2-1 Competitiveness, Strategy, and Productivity

CHAPTER
2

Competitiveness, Strategy,
and Productivity
2-2 Competitiveness, Strategy, and Productivity

Competitiveness:

How effectively an organization meets the

wants and needs of customers relative to
others that offer similar goods or services
2-3 Competitiveness, Strategy, and Productivity

Businesses Compete Using Marketing

 Identifying consumer wants and needs

 Pricing
 Advertising and promotion
2-4 Competitiveness, Strategy, and Productivity

Businesses Compete Using Operations

 Product and service design

 Cost
 Location
 Quality
 Quick response
 Flexibility
 Inventory management
 Supply chain management
 Service
2-5 Competitiveness, Strategy, and Productivity

Why Some Organizations Fail

 Too much emphasis on short-term financial performance

 Failing to take advantage of strengths and opportunities
 Failing to recognize competitive threats
 Neglecting operations strategy
 Too much emphasis in product and service design and not
enough on improvement
 Neglecting investments in capital and human resources
 Failing to establish good internal communications
 Failing to consider customer wants and needs
2-6 Competitiveness, Strategy, and Productivity

Mission/Strategy/Tactics

Mission Strategy Tactics

How does mission, strategies and tactics relate to

decision making and distinctive competencies?
2-7 Competitiveness, Strategy, and Productivity

Strategy
Strategies
Plans for achieving organizational goals
Mission
The reason for existence for an organization
Mission Statement
Answers the question “What business are we in?”
Goals
Provide detail and scope of mission
Tactics
The methods and actions taken to accomplish
strategies
2-8 Competitiveness, Strategy, and Productivity

Planning and Decision Making

Mission

Goals

Organizational Strategies

Functional Goals

Finance Marketing Operations

Strategies Strategies Strategies

Tactics Tactics Tactics

Operating Operating Operating

procedures procedures procedures
2-9 Competitiveness, Strategy, and Productivity

Examples of Strategies
 Low cost
 Scale-based strategies (high vol./ low unit cost)
 Specialization (low vol./ high variety)
 Flexible operations
 High quality
 Service
2-10 Competitiveness, Strategy, and Productivity

Strategy and Tactics

 Distinctive Competencies
The special attributes or abilities that give an organization a
competitive edge
 Price
 Quality
 Time
 Flexibility
 Service
 Location
2-11 Competitiveness, Strategy, and Productivity

Examples of Distinctive Competencies

Price Low Cost U.S. first-class postage

Motel-6, Red Roof Inns

Quality High-performance design Sony TV

or high quality Consistent Lexus, Cadillac
quality Pepsi, Kodak, Motorola

Time Rapid delivery Express Mail, Fedex,

On-time delivery One-hour photo, UPS

Flexibility Variety Burger King

Volume Supermarkets

Service Superior customer Disneyland

service Nordstroms

Location Convenience Banks, ATMs

2-12 Competitiveness, Strategy, and Productivity

Operations Strategy

Operations strategy – The approach, consistent

with organization strategy, that is used to guide the
operations function.
 Strategy Formulation:
 Distinctive competencies
 Environmental scanning
 SWOT
 Order qualifiers
 Order winners
2-13 Competitiveness, Strategy, and Productivity

Strategy Formulation
 Order qualifiers
 Characteristics that customers perceive as minimum
standards of acceptability to be considered as a
potential purchase
 Order winners
 Characteristics of an organization’s goods or services
that cause it to be perceived as better than the
competition
2-14 Competitiveness, Strategy, and Productivity

Key External Factors

 Economic conditions
 Political conditions
 Legal environment
 Technology
 Competition
 Markets
2-15 Competitiveness, Strategy, and Productivity

Key Internal Factors

 Human Resources
 Facilities and equipment
 Financial resources
 Customers
 Products and services
 Technology
 Suppliers
2-16 Competitiveness, Strategy, and Productivity

Quality and Time Strategies

 Quality-based strategies
 Focuses on maintaining or
improving the quality of an
organization’s products or
services
 Quality at the source

 Time-based strategies
 Focuses on reduction of time
needed to accomplish tasks
2-17 Competitiveness, Strategy, and Productivity

Time-based Strategies

JAN FEB MAR APR MAY JUN

Planning

Designing

Processing

Changeover On time!

Delivery
2-18 Competitiveness, Strategy, and Productivity

Productivity

 Productivity
 A measure of the effective use of resources, usually
expressed as the ratio of output to input
 Productivity ratios are used for
 Planning workforce requirements
 Scheduling equipment
 Financial analysis
2-19 Competitiveness, Strategy, and Productivity

Productivity
 Partial measures
 output/(single input)
 Multi-factor measures
 output/(multiple inputs)
 Total measure
 output/(total inputs)

Outputs
Productivity =
Inputs
2-20 Competitiveness, Strategy, and Productivity

Productivity Growth

Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
2-21 Competitiveness, Strategy, and Productivity

Measures of Productivity

Partial Output Output Output Output

measures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them
2-22 Competitiveness, Strategy, and Productivity

Example

7040 Units Produced

Sold for $1.10/unit

Cost of labor of $1,000 What is the

multifactor
Cost of materials: $520 productivity?

Cost of overhead: $2000 Ans. 2.20

2-23 Competitiveness, Strategy, and Productivity

Example Solution

MFP = Output
Labor + Materials + Overhead

MFP = (7040 units)*($1.10)

$1000 + $520 + $2000

MFP = 2.20
2-24 Competitiveness, Strategy, and Productivity

Factors Affecting Productivity

Capital Quality

Technology Management
2-25 Competitiveness, Strategy, and Productivity

Other Factors Affecting Productivity

 Standardization
 Quality
 Use of Internet
 Computer viruses
 Searching for lost or misplaced items
 Scrap rates
 New workers
2-26 Competitiveness, Strategy, and Productivity

Other Factors Affecting Productivity

 Safety
 Shortage of IT workers
 Layoffs
 Labor turnover
 Design of the workspace
 Incentive plans that reward productivity
2-27 Competitiveness, Strategy, and Productivity

Improving Productivity
 Develop productivity measures
 Determine critical (bottleneck) operations
 Develop methods for productivity improvements
 Establish reasonable goals
 Get management support
 Measure and publicize improvements
 Don’t confuse productivity with efficiency