best food and beverage values that they can find anywhere and to provide them with the information required for informed buying decisions. We provide these with a dedication to the highest quality of customer satisfaction delivered with a sense of warmth, friendliness, fun, individual pride, and company spirit. 2-21 Examples of Mission Statements To help people and businesses throughout the world realize their full potential.To organize the worlds information and make it universally accessible and useful. 2-22 Strategic Mission, Vision, and Profit tautens sometimes state that their mission is to simply earn a profit. Profit is the obvious intent of every commercial enterprise. Profit is not who we are and what we do. Profit is more correctly an objective and a result of what a firm does. 2-23 Linking the Strategic Vision and Mission with Company Values CORE purpose A firms values are the beliefs, traits, and behavioral norms that the firms personnel are expected to display in conducting the firms business and pursuing its strategic vision and mission. -24 CONCEPTS & CONNECTIONS 2. 2 ZAPPOS MISSION AND CORE VALUES Deliver Wow through Service Embrace and Drive switch over Create Fun and a Little Weirdness Be Adventurous, Creative, and Open Minded Pursue Growth and Learning Build Open and Honest Relationships with conference Build a Positive Team and Family Spirit Do More with Less Be Passionate and Determined Be Humble 2-25 Stage 2 Setting Objectives Why set objectives? To convert the strategic vision into specific performance targets To create yardsticks to track relegate and measure performance Objectives shouldBe well-stated (clearly worded) Be challenging, yet achievable in order to stretch the organization to perform at its full potential Be quantifiable (measurable) Contain a specific deadline for achievement 2-26 Core Concept Objectives are an organizations performance targetsthe results management wants to achieve. 2-27 Stage 2 Setting Objectives (contd) What Kinds of Objectives to Set Financial objectives Communicate managements targets for financial performance Are lagging indicators that reflect the results of past decisions and organizational activities Relate to revenue growth, profitability, and return on investment -28 Stage 2 Setting Objectives (contd) What Kinds of Objectives to Set Strategic objectives Are related to a firms marketing standing and competitive vitality Are leading indicators of a firms future financial performance and business prospects. If achieved, indicate that a firms future financial performance will be better than its current or past performance. 2-29 Core Concept The balanced scorecard is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complet e and balanced view of how well an organization is performing. -30 TABLE 2. 4 The equilibrize Scorecard Approach to Performance Measurement Strategic Objectives Winning an x pct market share Achieving customer satisfaction rates of x percent Increase percentage of sales coming from new products to x percent Financial Objectives An x percent increase in annual revenues Annual increases in earnings per share of x percent An x percent return on capital employed (ROCE) or shareholder investment (ROE) Bond and realisation ratings of x Internal cash flows of x to fund new capital investment meliorate information systems capabilities to give frontline managers Achieving a customer defect information in retention rate of x percent x minutes Acquire x number of new Improve teamwork by customers increasing the number of knowledgeableness of x number projects involving more of new products in the than one business unit next three years to x Reduce product development times to x months 2-31 Examples of Financial ObjectivesX% increase in annual revenues X% increase annually in after-tax profits Profit margins of X% X% return on capital employed (ROCE) Sufficient internal cash flows to fund 100% of new capital investment 2-32 Examples of Strategic Objectives Winning an X% market share Achieving a customer retention rate of X% Acquire X number of new customers Reduce product defects to X% Introduction of X number of new products in the next three years Increase employee training to X hours/year Reduce turnover to X% per year 2-33 Examples of Company ObjectivesGeneral Motors Reduce the percentage of automobiles using internal combustion engines through the development of hybrids, range-extended electric vehicles, and hydrogen fuel cell electric engines. Reduce self-propelled structural costs to benchmark levels of 23% of revenue by 2012 from 34% in 2005. Reduce annual U. S. labor costs by an additional $5 billion by 2011. 2-34 Examples of Company Objectives The Home Depot Be the number one destination for professional contractors. Improve in-stock positions so customers can find and buy exactly what they need.Deliver differentiated customer service and the know-how that our customers have come to expect. Repurchase $22. 5 billion of outstanding shares during 2008. Open 55 new inserts with 5 store relocations in 2008. 2-35 Short-Term and Long-Term Objectives Short-Term Objectives Targets to be achieved soon Milestones or stair steps for reaching long-range performance Long-Term Objectives Targets to be achieved within 3 to 5 years 2-36 The Need for Objectives at All Organizational Levels Objectives Are Needed at All Levels 1. Set business-level objectives 2.Establish functional-area objectives 3. Set operating-level objectives last long-run objectives take precedence over short-term objectives 2-37 Stage 3 Crafting a Strategy Crafting a strategy means asking How to attract and please customers How to compete against rivals How to pos ition the firm in the marketplace and capitalize on attractive opportunities to grow the business How best to respond to changing economic and market conditions How to manage each functional piece of the business How to achieve the firms performance targets 2-38A Firms Strategy-Making Hierarchy A firms strategy is a collection of initiatives undertaken by managers at all levels in the organizational hierarchy Crafting strategy is a collaborative effort that Involves managers from various levels of the organization Is rarely something only highlevel executives engage in Requires choosing among the various strategic alternatives 2-39 Concept to Action In most firms, crafting strategy is a collaborative team effort that includes managers in various positions and at various organizational levels.Crafting strategy is rarely something only highlevel executives do. 2-40 Concept to Action Corporate strategy establishes an overall game object for managing a set of businesses in a diversifi ed, multibusiness firm. Business strategy is primarily concerned with strengthening the firms market position and structure competitive advantage in a single business company or a single business unit of a diversified multibusiness corporation. 2-41 FIGURE 2. 2 A Companys Strategy-Making Hierarchy 2-42 Corporate Strategy versus Business StrategyCorporate strategy is score by the CEO and other senior executives and establishes an overall game plan for managing a set of businesses in a diversified, multibusiness company. Business strategy is primarily concerned with building competitive advantage in a single business unit of a diversified company or strengthening the market position of a nondiversified single business company. 2-43 The Strategy-Making Hierarchy Corporate strategy Is orchestrated by the CEO and other senior executives and establishes an overall game plan for managing a set of businesses in a diversified, multibusiness company. Addresses the questions of how to captu re cross-business synergies, what businesses to hold or divest, which new markets to enter, and how to best enter new marketsby acquisition, creation of a strategic alliance, or through internal development. Business strategy Functional-area strategies Is primarily concerned with building competitive advantage in a single business unit of a diversified company or strengthening the market position of a nondiversified single business company. Are concerned with the strategies specifically related to particular functions or processes within a business (marketing strategy, production strategy, finance strategy, customer service strategy, product development strategy, and human resources strategy). Are relatively narrow strategic initiatives and approaches of limited scope for managing key operating units (plants, distribution centers, geographic units) and specific operating activities such as materials purchasing or Internet sales. 2-44 Operating strategies Stage 4 Implementing and E xecuting the Chosen StrategyManaging the strategy execution process involves Staffing the organization to provide postulate skills and expertise. Allocating ample resources to activities critical to good strategy execution. Ensuring that policies and procedures facilitate rather than impede effective execution. Installing information and operating systems that enable personnel to perform essential activities. 2-45 Stage 4 Implementing and Executing the Chosen Strategy (cond) Managing the strategy execution process involves Pushing for continuous improvement in how value chemical chain activities are performed.Tying rewards and incentives directly to the achievement of performance objectives. Creating a company culture and work climate conducive to successful strategy execution. Exerting the internal leadership needed to propel implementation forward. 2-46 Stage 5 Evaluating Performance and Initiating Corrective Adjustments Triggering change as needed Monitoring new external develo pments Evaluating the firms progress Making corrective adjustments Managing strategy is an ongoing process, not an every-now-and-then task A firms vision, objectives, strategy, and approach to strategy execution are never final exam -47 Corporate Governance The Role of the Board Of Directors The Role of the Board Of Directors in the StrategyMaking, Strategy-Executing Process 1. Oversee the firms financial accounting and reporting practices. 2. diligently critique and oversee the companys direction, strategy, and business approaches. 3. Evaluate the caliber of senior executives strategy-making and strategy-executing skills. 4. Institute a compensation plan for top executives that rewards them for actions and results that serve shareholder interests. 2-48 Strong Boards Lead to equitable Corporate GovernanceA Strong, Independent Board of Directors Is well informed about the companys performance Guides and judges the CEO and other top executives Has the courage to curb management actio ns it believes are inappropriate or unduly risky Certifies to shareholders that the CEO is doing what the board expects Provides insight and advice to management Is intensely regard in debating the pros and cons of key decisions and actions 2-49 leaders the Strategic Management Process The Strategic Management Process calls for six managerial actions 1.Making sure the company has a good strategic plan 2. Stay on top of what is happening (MBWA) 3. Putting constructive pressure on organizational units to achieve good results 2-50 Leading the Strategic Management Process (contd) The Strategic Management Process calls for six managerial actions 4. Pushing corrective actions to improve both the firms strategy and how well it is being executed 5. Leading the development of better competitive capabilities 6. Displaying ethical integrity and leading social responsibility initiatives 2-51 Making Sure a Firm Has a Good Strategic PlanResponsibility of CEO Effectively communicate the vision, objectives, and major strategy components Exercise due diligence in reviewing lower-level strategies for consistency with higher-level strategies 2-52 Staying on purloin of How Well Things Are Going Stay connected to the field by managing by walking around (MBWA) Insist that top managers spend time in the trenches to exchange information and ideas through face-to-face contact with employees Prevent overly abstract thinking and getting disconnected with reality of whats happening 2-53Pushing for Good Results and Operating Excellence Fosters a resultsoriented, high-performance culture Treat employees with dignity and respect Encourage employees to use initiative and creativity in performing their work Set stretch objectives and clearly communicate expectations Focus attention on continuous improvement Reward high performance Celebrate successes 2-54 Initiating Corrective Actions to Improve Strategy and Execution The leadership challenge of making corrective adjustments is twofold Dec iding when adjustments are needed Deciding what adjustments to makeLeaders responsibility is to step forward and push corrective actions 2-55 Leading Social Responsibility The strength of management commitment determines whether a company will implement and execute a full-fledged strategy of social responsibility that That protects the environment Actively participates in community affairs Supports charitable causes Supports workforce diversity and the overall well-being of employees 2-56 Displaying Ethical oneness The CEO and other senior executives must set an excellent example in their own ethical behavior.Top management must declare unequivocal support of the companys ethical code. Top management must be prepared to act swiftly and decisively in punishing ethical misconduct. 2-57 Leading the Development of Better Competitive Capabilities Lead efforts to strengthen existing competitive capabilities Anticipate changes in customer-market requirements Proactively build new competen cies and capabilities that hold promise for building an unchanging competitive edge 2-58