Page 107 - Operations Strategy

82 CHAPTER 2 • OPERATiOns PERfORmAnCE
may segment its market by the size of the promotional accounts of its clients. Ideally, it
may wish to have different service offerings for large, medium and small accounts. Each
of these offerings would have different mixes of services specialising in different types
of communication, such as TV, posters, radio, press and so on. In this way they can
position themselves as ‘one-stop shops’ that will produce entire marketing campaigns
seamlessly for each market segment. However, from an operations viewpoint, the com-
pany’s creative staff (its main resource) may retain their creativity more effectively if
they work in teams focused on specific media – for example, one team specialising in
TV advertising, another in press campaigns and so on. So, what is ideal for the market
(one-stop shops by size of promotional spend) does not match the ideal way of organis-
ing resources to maintain or improve their effectiveness (in this case, creativity).

The ‘operation-within-an-operation’ concept
Any decision to focus an operation might appear to carry with it the need to set up
completely new operations if further products/services are added to the range, and it
is true that in some cases a failure to do this has undermined successful operations.
However, it is not always feasible, necessary or desirable to do this and the ‘opera-
tion-within-an-operation’ (or ‘plant-within-a-plant’, or ‘shop-within-a-shop’) con-
cept is a practical response that allows an organisation to accrue the benefits of focus
without the considerable expense of setting up independent operations. A portion
of the operation is partitioned off and dedicated to the manufacture of a particular
product/delivery of a particular service. The physical separation of products/services
will allow the introduction of independent workforces, control systems, quality stand-
ards and so on. In addition, this approach allows for easier supervision, motivation
and accounting.

example Did ryanair go too far in cost cutting? 14
Ryanair is arguably the best-known budget airline in Europe, but it was not the first to focus its
operations strategy on very low operating costs. The idea was born when Southwest Airlines in
the USA organised its airline operations ruthlessly around providing a low-cost ‘no frills’ ser-
vice. It could both grow its customer base and do so profitably. Around the world, Southwest’s
example inspired a number of imitators, who likewise focused on focus. In Europe, the European
Airlines Deregulation Act prompted the emergence of several low-cost airlines (LCAs). The larger
airlines had been drawn towards longer-haul routes where their interconnecting network of
services and their extended levels of service were a major attraction. So, even in Europe, which
has a viable and popular rail network, several companies saw the opportunity to offer low-cost,
short-haul services. Companies such as Ryanair adopted similar strategies for keeping costs
down. To some extent these strategies included trading off levels of service for reduced costs.
So complimentary in-flight services were kept to a minimum, secondary and sometimes less
convenient airports were used, and one standard class of travel was offered. In other ways these
companies attempted to overcome trade-offs by focusing their operations. For example, they
focused on a standardised fleet of aircraft, thus keeping maintenance costs down. They focused
on their key processes, such as passenger handling, while outsourcing more peripheral pro-
cesses. They focused on direct sales to their customers, often pioneering low-cost channels such
as the internet. They also focused on those elements of the process that hinder the effective uti-
lisation of their expensive resources, such as reducing aircraft turn-around time at the airports.

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