CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-1 Chapter 2 Productivity, Competitiveness, and Strategy

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-2 Productivity Partial measures – output/(single input) Multi-factor measures – output/(multiple inputs) Total measure – output/(total inputs)

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-3 Measures of Productivity Table 2-1 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

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-4 Example 10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr Cost of raw material: $5,000 Cost of purchased material: $25,000 What is the labor productivity?

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY ,000 units/500hrs = 20 units/hour or we can arrive at a unitless figure (10,000 unit* $10/unit)/(500hrs* $9/hr) = Can you think of any advantages or disadvantages of each approach? Example--Labor Productivity

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-6 Example--Multifactor Productivity MFP =Output Labor + Materials MFP =(10,000 units)*($10) (500)*($9) + ($5000) + ($25000) MFP =2.90

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-7 Factors Affecting Productivity CapitalQuality TechnologyManagement

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-8 Improving Productivity Develop productivity measures Determine critical operations Develop methods for productivity improvements Establish reasonable goals Get management support Measure and publicize improvements Don’t confuse productivity with efficiency

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-9 Bottleneck Operation Operation Bottleneck Operation Bottleneck Operation Figure 2-2

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-10 Competitiveness Quality Price Time Flexibility Differentiation

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-11 Mission/Strategy/Tactics How does mission, strategies and tactics relate to decision making and distinctive competencies? StrategyTacticsMission

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-12 Strategy Mission – The reason for existence for an organization Mission Statement – A clear statement of purpose Strategy – A plan for achieving organizational goals Tactics – The actions taken to accomplish strategies

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-13 Strategy Example Rita 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, graduate, get job Example 3

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-14 Planning and Decision Making Mission Goals Organizational strategy Functional strategies FinanceMarketingOperations Tactics Finance operations Marketing operations Operations operations Figure 2-3

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-15 Strategy Formulation Distinctive Competencies – The special attributes or abilities that give an organization a competitive edge. Environmental Scanning – The considering of events and trends that present threats or opportunities for a company.

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-16 New Strategies Quality-based strategies – Focuses on quality in all phases of an organization – Quality at the source Time-based strategies – Focuses on reduction of time needed to accomplish tasks

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-17 Time-based Strategies JANFEBMARAPRMAYJUN Planning Processing Changeover On time! Designing Delivery

CHAPTER TWO Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY 2-18 Production Craft Production - Highly skilled workers use simple flexible tools to produce small quantities of customized goods. Mass Production - Lower-skilled workers use specialized machinery high volumes of standardized goods. Lean Production - Uses minimal amounts of resources high volume of high-quality goods.