Competitiveness, and Strategy

Competitiveness Price Flexibility Quality Time

Four Dimensions of Competitiveness Price Low Labor Low Material Low Overhead Quality Characteristics that satisfy customer expectations above what competitors offer Consistent quality over time (Reliability)

Four Dimensions of Competitiveness Time Lead Time Reliability in Lead Time (on time) Flexibility Variety Volume

Formulation of Operational Strategy (SWOT) Competing edges of the system (Strengths and Weaknesses) The special attributes or capabilities that give an organization a competitive edge. Environmental Scanning (Opportunities and Threats) The considering of events and trends that present threats or opportunities for a company.

Technology, Facilities and Equipment Financial Resources Customers Competitive Edges Human Resources Technology, Facilities and Equipment Financial Resources Customers Product and Services Suppliers

Threats and Opportunities Main Threats and Opportunities Competitor’s activities Changes in consumer needs and preferences Technological changes Economic trends (GNP, unemployment, inflation, interests, taxes, tariffs) Legal, political, and environmental issues

Traditional and Recent Strategies Traditional Strategies Cost Reduction Reduce cost in all activities Product Differentiation Differentiate all parts and products New Strategies Quality-based Time-based

Quality Based Strategy Focuses on quality in all aspects of an organization. High quality not only in product but also in design, production, service and organization. Quality at the source, zero defect, any defect stops the whole production system. Order qualifiers: Characteristics that customers perceive as minimum standards of acceptance in the product. Order winners: Characteristics that cause the product to be perceived better than that of competitors.

Time based strategies Focuses on reduction of time needed to accomplish tasks. Cycle time reduction results in: Higher Productivity, and therefore Lower Costs (both direct cost and overhead). The less time a product stays in a factory the less time it has to absorb overhead costs.

Japanese Strategies Over Time Low Price / Cheap Labor Economy of Scale Strategy: Inject capital to increase labor productivity Focused Factory Strategy: Quality, avoid diseconomy of scale Flexible Factories Strategy: Cope with changes in consumer preferences Continuous Improvement Strategy Zero Defect, Perfect Reliability (Car Industry)

Questions What are the factors that affect productivity? List the four key ways that organizations compete. What is “Reliability”? What two key aspects are studied to formulate the Operations Strategy? List the five main groups of aspects studied under threats and opportunities. What are two classes of traditional strategies. What are two classes of new strategies. Briefly define “order qualifiers” and “order winners”. Why time based strategy results in a lower cost. What were the main concepts in each of the 5 development strategies of Japanese Industries.