978-0132921145 Chapter 2

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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

delivery service, FedEx, etc.

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-

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

5W + 320 = (60 + 15 + 125 + 15 + 30 + 75)

4W + 330

3W + 370

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