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

Learning Objectives List and briefly discuss the primary ways that business organizations compete. List five reasons for the poor competitiveness of some companies. Define the term strategy and explain why strategy is important for competitiveness. Contrast strategy and tactics.

Learning Objectives 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 to countries. List some of the reasons for poor productivity and some ways of improving it.

NEW PRACTICUM SCHEDULE SEMESTER SIX (6) EMPLOYER SUGGESTION JOB OPPORTUNITIES STUDENTS WERE OFFERED BUT CANNOT ENTER THE JOB MARKET SUGGEST PRIVATE ORGANIZATION COMMENCE IMMEDIATELY CANCEL IF ARRANGEMENT HAS BEEN

RULES FOR STUDENT WEAR ONLY DECENT CLOTHES NO T-SHIRT NO SHORT NO JEANS WEAR ONLY SHOES. NO SANDAL/ SLIPPER SWITCH OFF HP ATTENDANCE IS COMPULSORY

Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services

Businesses Compete Using Marketing Identifying consumer wants and needs Pricing Advertising and promotion

Businesses Compete Using Operations Product and service design Cost Location Quality Quick response

Businesses Compete Using Operations Flexibility Inventory management Supply chain management Service and service quality Managers and workers

Why Some Organizations Fail Too much emphasis on short-term financial performance Failing to take advantage of strengths and opportunities Neglecting operations strategy Failing to recognize competitive threats

Why Some Organizations Fail 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

Mission/Strategy/Tactics How do mission, strategies and tactics relate to decision making and distinctive competencies?

Strategy Mission Mission Statement Goals Strategies Tactics Explains the existence for an organization Mission Statement States the purpose of an organization Goals Provide detail and scope of mission Strategies Plans for achieving organizational goals Tactics The methods and actions taken to accomplish strategies

Planning and Decision Making Figure 2.1 Mission Organizational Goals Organizational Strategies Functional Goals Finance Strategies Marketing Strategies Operations Strategies Tactics Operating Procedures

Strategy Example Mission: Live a good life Jun Hee is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably Mission: Live a good life Goal: Successful career, good income Strategy: Obtain a college education Tactics: Select a college and a major Operations: Register, buy books, take courses, study

Examples of Strategies Low cost Scale-based strategies Specialization Flexible operations High quality Service

Strategy and Tactics Distinctive Competencies Strategy Factors The special attributes or abilities that give an organization a competitive edge. Strategy Factors Price Quality Time Flexibility Service Location

Examples of Operations Strategies Table 2.2 Price Low Cost National first-class postage, Carrefour, Jetstar Quality High-performance design and/or high quality Consistent quality Sony TV, Lexus, Disneyland Time Coca-Cola, PepsiCo, Kodak, McDonald’s restaurants, UPS Pizza Hut, FedEx Rapid delivery On-time delivery Flexibility Variety Volume Burger King McDonald’s Service Superior customer service Disneyland, Hewlett-Packard, IBM Location Convenience Supermarkets, dry cleaners

Global Strategy Strategic decisions must be made with respect to globalization What works in one country may not work in another Strategies must be changed to account for these differences Other issues Political, social, cultural, and economic differences

Strategy Formulation Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners

Strategy Formulation Order qualifiers Order winners 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

Operations Strategy Operations strategy: The approach consistent with organization strategy, that is used to guide the operations function.

Strategic OM Decisions Table 2.4 Decision Area Affects Product and service design Costs, quality liability and environmental Capacity Cost structure, flexibility Process selection and layout Costs, flexibility, skill level, 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

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

Time-Based Strategies JAN FEB MAR APR MAY JUN Planning Processing Changeover On time! Designing Delivery

Productivity Productivity Productivity ratios are used for 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

Food Processor Inputs Processing Outputs Labor Canned vegetables Metal sheets Making cans Water Cutting Energy Cooking Packing Labeling Cleaning 1-27

Productivity Productiv ity = Output Input Partial measures output/(single input) Multi-factor measures output/(multiple inputs) Total measure output/(total inputs) Productiv ity = Output Input

Productivity Productiv ity = Output Input Determine the productivity of the following; Four workers installed 720 square yards of carpeting in 8 hours. A machine produced 68 usable pieces in 2 hours. A company that processes fruits and vegetables is able to produce 400 cases of canned peaches in half hour with 4 workers. What is labour productivity Productiv ity = Output Input 2-29

Productivity Growth Productivity Growth = Current Period Productivity – Previous Period Productivity Previous Period Productivity If Productivity increased from 80 to 84, find the growth rate.

Measures of Productivity Table 2.5 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

Examples of Partial Productivity Measures Table 2.6 Units of output per kilowatt-hour Dollar value of output per kilowatt-hour Energy Productivity Units of output per dollar input Dollar value of output per dollar input Capital Productivity Units of output per machine hour Dollar value of output per machine hour Machine Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Labor Productivity

Example Determine the multifactor productivity using the following data: 7040 Units Produced Cost of labor: $1,000 Cost of materials: $520 Cost of overhead: $2000 What is the multifactor productivity? Ans. 2.0 units per dollar of input

Example : Solution MFP = Output Labor + Materials + Overhead MFP = (7040 units) $1000 + $520 + $2000 MFP = 2.0 units per dollar of input

Question 1. A wrapping paper company produced 2,000 rolls of paper one day. Standard price in RM1/roll. Labour cost was RM160, material cost was RM50, and overhead was RM320. Determine the multifactor productivity 2. Suppose that a company produced 300 standard bookcases last week using 8 workers and it produced 240 standard bookcases this week using 6 workers. In which period was the productivity higher? 2-35

Process Yield Process yield is the ratio of output of good product to input Defective product is not included in the output Service example: Ratio of cars rented to cars available to rent

Factors Affecting Productivity Capital Quality Technology Management

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