Strategic Management: Formulation and Implementation

Operating Strategy

Steven C. Wheelwright and Robert H. Hayes argue that operations management plays different roles in determining strategy, depending on an organization's strategic role stage. There are four stages:

Stage 1: Minimize Negative Potential. At stage 1, top managers attempt to neutralize any negative impact that internal operations may have on the organization. Top managers typically use detailed measures and controls to be sure that the operations function does not veer too far off track before corrective action is taken.

Stage 2: Achieve Parity with Competition. At this stage, top managers seek to have operations management maintain parity, or stay even, with competition. Companies at this stage typically attempt to maintain equality with the competition by adopting industry practices related to work-force matters (such as labour negotiations), equipment purchases, and upgrades of capacity.

Stage 3 Support Overall Organizational Strategy. At stage 3, to managers expect the operations management function to actively support and strengthen the organization's overall strategy.

Stage 4: Pursue Operations Management-Based Strategy. At stage 4, top managers include operations managers in the strategy development process and formulate a strategy that depends to a significant degree on operations capabilities.

In strategic role stages 3 and 4, the two operations strategies that are most commonly used are low-cost producer and innovative producer.