Page 149 -

CHAPTER 4 • THE INTERNAL ASSESSMENT 115

TABLE 4-8 Implications of Various Strategies on Production/Operations
Various Strategies Implications
1. Low-cost provider Creates high barriers to entry
Creates larger market
Requires longer production runs and fewer product changes
2. A high-quality provider Requires more quality-assurance efforts
Requires more expensive equipment
Requires highly skilled workers and higher wages
3. Provide great customer service Requires more service people, service parts, and equipment
Requires rapid response to customer needs or changes in customer tastes
Requires a higher inventory investment
4. Be the first to introduce new products Has higher research and development costs
Has high retraining and tooling costs
5. Become highly automated Requires high capital investment
Reduces flexibility
May affect labor relations
Makes maintenance more crucial
6. Minimize layoffs Serves the security needs of employees and may develop employee loyalty
Helps to attract and retain highly skilled employees

Source: Based on: J. Dilworth, Production and Operations Management: Manufacturing and Nonmanufacturing, 2nd ed. Copyright © 1983 by
Random House, Inc.

Production/Operations Audit Checklist
Questions such as the following should be examined:

1. Are supplies of raw materials, parts, and subassemblies reliable and reasonable?
2. Are facilities, equipment, machinery, and offices in good condition?
3. Are inventory-control policies and procedures effective?
4. Are quality-control policies and procedures effective?
5. Are facilities, resources, and markets strategically located?
6. Does the firm have technological competencies?

Research and Development
The fifth major area of internal operations that should be examined for specific strengths
and weaknesses is research and development (R&D). Many firms today conduct no
R&D, and yet many other companies depend on successful R&D activities for survival.
Firms pursuing a product development strategy especially need to have a strong R&D
orientation.
Organizations invest in R&D because they believe that such an investment will lead
to a superior product or service and will give them competitive advantages. Research
and development expenditures are directed at developing new products before competi-
tors do, at improving product quality, or at improving manufacturing processes to
reduce costs.
Effective management of the R&D function requires a strategic and operational
partnership between R&D and the other vital business functions. A spirit of partnership
and mutual trust between general and R&D managers is evident in the best-managed
firms today. Managers in these firms jointly explore; assess; and decide the what, when,
where, why, and how much of R&D. Priorities, costs, benefits, risks, and rewards asso-
ciated with R&D activities are discussed openly and shared. The overall mission of
R&D thus has become broad-based, including supporting existing businesses, helping