What is Porter's target market?
- They want to be the best airline for business travellers, not for leisure travellers
- Ottawa, Montreal due to high business travellers
- You have to be best at something (can't be best at everything i.e. BizCafe focus on low prices
OR high quality products)
What is important to these markets?
- Speed, want to have direct flights, want to have efficient boarding, getting to the plane(time is
money for business travellers)
- Frequent flights, options for travellers when they need to fly (more flights during the peak
hours - mornings, need to travel during this time, less flights during the night)
- On time departure and arrival
- Pampered experience = more money,why give up profitability and not go for cheap flight?
○ Their companies are paying for them (they don’t pay for themselves,not all but most)
○ They rather have premium experience to get more productivity
How do their decisions support the achievement of their strategic objectives?Specifically:
- Location - more accessible, shuttle bus to bring you to the airport more efficiently, you don’t
have to drive your car, chosen routes carefully based on business demands
- Facility design - executivelounges to give temporarywork station, seating, entertainment
while waiting, convenient to get in and out of the building (you don’t have to take a ferry,
there is a bridge)
- Aircraft- cutting edge plane (latest technology,environmentfriendly, fast, quiet engine, fixed
seating capacity, smaller plane = more flights/ lesser people) choice of plane = minimize cost,
- Service experience - trained people to get high customer service (again, cost morebut this is
okay since travellers don’t pay for themselves)
Firms must differentiate themselvessomehow- operational strategy is the key to this
What managers do:
"Managers are responsible for making decisions under conditions of uncertainty about the
allocation of scarce resources towards achieving the organization's strategic objectives."
The need of integration - important!
Business System Components
Successful organizations understand the interconnectivityof strategy, business structure, and Successful organizations understand the interconnectivityof strategy, business structure, and
operations, and seek to ensure that all three are integrated into the decision-making process and
that structure and operations are aligned and in support of the organization’s strategic intent.
• Strategy is what we want to accomplish.
• The business structure should provide the controls and the formal communicationand
responsibility frameworkthat will guide the organization as it seeks to realize its strategy.
• Operations are understood to be the actual processes employed,which, when combined with
the utilization of the organization’s capital assets, enable strategic outcomesto be actualized
Successful businesses look to establish within their business systemscompetitiveadvantages that
enable them to deliver their products and/or servicesto their targeted market segments in a
manner superior to that of the competition
- The design and operation of productive systems
- One of the most important field of management
- Sustainable source of long term competitiveadvantage, more so than any other forms
- Competitorscannot easily see these operational strategies
- All about the effectivedesign, development,and managementof the processes, procedures, - All about the effectivedesign, development,and managementof the processes, procedures,
and practices embedded within an organization’s business system for the purpose of achieving
its strategic intent
Three categoriesof responsibility:
• Process Management is the design and developmentof the work flow and connectivityof the
transformationrequirements (processes)needed to ensure that an organization’s products
and services are efficiently produced and effectivelydelivered to the marketplace
• Supply Chain Management is the managementof the interdependencies among suppliers,
manufacturers, and distributors; it seeks to develop the terms and conditions that will enable
all parties to efficiently and effectivelymeet their obligations to one another due to their
• Product/ServiceManagement refers to the variety of activities that commencewith the
design and developmentof potential new products in research and development(R&D) and
extend to the post-purchase support of products/servicesnow in the hands of customers.
Value Chain Analysis: Primary Activities
- A business concept first proposed by Michael Porter of Harvard Business School (1985) in his
book CompetitiveAdvantage: Creating and Sustaining CompetitivePerformance
- At the centre of the value chain model is the underlying principle that managers should seek
to make decisions across the chain`s activity areas in a manner that contributes positivelyto
the overall value of the products or services being produced or offered.
- The key is adding/ maximizingvalue that cannot be easily duplicated by competition
- Value Maximization refers to maximizing the benefits (price/ quality comparison)that an
individual or set of customerswill realize as a result of using a product or service
- Primary Activitiesrelate to the specific activitiesthrough which the developmentand
transformationof a product or service occurs as it is produced and delivered to the
○ Inbound Logistics refers to the managementof supplier relationships relating to those parts
and/ or components,or finished products, that are brought into the organization in order to
produce finished products for delivery to the marketplace
○ Operations refers to the manufacturing and/or product change processes set up to ensure
that the final product the organization is manufacturing or handling is ready for the
○ Outbound Logisticsrefers to getting the finished product to the customervia a distribution
channel that is accessible, convenient, and able to minimize stockouts and other sales
○ Marketing and Sales refers to those activities that create profile and awareness for the
organization’s products, services, or brand(s), and the benefits de- rived from the acquisition
and use of such products or services.
○ Customer Service refers to the support provided to customersbefore, during, and following
the purchase process.
○ Key outcome: maintain/ enhance value of product/ service to increase customer
The developmentof strong supplier and distributor relationships is invaluable to the organization
with regard to understanding market trends and shifts, maintaining a watchful eye on competitive with regard to understanding market trends and shifts, maintaining a watchful eye on competitive
innovation, and ensuring that cost control management practices are put into place throughout the
supply chain in order to maintain competitivepricing strategies.
- A function or system that transforms inputs into outputs of greater value
- About taking inputs and transforming them, creating value and create outputs to deliver to
customers - every company does basically the same thing
- How you deliver services is what differentiate a company from another (not WHAT you do, but
HOW you do it)
- Some input considerations:where do you buy them? How much? What quantities?
○ Processof input: what system do we use?
- Output considerations
- Operations is vital to organization's success
- It is so important but not a "sexy" subject, it is a critical subject - it is how businesses get things
Focus on Productivity,Competitivenessand Quality
- is the alignment of the operational tasks within an organization by its managementteam in
order to meet the strategic outcomesdefined in the organization’s business strategy.
- Process Standardization is the design and utilization of commonplatforms and commontask
sequencing to produce/developa variety of products or services.
- Process Simplification is the design and utilization of a minimum number of tasks when
developing products and/or services.
- Operations managers need to understand the strategic intent of the organization and, using
this information, translate it into the action plans that will drive the execution of the
organization’s strategy. Value Chain Analysis: Support Activities
- Support Activities are those areas within the organization that are not directly associated with
the actual processes the organization uses to produce products and/or deliver services but
that are an integral part of the support structure the primary activities rely on to successfully
- The successful execution of the primary activities of the organization is facilitated by the
organization’s support activities
Major themes include:
- Manufacturing vs. Service Operations
- Productivity - Efficiency, ResourcesAllocation
- Quality - Effectiveness,Measurement
- Competitiveness - Strategy, Flexibility, International
- Cost - controls, investmentdecisions
- Relationships - employees,customers,suppliers - Relationships - employees,customers,suppliers
Operations - core to the business, everyother aspect relies on it
Source of competitiveadvantage
- Cost: the unit production of a good or performance of a service to the organization.
that competebased on cost (i.e., price from a customer’sperspective)emphasize lowering
their operating costs.
○ low cost without taking value out
- Quality: determining customers’quality requirements,translating these into specifications for
goods or services,and consistently producing goods or performing services to these
○ how to build quality within operations to provide high quality service, use reputable
- Flexibility:refers to being able to produce a varietyof goods or performing a variety of
services in the same facility.
○ includes customization,which is modifying goods or services to meet the requirements
of individual customers.
○ may also refer to being able to easily increase or decrease the production quantity of
goods or performancequantity of services (quantity flexibility)
○ usually achieved by having general-purpose equipment, excess capacity, and multi-
skilled workers, resulting in easy changeoverbetween production of goods and
○ think about manufacturing, increase/ decrease production in short period of time
Produce mass quantity but price is standardized: Dell become standardized
industry because of this
- Timeliness -refers to being able to consistently