Lasik Vision’s competitive priority focused on the financial perspective of the management. The strategy design was diverted to improving the revenue and profitability aspects of the business. Prior to Michael Henderson joining the company, Dr. Hugo Sutton managed to integrate all elements of operations and utilized a comprehensive strategy for the company. Though being a medical practitioner and surgeon, his area of expertise was more of the strategic competencies and technologies of the com Competitive Priorities
The key to developing an effective operations strategy lies in understanding how to create or add value for customers. Specifically, value is added through the competitive priority or priorities that are selected to support a given strategy. Skinner and others initially identified four basic competitive priorities. These were cost, quality, delivery, and flexibility. These four priorities translate directly into characteristics that are used to describe various processes by which a company can add value to the products it provides.
There now exists a fifth competitive priority—service—and it was the primary way in which companies began to differentiate themselves in the 1990s. Cost:- Within every industry, there is usually a segment of the market that buys strictly on the basis of low cost. To successfully compete in this niche, a firm must necessarily, therefore, be the low-cost producer. But, as noted earlier, even doing this doesn’t always guarantee profitability and success. Products sold strictly on the basis of cost are typically commodity-like. (Examples of commodities include flour, petroleum, and sugar. In other words, customers cannot easily distinguish the products made by one firm from those of another. As a result, customers use cost as the primary determinant in making a purchase. However, this segment of the market is frequently very large and many companies are lured by the potential for significant profits, which are associated with large unit volumes of product. As a consequence, the competition in this segment is exceedingly fierce—and so is the failure rate. After all, there can only be one low-cost producer, and that firm usually establishes the selling price in the market.
Quality Quality can be divided into two categories: product quality and process quality. The level of quality in a product’s design will vary as to the particular market that it is aimed to serve. Obviously, a child’s first two-wheel bicycle is of significantly different quality than the bicycle of a world-class cyclist. The use of thicker sheetmetal and the application of extra coats of paint are some of the product quality characteristics that differentiate a Mercedes- Benz from a Hyundai. One advantage of offering higher-quality products is that they command higher prices in the marketplace.
The goal in establishing the “proper level” of product quality is to focus on the requirements of the customer. Overdesigned products with too much quality will be viewed as being prohibitively expensive. Underdesigned products, on the other hand, will lose customers to products that cost a little more but are perceived by the customers as offering much greater benefits. Process quality is critical in every market segment. Regardless of whether the product is a child’s first two-wheeler or a bicycle for an international cyclist, or whether it is a Mercedes-Benz or a Hyundai, customers want products without defects.
Thus, the goal of process quality is to produce error-free products. Delivery Another market niche considers speed of delivery to be an important determinant in its purchasing decision. Here, the ability of a firm to provide consistent and fast delivery allows it to charge a premium price for its products. George Stalk Jr. , of the Boston Consulting Group, has demonstrated that both profits and market share are directly linked to the speed with which a company can deliver its products relative to its competition. 11 In addition to fast delivery, the reliability of the delivery is also important.
In other words, products should be delivered to customers with minimum variance in delivery times. Flexibility From a strategic perspective, in terms of how a company competes, flexibility consists of two dimensions, both of which relate directly to how the firm’s processes are designed. One element of flexibility is the firm’s ability to offer its customers a wide variety of products. The greatest flexibility along this dimension is achieved when every product is customized to meet the specific requirements of each individual customer. This is often referred to as mass customization.
The other dimension of flexibility is how fast a company can change its production facilities to produce a new line of products. This dimension is growing in importance, as product life cycles become shorter and shorter. Sony provides a good example here with its ability to quickly produce new models of its Walkman. Because it has this high degree ofchangeover flexibility, Sony is able to easily substitute new Walkman models for those models that do not sell well. Service With product life cycles becoming shorter and shorter, the actual products themselves tend to quickly resemble those of other companies.
As a consequence, these products are often viewed as commodities in which price is the primary determinant in deciding which one to buy. A good example of this is the personal computer (PC) industry. Today, the differences in the products offered among the different PC manufacturers are relatively insignificant, so price is the prime selection criterion. To obtain an advantage in such a competitive environment, firms are now providing “value-added” service. This is true for firms that provide goods and services. The reason is simple.
As Sandra Vandermerwe puts it, “The market power is in the services, because the value is in the results. ” (Specific examples of how manufacturers are using services as a competitive advantage are presented later in this chapter. ) While a menu-driven voicemail system is more cost efficient, management knows that its high-income customers prefer a human operator. The Fairmont Vancouver Airport hotel even has an Air Canada boarding pass kiosk in its lobby. Passengers flying to North American destinations without check-in baggage can obtain boarding passes from these kiosks, thus avoiding a wait in line at the airport.
