How to Determine a Corporate Strategy for Your Operations Management Plan
Your corporate strategy ideally establishes the organization’s direction and the basis upon which the business and your operations will compete. Michael Porter, a leading expert on corporate strategy and competitiveness, proposed basic strategies for competitive advantage.
They include a focus on being the low-cost provider (Walmart), a focus on being the leader in innovation (Apple) or product quality (Toyota), or a focus on the differentiated needs of the customer (American Express). Each of these strategies requires a different approach to operations management.
The key to executing the corporate strategy is the business plan, which answers the core questions of running the business, such as what products or services the firm wants to provide and where and how it will produce, market, and distribute them. The business plan also describes market dynamics and competition.
The business plan has a long-term effect on the health of the company and its shareholders. It covers many aspects of running the business, including these:
Goals: What financial and performance goals will the company set?
Markets: What markets and which customers will the firm pursue?
Product portfolio: What products will the business offer, and how quickly will the company introduce and update the products?
The business plan also covers the key strategic operations management decisions, including these considerations and others:
Facility location: Will the company have multiple facilities, and if so, where will they be located?
Long-term capacity: What is the forecast for expected demand, and how much capacity will the firm need to meet the demand?
Outsourcing strategy: What will the company produce or provide itself and what will it outsource?
Production allocation: What facilities will make which products, and will a product be produced at multiple facilities or will a facility make multiple products?
Production policy: How will the firm face the market? Will the company make its product to order or make it to stock?
These high-level decisions have long-term implications and must be considered over a long time horizon. Given the long-term nature of corporate strategy decisions, company leaders must look into the future and create a shared vision of what the company will be before making those decisions.