Chapter 2

Competitiveness, Strategy and Productivity

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Learning objectives

1. List and briefly discuss the primary ways that business organisations
compete
2. List five reasons for the poor competitiveness of some companies
3. Define the term strategy and explain why strategy is important for
competitiveness
4. Contrast strategy and tactics
5. Discuss and compare organisation strategy and operations strategy, and explain
why it is important to link the two.
6. Describe and give examples of time-based strategies
7. Define the term productivity and explain why it is important to organisations and to
countries
8. List some of the reasons for poor productivity and some ways of improving it.

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Introduction

Learn about different ways companies compete

Why some companies do a very good job of competing

Learn effective strategies that can lead to competitive organisation

Learn about productivity, why it is important and what organisations can

do to improve it.

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competitiveness

How effectively an organisation meets the wants and needs of

customers relative to others that offer similar goods or services.

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competitiveness

Combination of marketing and operations functions

1. Identifying consumer wants and/or needs

2. Pricing

3. Advertising and promotion

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competitiveness
Operation has a major influence on competitiveness through;
1. Product and service design- (innovations, time to market)
2. Cost of the organisation output
3. Location
4. Quality
5. Quick response
6. Flexibility
7. Inventory management
8. Supply chain management
9. Service (after sale)
10. Managers and workers (heart and soul of an org.)

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Why some organisations fail

1. Putting too much emphasis on short- term financial performance at the

expense of research and development
2. Failing to take advantage of strengths and opportunities, and or failing to
recognise competitive threats
3. Neglecting operation strategy
4. Too much emphasis on product and service design and not enough on
process design an improvements
5. Neglecting investments in capital and human resources
6. Failing to establish good internal communication and cooperation among
different functional areas
7. Failing to consider customer wants and needs.

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Why some organisations fail

The key to successful competing is to determine what customers;

Want and need

Directing efforts and resources toward;

Meeting and even exceeding customer expectation

Two basic issues

1. What do customers need and want

2. What is the best way to satisfy those needs and wants.

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9 strategy

Strategies
Plans for achieving organisational goals
major impact on;
what the organisation does and
how it does it

Strategies can be;

Long term
Intermediate term
Short term

To be effective strategies must be designed to support the organisations

mission and its
organisational goals

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10 Missions and Goals

Mission
The reason for the existence of an organisation
Mission Statement
States the purpose of an organisation
What business are we in?
Serves as the basis for organisational goals
Goals
Provide detail and scope of the mission

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11 Strategies and tactics

Goals- destination
Strategies as roadmaps for reaching the destination
Strategies- provides focus for decision making
1. Organisational strategies- relate to the entire organisation
2. Functional strategies- relate to the functions of the organisation

Tactics- methods and actions used to accomplish strategies

How to reach the destination (how)
Operation are the actual doing part of the process.

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12 Strategy formulation

Effective strategies must take into account distinctive competencies of

the org.

Scan the environment

Determine what the competitors are doing or planning to do and take into
account

SWOT approach (strength, weakness, opportunities and threats)

Strengths and weaknesses evaluated by operation people

Threats and opportunities evaluated by marketing people

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Strategy formulation cont.

Successful strategies must take into account two factors;

1. Order qualifiers
Characteristics that customers perceive as minimum standards of acceptability to be considered
as a potential for purchase
2. Order winners
Characteristics of an organisations goods and services that cause it be perceived as better than
the competition
Characteristics such as;
a. Price
b. Delivery
c. Reliability
d. Delivery speed
e. Quality

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14 Strategy formulation cont.

Environmental scanning
The considering of events and trends that present threats or opportunities for
a company
Competitors activities
Changing consumers needs
Legal
Economic
Political
Environmental issues
New markets
Technological change

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 15 Environmental scanning

External factors

1. Economic conditions

2. Political conditions

3. Legal environment

4. Technology

5. Competition

6. Markets

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 16 Environmental scanning cont.
Internal factors
1. Human resources
2. Facilities and equipment
3. Financial resources
4. Customers
5. Products and services
6. Technology
7. Suppliers
8. Others
1. Patents
2. Labour relationship
3. Company/product image
4. Distribution channels
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17 Global strategy

Globalisation has increased

What works in one country cannot work in another country

Threat of political and social issues

You dont have to go abroad to experience international competition

The world comes to you

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18 Operation strategy

The approach, consistent with the organisation strategy, that is used to guide the
operations functions
Relates to
Products/Processes/Methods/Operating resources/Quality
Costs/Lead times/Scheduling
Link /align to the organisational strategy

Quality and Time Strategies

Quality based strategy
focuses on quality in all phases of an organisation

Time based strategy

Focuses on reduction of time needed to accomplish tasks

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19 Productivity

A measure of the effective use of resources, usually expressed as the

ratio of output to input

productivity=

Productivity growth= X 100

see page 51 of text book for the rest of the equations

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