Strategic Management: Formulation and Implementation

Purchasing Strategies

A business unit's purchasing strategy will differ depending upon which generic strategy it adopts.

Firms that use either the niche-low-cost strategy or the low-cost strategy emphasize purchasing at the lowest costs possible.

Companies that use the generic strategy of niche-differentiation or differentiation emphasize the procurement of high-quality inputs, even if they cost more than alternative offerings.

When management pursues a niche-low-cost/differentiation or low-cost differentiation generic strategy, emphasis is placed on buying high-quality inputs at low costs.

Using multiple strategies requires a mixture of purchasing plans.

Functional Strategies In Production / Operations

Many writers have stressed the importance of linking manufacturing strategy with corporate level and business level strategy to ensure consistent decisions. Some researchers have argued that manufacturing is the way to compete. Others have forecasted increased strategic advantage due to manufacturing strategy in the future.

One of the most widely cited books dealing with the subject of competition through manufacturing strategy is Restoring Our Competitive Edge, by Hayes and Wheelwright. According to this researchers, two themes should be used to evaluate the soundness of any functional strategy: consistency (both internal and external) and contribution (to competitive advantages).

Production/operations management (POM) involves the process of transforming inputs, such as raw materials and parts, into outputs.

Roger Schroeder suggests the production/operations management comprises five function or decision areas: process, capacity, inventory, work force, and quality.

POM operating strategies must be coordinated with marketing/financial, human resource strategies. James Dilworth outlines several types of strategic decisions that a company might make and considers production/operations implications of those decisions.

Steven Wheelwright recommends that a manufacturing company explicitly establish the relative priorities it will give to the four performance characteristics: cost efficiency, quality, dependability, and flexibility.

These performance characteristics can be briefly described as follows:

Cost efficiency
A company that emphasizes cost efficiency will see that its capital, labor, and other operating costs are kept low relative to those of other, similar companies.
Quality
A company that emphasizes quality will consistently strive to provide a level of quality that is significantly superior to that of its competitors, even if it has to pay extra to do so.
Dependability
A company that stresses dependability can be relied on to have its goods available for customers or to deliver its goods or services on schedule, if its is at all possible.
Flexibility
A company that develops flexibility can quickly respond to changes in product design, product mix, or production volume.

It is important to note that production/operations activities often represent the largest part of an organization's human and capital assets.