Operation Strategy Lesson 6 ExerciseThe importance–performance matrix is used by operations to prioritise the particular competitive factors or performance objectives on which they should be concentrating. The gap between ‘customer importance’ and ‘company performance’ should drive any improvement action.
I’m going to apply this technique to the “Nespresso Capsule” described in my 2nd blog (http://blogs.warwick.ac.uk/chiaraserini/entry/operation_strategy_lesson/)
The importance–performance matrix method is split in 5 steps.
Step 1 deal with selecting one product or service into one market: “Nespresso Capsule” offering includes coffee, tea, cappuccino and herbal tea tastes. In order to avoid generalities on the matrix I’m going to focus only on the coffee capsules.
In the Step 2 relevant competitive factors have to be identified. For this product the selling is direct from producer to the immediate purchasers (that are also the ultimate consumers). We’ve to focus on what is relevant for those last mentioned ones. We’re analyzing a quite good product so, in order to debate over the way it’s managed, let’s consider factors that may be improved. Splitting these factors according to the 5 performance objectives let’s focus on:
- Quality: Error Free products, Taste, Reliable products
- Dependability: On-time arrival of products, Knowledge of delivery time
- Cost:Productive process, Low Prices
Step 3 and 4 require to rate these factors and operation performance (on a 1-9 importance scale - 1 is the best, 9 the worst). This is my analysis (we’ve to remember that is a quite subjective one)
In the Step 5 we’ve to plot the points on the importance-performance matrix. In order to put the factors on the matrix I’ve assigned them a letter (A to G).
This is the (subjective) result:
The analysis shows that a really urgent action has to be developed in order to reduce the price (G) for customers. Competitors are increasing in number (Lavazza, Costadoro, Gaggia..), in service offering and price competition.
Assuming that customers do not care about the productive process (F), this factor appears in the appropriate area. In my opinion this is one of the most important “weapon” in the “price war” so has to be considered more in the improve area then in the appropriate one. As mentioned above and in my 2nd blog, we’re dealing with a very good product so it didn’t surprise me that reliable (C) / error free (A) products and taste (B) are in the appropriate area. Attention has to be paid on services – on time arrival of products (D) and knowledge of delivery time (E) - directly connected to the sales that need to be improved especially in this growing competition contest.
Slack, Nigel and Lewis, Michael (2008), "Operations Strategy", Prentice Hall, Great Britain
University of Warwick(2008), "The Warwick MBA: Operations Strategy, Lesson 6", Warwick Business School.