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2
C H A P T E R
Operations Strategy in a Global Environment
1. Global seems the better label for Boeing since authority and
responsibility reside in the U.S.—the home country.
2. Six reasons to internationalize: Reduce costs, improve supply
chain, provide better goods and services, attract new markets, learn
to improve operations, attract and retain global talent.
3. No. Sweetness at Coca-Cola is adjusted for the tastes of indi-
vidual countries.
4. A mission is an organization’s purpose—what good or service
7. The answer to this question will depend on the establish-
ment studied, but should probably include some of the following
considerations:
The mission: diagnose automobile problems and make the neces-
sary repair at a fair price for the local customer.
Points to consider, or options, within the 10 decision areas are:
Decision: Option:
power train repair; repair and maintenance
only, versus repair, maintenance, and sales of
fuel; professional staffing versus rental of
tomer complaints, inspection by supervising
mechanic, etc.)
Process Use of general versus special purpose diag-
nostic and repair equipment (in particular,
the degree to which computer controlled
diagnostic equipment is employed)
Location In-town, shopping mall, highway
Layout Single bay/multibay; general-purpose bay
versus special-purpose bay (lubrication/tire
repairs and installation/wheel alignment/
engine and power train repair, etc.)
repair persons; employment of specialists
versus general mechanics
Supply Chain Choice of supplier(s) for both general and
original manufacturer parts and supplies
Scheduling Hours of operation (8:00 A.M.–5:00 P.M.;
24-hour towing; weekends/holidays), repairs
versus motor vehicle safety inspections, etc.;
service by appointment versus walk-in
(or drive-up) service
8. Library or Internet assignment: Student is to identify a mis-
sion and strategy for a firm. BusinessWeek, Fortune, The Wall
Street Journal, and Forbes all have appropriate articles.
9. OM strategy change during a product’s life cycle: During the
introduction stage, issues such as product design and development
are critical, then during the growth stage the emphasis changes to
product and process reliability; from there we move to concern for
10. The text focuses on three conceptual strategies—cost leader-
ship, differentiation and response. Cost leadership by Walmart—via
low overhead, vicious cost reduction in the supply chain; Differen-
11. An operations strategy statement for Southwest Airlines
would include a focus on efficient, low-cost service with high
capital utilization (high aircraft and gate utilization), flexible non-
union employees, low administrative overhead, etc. Southwest’s
strategy is complicated by the purchase of AirTran. First, there is
a major organizational culture issue. Southwest’s culture is
unique. The company really does think of itself as a family, with a
fun culture. AirTran’s culture is different. Integrating the two
cultures will be a challenge. Related to this are human resources
issue such as seniority, pay rate, and promotion policies, all of
which are complicated by union issues. On the tangible side,
Southwest’s use of just Boeing 737s is complicated by AirTran’s
8 CHAPTER 2 OPERATIONS ST RAT EG Y IN A GL OBA L EN V IR ON ME N T
use of several other types of planes. To maintain the “one plane”
12. The integration of OM with marketing and accounting is
13. To summarize outsourcing trends:
◼ Not everyone who outsources is 100% satisfied, and
14. Cost savings in recent years from outsourcing has been
significant. It may be possible to reduce labor costs by as much
75%. But more realistically, this figure is in the 20%–40% range.
Overall savings in the 10%–30% range are possible.
17. Bad outsourcing decisions may result in:
◼ Higher transportation cost
◼ Loss of control
ETHICAL DILEMMA
Here is an interesting scenario. A firm can save $10 million in pro-
duction costs per year. All it has to do is locate manufacturing in
China, which is not a democracy, where sustainability is not an
issue, and where some employees are exploited. Nike faced a
similar dilemma in Vietnam, where it was accused of paying less
discuss this current and sensitive subject.
END-OF-CHAPTER PROBLEMS
overhead and huge buying power to pressure its suppliers into
concessions. Differentiation can be illustrated by almost any
Sodexho, provide meal service to college campuses and similar
institutions. Such firms often get their contracts by being low
bidder to provide service. Response: a catering firm (the customer
2.3 Arrow; Bidermann International, France
Braun Household Appliances; Procter & Gamble, U.S.
Volvo Autos; Geely, China
Firestone Tires; Bridgestone, Japan
Godiva Chocolate; Campbell Soup, U.S.
2.4 (a) The maturing of a product may move the OM function
to focus on more standardization, make fewer product
changes, find optimum capacity, stabilize the manufac-
2.5 Specific answers to this question depend on the organization
considered. Some general thoughts follow:
(a) For a producer with high energy costs, major oil pric-
es change the cost structure, result in higher selling
prices, and, if the company is energy inefficient com-
Copyright ©2014 Pearson Education, Inc.
2.6 The corruption perception index maintained by Transparency
International (www.transparency.org) gives a 1-to-10 scale (10 being
least corrupt to 1 being most corrupt). Also see Chapter 8, Table 8.2.
A lively class discussion can also take place regarding who
2.7 The Economist does an analysis similar to this on occasion
but the “Global Competitiveness Index,” World Economic Forum,
Geneva (www.weforum.org) does one every year. (Also see
2; Sweden, 3; Finland, 4; and U.S, 5 are some rankings.
2.8 (a) Using the weighted model, with the four weights total-
ing 1.0, England has a risk of 2.3 and Canada a risk of
1.7. Now Canada is selected.
England = .1(2) + .6(3) + .2(1) + .1(1) = 2.3
Canada = .1(3) + .6(1) + .2(3) + .1(2) = 1.7
2.9 With weights given, the results are:
Mexico = 3.3 = [.4(1) + .2(7) + .1(3) + .1(5) + .1(4) + .1(3)]
Panama = 4.1
Costa Rica = 4.4
A
5W + 320 = (60 + 15 + 125 + 15 + 30 + 75)
B
4W + 330
C
3W + 370
D
5W + 255
3w + 370 4w + 330, or 40 w, or w 40
3w + 370 5w + 255, or 115 2w, or w 57.5
Company C is recommended for all w such that 1.0 w 25.0
ADDITIONAL HOMEWORK PROBLEM
Problem 2.13 appears at www.myomlab.com and
www.pearsonhighered.com/heizer.
2.13 Global. Its level of integration goes beyond multinational.
The collection of parts and subassemblies coming from other
countries is carefully orchestrated. It is not transnational because
its “home” is clearly the U.S., and there is little sense of “local
10 CHAPTER 2 OPERATI ONS ST RAT EGY I N A GLOBAL EN V IRO N M EN T
CASE STUDY
MINIT-LUBE
1. What constitutes the mission of Minit-Lube?
To provide economical preventative maintenance and
in-terior auto cleaning, primarily to vehicles owned by indi-
1. Regal Marine’s mission is to provide luxury performance boats to
the world through constant innovation, unique features, and high
quality that will differentiate the boats in the marketplace.
2. A strength of Regal Marine is continued innovation that is
being recognized in the marketplace. One current weakness is
maintaining an effective, well-trained labor force in a tight Florida
labor market. The opportunities for Regal include an increase in
8 CHAPTER 2 OPERATIONS ST RAT EG Y IN A GL OBA L EN V IR ON ME N T
use of several other types of planes. To maintain the “one plane”
12. The integration of OM with marketing and accounting is
13. To summarize outsourcing trends:
◼ Not everyone who outsources is 100% satisfied, and
14. Cost savings in recent years from outsourcing has been
significant. It may be possible to reduce labor costs by as much
75%. But more realistically, this figure is in the 20%–40% range.
Overall savings in the 10%–30% range are possible.
17. Bad outsourcing decisions may result in:
◼ Higher transportation cost
◼ Loss of control
ETHICAL DILEMMA
Here is an interesting scenario. A firm can save $10 million in pro-
duction costs per year. All it has to do is locate manufacturing in
China, which is not a democracy, where sustainability is not an
issue, and where some employees are exploited. Nike faced a
similar dilemma in Vietnam, where it was accused of paying less
discuss this current and sensitive subject.
END-OF-CHAPTER PROBLEMS
overhead and huge buying power to pressure its suppliers into
concessions. Differentiation can be illustrated by almost any
Sodexho, provide meal service to college campuses and similar
institutions. Such firms often get their contracts by being low
bidder to provide service. Response: a catering firm (the customer
2.3 Arrow; Bidermann International, France
Braun Household Appliances; Procter & Gamble, U.S.
Volvo Autos; Geely, China
Firestone Tires; Bridgestone, Japan
Godiva Chocolate; Campbell Soup, U.S.
2.4 (a) The maturing of a product may move the OM function
to focus on more standardization, make fewer product
changes, find optimum capacity, stabilize the manufac-
2.5 Specific answers to this question depend on the organization
considered. Some general thoughts follow:
(a) For a producer with high energy costs, major oil pric-
es change the cost structure, result in higher selling
prices, and, if the company is energy inefficient com-
Copyright ©2014 Pearson Education, Inc.
2.6 The corruption perception index maintained by Transparency
International (www.transparency.org) gives a 1-to-10 scale (10 being
least corrupt to 1 being most corrupt). Also see Chapter 8, Table 8.2.
A lively class discussion can also take place regarding who
2.7 The Economist does an analysis similar to this on occasion
but the “Global Competitiveness Index,” World Economic Forum,
Geneva (www.weforum.org) does one every year. (Also see
2; Sweden, 3; Finland, 4; and U.S, 5 are some rankings.
2.8 (a) Using the weighted model, with the four weights total-
ing 1.0, England has a risk of 2.3 and Canada a risk of
1.7. Now Canada is selected.
England = .1(2) + .6(3) + .2(1) + .1(1) = 2.3
Canada = .1(3) + .6(1) + .2(3) + .1(2) = 1.7
2.9 With weights given, the results are:
Mexico = 3.3 = [.4(1) + .2(7) + .1(3) + .1(5) + .1(4) + .1(3)]
Panama = 4.1
Costa Rica = 4.4
A
5W + 320 = (60 + 15 + 125 + 15 + 30 + 75)
B
4W + 330
C
3W + 370
D
5W + 255
3w + 370 4w + 330, or 40 w, or w 40
3w + 370 5w + 255, or 115 2w, or w 57.5
Company C is recommended for all w such that 1.0 w 25.0
ADDITIONAL HOMEWORK PROBLEM
Problem 2.13 appears at www.myomlab.com and
www.pearsonhighered.com/heizer.
2.13 Global. Its level of integration goes beyond multinational.
The collection of parts and subassemblies coming from other
countries is carefully orchestrated. It is not transnational because
its “home” is clearly the U.S., and there is little sense of “local
10 CHAPTER 2 OPERATI ONS ST RAT EGY I N A GLOBAL EN V IRO N M EN T
CASE STUDY
MINIT-LUBE
1. What constitutes the mission of Minit-Lube?
To provide economical preventative maintenance and
in-terior auto cleaning, primarily to vehicles owned by indi-
1. Regal Marine’s mission is to provide luxury performance boats to
the world through constant innovation, unique features, and high
quality that will differentiate the boats in the marketplace.
2. A strength of Regal Marine is continued innovation that is
being recognized in the marketplace. One current weakness is
maintaining an effective, well-trained labor force in a tight Florida
labor market. The opportunities for Regal include an increase in
