The Role of Production and Operations Management in Strategy

Any firm that wishes to survive in a competitive market must develop some form of operational strategy. In a broad sense, a strategy is a plan for how a firm intends to maximize value for its shareholders (Jacobs). Ideally, the strategy should be as efficient as possible, using internal and environmental strengths while marginalizing competitive threats and internal weaknesses. To fully understand strategy, it is important to understand how a firm’s internal and competitive environment can influence performance (Barney).

Jay Barney suggests that a sustained competitive advantage is not attained by a simple measure of the amount calendar time a firm maintains competitive advantage but rather by the inability of a competitor to duplicate and enjoy that competitive advantage (Barney). This may require the constant evolution of a strategy in order to maintain a competitive advantage. For example, in the hotel industry, it is in a hotel’s best interest to manipulate room rates to drive occupancy, thus maximizing profit. This strategy is known as yield management, where a hotel operations manager or revenue manager is constantly adjusting room rates in order to maximize occupancy (Withiam). A hotel that effectively implements yield management strategies will be able to draw optimal revenue from operations. As a sales director at hotel, I am able to see yield management strategies first-hand when I reserve a block of rooms for a group, enabling our revenue manager to increase rates for the remaining rooms, since the availability of our limited product (rooms) thus decreases.

Developing a strategy requires a firm to effectively evaluate internal strengths and weaknesses, environmental opportunities, and external threats (Barney). Productions and operations management (POM) plays a key role through this analysis. Competitive dimensions of POM include cost or price, quality, delivery speed and reliability, dealing with changes in demand, and speed of introduction of new...