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Operational strategy is a collectively mandated and chosen strategic approach of an organization. It is implemented in tandem or within the operational functions of a business. In every company, the operational strategy is required to bind various operational decisions and actions into a consistent and cohesive response; it is a competitive force linking corporate policies, systems, programs, and actions into a systemic response to strategic priorities communicated by the corporation. In brief, an operational strategy illustrates how a firm can arrange its operational capabilities to support its business strategies.
Operational Efficiency and Operational Strategy Case
Art’s Way Manufacturing is a small size corporation the mission of which is to deliver high quality products and services, to be a market responsive and produce products and services that exceed customers’ expectation, and maximize shareholders’ value. The company is a leading manufacturer and marketer of special agricultural products. A few months ago, the Vice President in-charge of the operations noticed that the current operational strategy was not in tandem with the organizational challenges and, hence, decided to act towards resolving the same. He learnt that the firm’s operational strategy encompassed; offering superior services to its customers, being flexible in its engineering design changes when needed, offering quality products to clients, and price/cost strategy of the business fixed lower prices on its products than those offered by the competitors (Lewis, 2003).
The company’s production efficiency was pegged to the enhanced automation, which allowed it to produce more goods at lower costs. There was also the dimension of reliable source materials, where the corporation relied on few suppliers to buy main raw materials at affordable price. The productivity further depended on improving employee retention and satisfaction, ease of collaboration, stronger ICT system to keep the companies secrets, and time management. Out of the operational efficiency strategy, the firm expected to get the maximum return on investments. However, there are some tasks that do not align with the Art’s Way Manufacturing’s operational strategy. If the scenario is not checked on time, it might cause conflicting objectives, time lag and system slack (Hill, 2000). The operational strategy is a way to the future while operational efficiency is the means to reach the future. If operational efficiency is not well checked and monitored, then operational strategy may just remain a strategy without implementation.
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There are however three tasks that do not align with the operational strategy.
Overreliance on a Single Supplier
Art’s Way Manufacturing relies only on a single supplier to buy tractor seats that cost more than the average market price.is This does not align with the operational strategy of providing quality products at a lower cost. If the firm wants to increase efficiency of raw materials’ usage, it must be ready to buy qualitative goods from the best vendors, and not the traditional suppliers that provide low quality raw materials (Garvin, 1987). The weakness of this task is that the arrangement is not cost effective as the seats are supplied at higher costs compared to the market price. Moreover, Art’s Way Manufacturing may be left with no seats for the tractors if any shut down occurs in the supplier’s premises.
Employee retention is an important strategy, but it is not in tandem with operational strategy. The weakness of this approach is that if workers are bound by contract to stay, mass personnel outflow can occur at the end of the contract period. Furthermore, Art’s Way Manufacturing used incentives as means of retention. However, the competitors have since copied this to attract talented employees, offering them even more benefits.
Collaboration strategy does not align with the firm’s strategy at all. Art’s Way Manufacturing’s partnership with the tire producer is biased; the latter receives all the benefits of collaboration, but does not put any effort in return. In addition, the cultures of these two companies and their business philosophies are at loggerheads. Art’s Way Manufacturing should concentrate on efficient production, delivery and customer service rather than collaboration.
New Operational Strategy
The firm needs a new strategy which would be more cost efficient, flexible, would ensure production of more qualitative products at affordable cost with all processes done in time. The proposed new strategy can be; capacity expansion, modernization of equipment, diversification, and networking. Capacity expansion can allow the firm to open more factories in different locations, which can make it gain economy of scale by buying raw material in bulk for all its factories. In the long run, the strategy will reduce the cost of production. Purchasing modern equipment will enable Art’s Way Manufacturing to produce agricultural equipment efficiently with fewer defects and at bigger volumes creating cost effectiveness in the firm. Consequently, diversification can facilitate horizontal expansion; new enterprises will be added to make use of economies of scale to achieve low cost status. Finally, the new strategy will involve working with others to gain advantages not available to other firms to leverage activities, hence increasing overall profitability of the company.
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Competitive priorities of the company depend on its ability to perform well in such areas as quality, cost, flexibility, knowhow, delivery and customer focus for it to adjust to variations in demand. To achieve all this, the management needs to provide a strong production process infrastructure like machinery, warehouse, and manpower. While competitive priorities concentrate on cost, flexibility delivery and customer focus, it is a variable dependent on production process infrastructure as the better it is, the more likely it is that the competitive priorities can be achieved (Nielsen-Englyst, 2003).
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