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Operations Strategy
Defining how firms compete

Chapter Objectives


Introduce the concept of operations strategy and its various components, and show how it relates to the overall business
strategy of the firm.



Illustrate how operations strategy pertains to adding value for the customer.



Identify the different ways in which operations strategy can provide an organization with a competitive advantage.



Introduce the concept of trade-offs between different strategies and the need for a firm to align its operations strategy to meet the needs of the particular markets it is serving.



Explain the difference between order-qualifiers and order-winners as they pertain to operations strategy.



Describe how firms are integrating manufacturing and services to provide an overall “bundle of benefits” to their customers.

STEELMAKER DOFASCO DOES
A TURNAROUND THROUGH
STRATEGIC REFOCUSING
It is no secret that Canadian steelmakers are
under pressure. The industry is increasingly
facing competition from steelmakers in developing countries such as Brazil, China, and India where labour costs are low. While some
other Canadian steel makers struggle, Hamiltonbased Dofasco, in business since 1912, has turned around its losses from a decade ago
through a revised strategy. The company also
owns or has partial ownership in facilities in the
United States and Mexico.
Until the late 1980s, the company competed on price by producing as much steel as possible at the lowest possible prices. However by the early 1990s increased competition resulted in Dofasco not being able to compete

profitably. As a result, by 1992 it found itself in debt and losing money. Realizing that the current “competing on cost” strategy (cost leadership) was untenable, Dofasco refocused its strategy to developing new and innovative products, and to providing its customers with solutions for high-quality and specialized applications (product differentiation). The business strategy was called Solutions in Steel and focused on operational excellence, technology and innovation, and intimate customer relationships. By 1999 it was the most profitable steel producer in North America. In 2000 it was ranked first in North America among thirty steel suppliers in an independent customer satisfaction survey and was rated one of the best Canadian companies to work for by Report on Business Magazine. What did it take to effect a successful transition from the old strategy to the new? Of course, this transformation did not come without effort, resources, or pain. Its workforce was reduced from about 13 000 to 7000. It spends considerable sums on research and development and facility upgrades. Dofasco recognized that employees would be critical to success in such a strategy. Thus employees were provided a variety of training and development opportunities. In addition, the company invested in the health, safety, and wellness in the workplace such that in 2002, the National Quality Institute awarded Dofasco a Canadian Award for Excellence Healthy Workplace Trophy. Studies have shown that investing in health, safety, and wellness can improve productivity and lower costs. Quality at Dofasco has meant paying attention to environmental concerns also. In 2002, Dofasco’s Hamilton facilities achieved ISO 14001 certification. This means that the company’s Environmental Management Systems comply with an international set of environmental standards (Chapter 6 discusses quality awards and ISO standards in detail). This vignette provides an excellent example of the importance of formulating a successful business strategy and implementing supporting operations strategy decisions to ensure long term survival.

Sources:
Priya Ramu, “Report on Canada’s Steel Industry,” World at Six, CBC Radio, August 6, 2003. Gordon DiGiacomo, Case Study: Dofasco’s Healthy Lifestyles Program (Canadian Labour and Business Centre, 2002), www.clbc.ca.

Dofasco Inc.,...
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