Operations Strategy, Competitiveness & Order Winners

TAKEAWAYS:

• Operations strategy links corporate goals to functional-level decisions (e.g., cost leadership, differentiation) using frameworks like Porter’s generic strategies.
• Order winners (e.g., speed, quality) and order qualifiers (e.g., price, reliability) determine a company’s competitive edge in the market.
• Performance objectives (cost, quality, delivery, flexibility) require trade-offs; prioritize based on customer needs and industry norms.
• Value chain analysis breaks down activities (primary/secondary) to identify cost drivers and value-adding opportunities.
• Competitive priorities (e.g., low cost, customization) must align with process choices (e.g., mass production vs. lean manufacturing).
• Case studies (e.g., Daraz’s logistics speed, Nabil Bank’s service reliability) illustrate how strategy translates into operational excellence.

1. Defining Operations Strategy

Operations strategy is the long-term plan that aligns a company’s operations with its corporate strategy to achieve competitive advantage. It answers:

• What operations capabilities are needed?
• How should resources be allocated?
• When should changes be made?

Key Components

Example: Nabil Bank’s strategy prioritizes reliable digital banking (order winner) over ultra-low fees (order qualifier). This aligns with Nepal’s growing fintech demand.

2. Order Winners and Order Qualifiers

These terms classify customer-deciding factors in a market:

• Order winners: Features that make customers choose your product/service (e.g., Daraz’s fast delivery, Pathao’s app convenience).
• Order qualifiers: Minimum standards customers expect (e.g., NTC’s basic network coverage, Ncell’s call quality).

Comparison Table

Worked Example: Why does Daraz win orders in Nepal?

• Order winner: Same-day delivery (via hubs in Kathmandu, Pokhara).
• Order qualifier: Affordable prices (competing with local shops).
• Trade-off: Daraz sacrifices some profit margin to invest in logistics (warehouses, delivery fleets).

3. Competitive Priorities and Trade-offs

Companies must choose 1–2 priorities from these 5 performance objectives:

1. Cost: Lowest price (e.g., Walmart, Daraz).
2. Quality: Reliability, durability (e.g., Toyota, Nabil Bank’s error-free transactions).
3. Delivery: Speed, on-time performance (e.g., Pathao, eSewa).
4. Flexibility: Customization, volume changes (e.g., Chaudhary Group’s varied products).
5. Service: Support, responsiveness (e.g., Ncell’s customer care).

Trade-off Example: Kathmandu Traffic Routes

flowchart TD
    A["High Speed (Order Winner)"] -->|"Trade-off"| B["High Cost (Tolls, Fuel)"]
    C["Low Cost (Order Qualifier)"] -->|"Trade-off"| D["Slow Speed (Congestion)"]
    E["Reliability (Order Qualifier)"] -->|"Trade-off"| F["Flexibility (Detours)"]

Real Scenario:

• Ring Road (Kathmandu): Fast but congested (high cost for businesses).
• Local roads: Cheap but slow (qualifier for daily commuters).

4. Porter’s Generic Strategies

Michael Porter identified three ways to achieve competitive advantage:

1. Cost Leadership: Be the lowest-cost producer (e.g., Daraz, NTC’s bulk calling plans).
2. Differentiation: Offer unique features (e.g., Himalayan Java’s single-origin coffee, Toyota’s hybrid cars).
3. Focus: Target a niche market (e.g., Chaudhary Group’s premium brands like Bhatbhateni).

How Nepali Companies Apply This

5. Value Chain Analysis

Developed by Porter, this tool breaks operations into primary (directly add value) and secondary (support) activities. Example for Nabil Bank:

flowchart TD
    subgraph Primary Activities
        A["Inbound Logistics"] -->|"Digital Payments"| B["Operations"] -->|"Loan Processing"| C["Outbound Logistics"] -->|"ATM/Online"| D["Marketing"] -->|"Ads"| E["Service"] -->|"Customer Support"|
    end
    subgraph Secondary Activities
        F["Firm Infrastructure"] -->|"IT Systems"| G["HR Management"] -->|"Trained Staff"| H["Tech Development"] -->|"Mobile App"| I["Procurement"] -->|"Vendor Partnerships"|
    end

Key Insight:

• Nabil Bank’s mobile app (tech development) reduces costs in service (fewer branch visits).
• Loan processing (operations) is an order winner for corporate clients.

6. Process Choice and Competitive Priorities

The process type you choose (e.g., job shop, batch, mass, continuous) directly impacts competitive priorities:

Worked Example: Why does NTC use mass production for SIM cards?

• Order winner: Low cost (qualifier for affordability).
• Trade-off: Cannot customize designs (e.g., no personalized SIMs).

7. Case Study: Toyota’s Lean Operations (Global) vs. Daraz’s Logistics (Nepal)

Toyota (Cost Leadership + Quality)

• Strategy: Eliminate waste (muda) via Just-in-Time (JIT) production.
• Operations:
  • Order winner: Reliable cars (low defects).
  • Order qualifier: Competitive pricing.
• Trade-off: High initial setup cost for automation.

Daraz (Delivery Speed + Cost)

• Strategy: Focus on last-mile delivery in Nepal’s fragmented geography.
• Operations:
  • Order winner: Same-day delivery (via 50+ hubs).
  • Order qualifier: Affordable prices (competing with local shops).
• Trade-off: Higher logistics cost than local retailers.

In the Real World

1. eSewa (Digital Payments)

   • Idea Used: Order winner = speed (instant transactions).
   • How: Aligns operations with Nepal’s cash-heavy economy by offering 24/7 digital payments (qualifier: reliability).
   • Trade-off: High fraud detection cost vs. user convenience.

2. Pathao (Ride-Hailing)

   • Idea Used: Value chain analysis to cut costs.
   • How: Partners with local drivers (secondary activity: procurement) to reduce fleet costs, while app-based matching (primary activity) ensures speed (order winner).

3. Nabil Bank (Service Differentiation)

   • Idea Used: Porter’s differentiation strategy.
   • How: Invests in ATM networks (primary activity) and mobile banking (tech development) to offer 24/7 service (order winner), while keeping basic fees low (order qualifier).

Exam Tip

1. Memorize the 5 performance objectives (cost, quality, delivery, flexibility, service) and trade-offs between them. Exams often ask for examples (e.g., "How does Daraz trade cost for delivery speed?").
2. Porter’s generic strategies are high-yield. Link them to Nepali companies:
   • Cost leadership: Daraz, NTC.
   • Differentiation: Himalayan Java, Nabil Bank.
   • Focus: Local bakeries, Pathao’s hyper-local delivery.
3. Value chain diagrams are common in case studies. Practice drawing them for Nepali firms (e.g., Chaudhary Group, Ncell).
4. Order winners/qualifiers are tested with scenarios. For example:
   • Question: "Why might a customer choose Pathao over a taxi?"
   • Answer: Order winner = app convenience/speed; order qualifier = basic safety (insurance).
5. Process choice questions often ask: "Which process would you recommend for [X] and why?" Always tie it to competitive priorities (e.g., mass production for low cost, job shop for customization).

Visual Summary: