Operations Strategy

In this module we will discuss a number of firms such as Southwest Airlines and Wal-Mart that have unique operational strategies and capabilities.  The growth and development of Wal-Mart and its ability to best competitors such as K-Mart is a fascinating story.  The following article offers some background on how Wal-Mart succeeded:

Loss Leader: How Wal-Mart Outdid a Once-Touted Kmart in Discount-Store Race, Christina Duff and Bob Ortega, WSJ, March 24, 1995 (PDF Format).

Part of Wal-Mart’s success is due to its use of information technology.  See:

What Wal-Mart Knows About Customers’ Habits, Constance L. Hays, NYT, November 14, 2004 (PDF Format).

It is worth noting, however, that while Wal-Mart has been a powerhouse in the US, its international unit has not fared as well.  See:

Wal-Mart – Chimera, The Economist, January 29, 2000 (PDF Format).

Finally, here is an article on how suppliers have tried to deal with the demands of Wal-Mart:

Manufacturers Try to Thrive on Wal-Mart Workout, New York Times, February 20, 2005 (PDF Format).

Southwest is also an interesting company to look at.  Its impact is now felt outside of the US.  This article discusses the growth of discount airlines in Great Britain:

Britain Takes to the Air, The Economist, June 28, 2001 (PDF Format).

We will also discuss Shouldice Hospital, which runs a very focused operation.  A classic article on focused operations, The Focused Factory by Wickham Skinner, is particularly relevant to the Shouldice example.  For more on focused operations, see here.  In addition, here are a set of articles on operational issues in hospital settings:

Nurses Find Healing Power Of Strong Customer Service, Thomas Petzinger Jr., WSJ, February 27, 1998 (PDF Format).

The Battle for Hearts and Tonsils; Hospitals Specialize to Enhance Profits, Allen R. Myerson, NYT, October 7, 1997 (PDF Format).

The Perfect Vision Dr. V, Harriet Rubin, Fast Company, February 2001, (PDF Format).

Hospitals Get Serious about Operations, P. D. Mango and L. A. Shapiro, The McKinsey Quarterly, 2001, Number 2 (PDF Format).

We should note that focused, for-profit hospitals have been quite controversial.  See:

For-Profit Center to Treat Cancer Sparks Heated Debate in Canada, Elena Cherney, WSJ, May 29, 2001 (PDF Format).

Skillful Operation, David Armstrong, WSJ, Aug 2, 2005 (PDF Format).

They have also led litigation in the US.  See:

Barred as Rivals, Doctors See Some Hospitals in Court, Reed Abelson, NYT, April 13, 2004 (PDF Format).

In discussing Shouldice, we’ll note that they run a very focused operation as opposed to, say, an emergency room that must accommodate a wide variety of customers.  Oakwood Hospitals in Michigan has taken an interesting approach to managing its emergency room.  Details are available here.

Another article in the coursepack, What is Strategy? by Michael Porter, provides a nice discussion on strategy and operational effectiveness.  One of the companies Porter discusses is the Swedish furniture realtor IKEA.  The furniture industry provides an interesting setting in which different firms emphasize different combinations of timeliness, quality, product variety, and cost.  The following articles discuss these issues:

On the Couch: Ever Wondered Why Furniture Shopping Can Be Such a Pain?, James R. Hagerty and Robert Berner, WSJ, November 2, 1998 (PDF Format).

A Maverick of Sofas Rearranges the Furniture Business, James R. Hagerty, WSJ, December 11, 1998 (PDF Format).

Tennessee Producer Tries New Tactics in Sofas: Speed, Dan Morse, WSJ, November 19, 2002 (PDF Format).

In North Carolina, Furniture Makers Try to Stay Alive, Dan Morse, WSJ, February 20, 2004 (PDF Format).

When Couches Fly, Chuck Salter, Fast Company, July 2004 (PDF Format).

New Options for Furniture Finish, Cheryl Lu-Lien Tan, WSJ, October 27, 2005 (PDF Format).

If you are curious how furniture actually gets made, Caseworks (a maker of word furniture for hotels and healthcare facilities) offer on-line factory tour.

One of the points emphasized in the articles on the furniture industry is that most firms in that area use general-purpose machinery.  However, there have been many recent advances in manufacturing technologies.  Here is a recent article on advances in machine tools (i.e., machines made to make other things) and the impact that this new technology has had on different industries and the economy overall:

High-Tech Devices Speed Manufacturing, and May Play Larger Role in the Economy, Steve Liesman, WSJ, February 15, 2001 (PDF Format).

The following article discusses Chrysler’s attempts to improve the flexibility of its US plants:

Amid Price War, Chrysler To Revamp Manufacturing, Neal E. Boudette and Norihiko Shirouzo, WSJ, Aug 2, 2005 (PDF Format).

If you are interested in reading more on operations strategy, check out the following articles. (Follow the links for short abstracts.)

If you are interested in seeing other on-line plant tours, try these sites:

The McGraw-Hill site also has a number of OM related articles.

Last Modified by Martin A. Lariviere:October 27, 2005.