Competitiveness, Strategy, and Productivity Chapter 2 Competitiveness, Strategy, and Productivity McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 2: Learning Objectives You should be able to: List the three primary ways that business organizations compete Explain five reasons for the poor competitiveness of some companies Define the term strategy and explain why strategy is important Discuss and compare organization strategy and operations strategy, and explain why it is important to link the two Describe and give examples of time-based strategies Define the term productivity and explain why it is important to organizations and countries Provide some reasons for poor productivity and some ways of improving it 2-2 Student Slides

Competitiveness Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services Organizations compete through some combination of their marketing and operations functions What do customers want? How can these customer needs best be satisfied? 2-3 Student Slides

Businesses Compete Using Operations Product and service design Cost Location Quality Quick response Flexibility Inventory management Supply chain management Service Managers and workers 2-4 Student Slides

Hierarchical Planning Mission Goals Organizational Strategies Tactics Functional Strategies 2-5 Student Slides

Mission, Goals, and Strategy The reason for an organization’s existence Goals Provide detail and the scope of the mission Goals can be viewed as organizational destinations Strategy A plan for achieving organizational goals Serves as a roadmap for reaching the organizational destinations 2-6 Student Slides

Core Competencies Core Competencies The special attributes or abilities that give an organization a competitive edge To be effective core competencies and strategies need to be aligned 2-7 Student Slides

Strategy Formulation Effective strategy formulation requires taking into account: Core competencies Environmental scanning SWOT Successful strategy formulation also requires taking into account: Order qualifiers Order winners 2-8 Student Slides

Operations Strategy Operations strategy The approach, consistent with organization strategy, that is used to guide the operations function. Decision Area What the Decisions Affect Product and service design Costs, quality, liability, and environmental issues Capacity Cost, structure, flexibility Process selection and layout Costs, flexibility, skill level needed, capacity Work design Quality of work life, employee safety, productivity Location Costs, visibility Quality Ability to meet or exceed customer expectations Inventory Costs, shortages Maintenance Costs, equipment reliability, productivity Scheduling Flexibility, efficiency Supply chains Costs, quality, agility, shortages, vendor relations Projects Costs, new products, services, or operating systems 2-9 Student Slides

Strategic OM Decision Areas What the Decisions Affect Product and service design Costs, quality, liability, and environmental issues Capacity Cost, structure, flexibility Process selection and layout Costs, flexibility, skill level needed, capacity Work design Quality of work life, employee safety, productivity Location Costs, visibility Quality Ability to meet or exceed customer expectations Inventory Costs, shortages Maintenance Costs, equipment reliability, productivity Scheduling Flexibility, efficiency Supply chains Costs, quality, agility, shortages, vendor relations Projects Costs, new products, services, or operating systems 2-10 Student Slides

Time- and Quality-Based Strategies Time-based strategies Strategies that focus on the reduction of time needed to accomplish tasks It is believed that by reducing time, costs are lower, quality is higher, productivity is higher, time-to-market is faster, and customer service is improved Quality-based strategy Strategy that focuses on quality in all phases of an organization Pursuit of such a strategy is rooted in a number of factors: Trying to overcome a poor quality reputation Desire to maintain a quality image A desire to catch up with the competition A part of a cost reduction strategy 2-11 Student Slides

Productivity Productivity Productivity measures are useful for A measure of the effective use of resources, usually expressed as the ratio of output to input Productivity measures are useful for Tracking an operating unit’s performance over time Judging the performance of an entire industry or country 2-12 Student Slides

Productivity Measures 2-13 Student Slides

Factors Affecting Productivity Methods Capital Quality Technology Management 2-14 Student Slides

Improving Productivity Develop productivity measures for all operations Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Make it clear that management supports and encourages productivity improvement Measure and publicize improvements Don’t confuse productivity with efficiency 2-15 Student Slides