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2
C H A P T E R
Operations Strategy in a Global Environment
DISCUSSION QUESTIONS
2. Six reasons to internationalize: Reduce costs, improve supply
3. No. Sweetness at Coca-Cola is adjusted for the tastes of indi-
4. A mission is an organization’s purpose—what good or service
5. Strategy is an organization’s action plan—how it is going to
6. A mission specifies where the organization is going and a
7. The answer to this question will depend on the establishment
Decision: Option:
Quality Appropriate level of quality; warranty; method
of measuring and maintaining quality (cus-
diagnostic equipment is employed)
Location In-town, shopping mall, highway
Human resources Employment of certified versus noncertified
original manufacturer parts and supplies
Scheduling Hours of operation (8:00 A.M.–5:00 P.M.;
(or drive-up) service
facturer parts
Maintenance Bays with hydraulic lifts versus easier-to-
AACSB: Application of knowledge
9. OM strategy changes during a product’s life cycle: During the
introduction stage, issues such as product design and development
10 CHAPTER 2 OPERA TI O NS STRA TE G Y IN A GLOBAL EN VI R ON ME N T
upscale autos—Lexus, etc.; response, your local pizza delivery ser-
vice, FedEx, etc.
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
other types of planes. To maintain the “one plane” efficiency (pilot
training maintenance, inventory, etc.), Southwest is going to have
12. The integration of OM with marketing and accounting is
pervasive. You might want to cite examples such as developing
new products. (Marketing must help with the design, the forecast
13. To summarize outsourcing trends:
◼ Not everyone who outsources is 100% satisfied, and
future arrangements may be revised or insourced.
◼ IT will be a major expansion area, according to
Gartner, Inc.
AACSB: Reflective thinking
14. Cost savings in recent years from outsourcing has been
significant. It may be possible to reduce labor costs by as much
15. Internal issues include
◼ Employment—morale may drop, and employees may lose
LO 2.3: Understand the significance of key success factors and
core competencies
AACSB: Analytical thinking
16. The company should identify its own core competencies and
17. Bad outsourcing decisions may result in:
◼ Higher transportation cost
core competencies
AACSB: Analytical thinking
18. McDonald’s fits the categorization in the text as a multi-
AACSB: Application of knowledge
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
END-OF-CHAPTER PROBLEMS
2.1 Arrow; Bidermann International, France
CHAPTER 2 OPERATI ONS ST RAT E G Y IN A GL O BA L EN V I R O N M E N T 11
Haagen-Dazs Ice Cream; great globalization discussion
example: Haagen-Dazs was established in New York
City; now owned by Pillsbury (U.S.A.), which is owned
by General Mills (U.S.A.), but Nestlé SA (Switzerland) is
2.2 The corruption perception index maintained by Transparency
2.3 The Economist does an analysis similar to this on occasion, but
2.4 The three methods are cost leadership, differentiation, and
distinct menu and style of service than others. Response can be
illustrated by a courier service such as FedEx, that guarantees
specific delivery schedules; or by a custom tailor, who will hand
make a suit specifically for the customer.
Such firms often get their contracts by being low bidder to provide
service. Response: a catering firm (the customer picks the menu,
time, and date). Differentiation: virtually all restaurants seek differ-
2.6 (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-
turing process, lower labor skills, use longer production
runs, and institute cost cutting and design compromises.
(b) Technological innovation in the manufacturing process
may mean new human resources skills (either new per-
sonnel and/or training of existing personnel), and added
2.7 Specific answers to this question depend on the organization
considered. Some general thoughts follow:
(a) For a producer with high energy costs, major oil prices
change the cost structure, result in higher selling prices,
prohibit the use of specific technologies. The high cost
more difficult to predict both the cost of production and
the market demand.
the lower pay classifications, putting substantial pres-
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.
(b) When each of the weights is doubled, the selection stays
the same: Canada.
Peru = 4.2
Mexico is the lowest-risk country for the firm to outsource to.
2.10 (a) The results of the factor rating method are
Overnight
Shipping
Worldwide
Delivery
United
Freight
Weighted total
800
815
775
average is 88, and the weighted sum is 880. So Overnight
is now the preferred logistics provider.
12 CHAPTER 2 OPERA TI O NS STRA TE G Y IN A GLOBAL EN VI R ON ME N T
1
2.11
2.12
Provider
Score
A
5W + 320 = (60 + 15 + 125 + 15 + 30 + 75)
B
4W + 330
C
3W + 370
2.13 Global. Its level of integration goes beyond multinational.
CASE STUDY
RAPID-LUBE
1. What constitutes the mission of Rapid-Lube?
2. How does the Rapid-Lube strategy provide competitive
advantage?
This case is a good way to get the student thinking about the
10 decisions around which the text is organized. Rapid-Lube’s
be relatively easy to maintain.
◼ Process strategy: The process strategy allows employees
and capital investment to focus on doing this mission well,
rather than trying to be a “general-purpose” garage or gas
◼ Layout strategy: The three bays are designed specifically for
the lubrication and vacuuming tasks to minimize wasted
movement on the part of the employees and to contribute to
the speedier service.
◼ Supply-chain management: Purchasing is facilitated by
negotiation of large purchases and custom packaging.
volume are determined, scheduling should be very direct—
in the case of failure.
LO 2.2: Identify and explain three strategic approaches to com-
petitive advantage
AACSB: Reflective thinking
AACSB: Reflective thinking
VIDEO CASE STUDIES
STRATEGY AT REGAL MARINE
LO 2.1: Define mission and strategy
AACSB: Reflective thinking
2. A strength of Regal Marine is continued innovation that is
Selection
Criteria
Criterion
Weight
Computations
for Manila
Computations
for Delhi
Computations
for Moscow
1. Flexibility
0.5
0.5 5 = 2.5
0.5 1 = 0.5
0.5 9 = 4.5
2. Trustworthiness
0.1
0.1 5 = 0.5
0.1 5 = 0.5
0.1 2 = 0.2
CHAPTER 2 OPERATI ONS ST RAT E G Y IN A GL O BA L EN V I R O N M E N T 13
2
boat sales brought about through the reduction of the luxury tax and
Regal Marine’s increasing market presence in the world boat mar-
ket. The threats to Regal are a huge number of small competitors
going after various parts of the market. Brunswick goes after the
4. Each of the 10 operations management decisions is important
to Regal’s success:
◼ Product: Must be unique, full of features, and richly
appointed, which puts constant pressure on the design, styl-
ing, and appointments.
◼ Quality: Because the typical Regal Marine customer is inter-
ested in exceptional quality for his/her substantial investment.
◼ Process selection and design: Because of the large number
of boats and custom features, building via repetitive pro-
HARD ROCK CAFE’S GLOBAL STRATEGY
There is a short video (9 minutes) available from Pearson, and filmed
specifically for this text, that supplements this case.
◼ Then it became an established name and began opening
hotels and casinos.
◼ Then it upgraded its menu.
◼ Then it moved into cities that are not the typical tourist
destination.
LO 2.1: Define mission and strategy
AACSB: Reflective thinking
2. As these strategic changes have taken place—the 10 decisions
of OM change:
14 CHAPTER 2 OPERA TI O NS STRA TE G Y IN A GLOBAL EN VI R ON ME N T
3
OUTSOURCING OFFSHORE AT DARDEN
The 10-minute video that accompanies this case study is available
from Pearson and was filmed specifically for text. Since this case
was written and filmed, Darden spun off in 2015 Red Lobster into
a separate company.
maintains tight quality standards “from farm to fork.”
LO 2.3: Understand the significance of key success factors and
core competencies
AACSB: Analytical thinking
2. When a giant like Darden procures supplies in 35 countries, it
needs to have a large staff “on the ground” to arrange for training,
3. In other industries, perhaps where 48-hour freshness is not
a critical issue, supply chains may differ. Challenges come from
culture, communications, distance, and documents. Companies
like Walmart have used alliances. P&G reorganized along
product lines instead of geography to increase coordination.
4. Darden outsources seafood harvesting and preparation off-
shore because (a) it may not legally own/control the catch in for-
eign waters; (b) labor intensity of food preparation means it is
cheaper for that work to be done offshore; (c) bulk food purchases
are capital intensive and not part of Darden’s core competence.
Darden has recently spun off its Red Lobster restaurants in part
ADDITIONAL CASE STUDY
(available in MyOMLab)
OUTSOURCING TO TATA
Tata is a major Indian industrial and consultancy organization that
has used its low-cost, highly skilled software professionals to
1. The government of New Mexico, like most other state gov-
ernments, does not have the expertise on staff to complete a
major multi-year IT project internally. The factor rating
method in this chapter may have helped find the ideal pro-
vider and that may be a worthwhile exercise for your stu-
dents. Perhaps New Mexico should have considered factors
that relate to:
providers
AACSB: Analytical thinking
2. There are undoubtedly cultural issues that arise the first time
an organization deals with any foreign partner (you can
have an increased chance of budget over runs, delay, and
changing specifications.
AACSB: Diverse and multicultural work environments.
3. There are numerous risks associated with outsourcing IT
projects. One estimate found that 79% of U.S. firms out-
