Considering Strategic Choice - Operation Strategy
(Strategic analysis will be covered in Strategy - Analysis and Evaluation).
The following points are an extract from Porter (1985):
1. Find areas of value the buyer views as important
2. Create value and communicate this in credible ways
3. Bear, but minimise the cost of uniqueness; find a basis of uniqueness which is difficult to emulate
4. Manage the issue of cost and differentiation successfully
5. Sustain differentiation by innovating new sources of buyer value.
Finding areas 'of value' outlined by Porter (1985) is also supported by Kay (1993) who describes the rent model of the firm. He suggests that to understand why some companies are successful and others are not, it is necessary to understand the distinctive competencies of the firm.
The analogy he uses is of a farm. One farm has excellent land and therefore produces and receives a price premium. Whereas a farm with poor land cannot produce or receive the same income as the farm with the best land. Hence the difference in income, referred to as rent, is related to the land (resource). This then is the basis of differentiation. Kay argues that distinctive competence may come from reputation or organisational relationships within the value chain (he refers to this as the architecture of the firm). Reputation is usually based on an earlier competence such as quality. This relates well to operations strategy and is translated as competence or operational capability and is very much the purpose of the operations function. Operations must deliver the service or product by which the consumer will ultimately judge. It is more important to be doing the right thing, rather than things right.