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320 CHAPTER 9 • THE PRoCEss of oPERATions sTRATEgy – foRmulATion And imPlEmEnTATion

had developed a radically different and very successful set of operations based on an extremely
efficient supply chain, low inventories, modular product designs that allowed it to customise
to its individual customer requirements and a direct link to customers. All of this allowed it to
sell robust computers at low prices. Some of the questions raised by commentators focused on
Dell’s size. Perhaps it had grown so big that its lean supply model was no longer appropriate?
How could a $56-billion company remain lean, sharp and alert? Other commentators pointed
out that Dell’s rivals had also now learnt to run efficient supply chains (‘getting a 20-year com-
petitive advantage from your knowledge of how to run supply chains isn’t too bad’). However, one of
the main factors was seen as the shift in the nature of the market itself. Sales of PCs to business
users had become largely a commodity business, with wafer-thin margins, and this part of the
market was growing slowly compared to the sale of computers to individuals. Selling computers
to individuals provided slightly better margins than the corporate market, but they increasingly
wanted up-to-date computers with a high design value and, most significantly, they wanted to
see, touch and feel the products before buying them. This was clearly a problem for a company
such as Dell, who had spent 20 years investing in its telephone and, later, internet-based sales
channels. Also, Dell’s early attempts to move into products other than PCs, such as televisions,
were also hindered by its lack of physical stores. What all commentators agreed on was that in
the fast-moving and cut-throat computer business, where market requirements could change
overnight, operations resources must constantly develop appropriate new capabilities.

What analysis is needed for formulation?

However formulation is approached, it is likely to require some significant analysis.
As one would expect in a process that reconciles market requirements with operations
resource capabilities, the two chief areas of analysis concern markets and resources. The
practical reason for emphasising the problems with this analysis is to help reinforce the
balanced nature of the reconciliation between resources and requirements. Although
analysis of the marketplace is generally characterised by better tools and techniques,
in reality both are characterised by ambiguity and uncertainty.

analysing market requirements
It is beyond the scope of an operations strategy book to explore the many practical
models that exist to help practitioners assess the requirements of the marketplace.
There is a rich and sophisticated literature on marketing stretching back over the his-
tory of modern business. However, simply because there are many highly structured,
rational models for analysing the external environment, this does not imply that these
analyses are foolproof. No matter how complex and detailed the model, regardless of
how much time and effort is invested in the data collection, it is still an ambiguous and
unreliable process.

analysing operational resource capabilities

It can be difficult to analyse the external environment, despite the widespread avail-
ability of practical tools and techniques designed to help in this process. But it can be
even more difficult to analyse the ‘inside’ of the organisation. This aspect of strategy
formulation is not supported by many practical frameworks. In fact, Birger Wernerfelt,

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