Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Competitiveness, Strategy, and Productivity 2 Slides prepared by Laurel Donaldson Douglas College

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives 2 List and briefly discuss the primary ways that organizations compete. Describe a company’s strategic planning, mission/vision/values, strategies, operations strategy, and list steps involved in formulating an operations strategy. Define and measure the term productivity, evaluate Canada’s productivity, describe factors affecting productivity, and explain why measuring productivity of services is difficult. List and briefly discuss the primary ways that organizations compete. Describe a company’s strategic planning, mission/vision/values, strategies, operations strategy, and list steps involved in formulating an operations strategy. Define and measure the term productivity, evaluate Canada’s productivity, describe factors affecting productivity, and explain why measuring productivity of services is difficult. LO 3 LO 2 LO 1

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Outline  Competitiveness  Strategic Planning  Productivity 3

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 1 Competitiveness:  the ability and performance of an organization in the marketplace compared to other organizations that offer similar goods or services 4

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 1 Order Qualifiers and Order Winners  Order qualifiers  minimum standards of acceptability for purchase  allow product to be considered  Order winners  create perception of being better than the competition  allow product to be purchased  Order qualifiers  minimum standards of acceptability for purchase  allow product to be considered  Order winners  create perception of being better than the competition  allow product to be purchased 5

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 1 Businesses Compete Using Operations  Cost  Quality  Flexibility  Timeliness 6

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 1 Competitive Priorities 7

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Mission/Vision/Values  Mission  Where the organization is going now  Vision  Where the organization desires to be in the future  Values  Shared beliefs of the organization’s stakeholders  Goals and Objectives  Provide detail and scope of mission  Strategies  Plans that determine direction for achieving organizational goals  Tactics and Action Plans  The methods and actions taken to accomplish strategies 8

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Hierarchical Strategic Planning 9

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Hierarchical 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 10  Mission: Live a good life  Goal: Successful career, good income  Strategy: Obtain a college education  Tactics: Select a college and a major  Action plans: Register, buy books, take courses, study, graduate, get job

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Operations Strategy  Operations strategy – The approach that is used to guide the operations function.  consistent with organization strategy  support competitive priorities 11

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Strategic Decision Categories 12

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Formulation of an Operations Strategy 6. Develop and deploy strategy for each decision category objectives, policies, action plans 5. Assess degree of plant focus 4. Assess strengths/weakness and competitive position 3. Group product lines into types 2. Categorize customers into types and choose competitive priority emphasis 1. Determine operations requirements 13

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Generic Operations Strategies: 14

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Time-based Competition and Outsourcing  Time-based Competition  Focuses on reduction of time needed to accomplish tasks 15  Outsourcing  buying a part of a good/service or a segment of production/service process from an outside supplier.

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3  Productivity ratios can be computed for:  a worker  a department  an organization  a country Productivity  Productivity  A measure of the effective use of resources, usually expressed as the ratio of output to input  Productivity  A measure of the effective use of resources, usually expressed as the ratio of output to input 16 Productivity= Outputs Inputs

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 Productivity Growth Productivity Growth = 17 Current Period Productivity – Previous Period Productivity Previous Period Productivity

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 Measures of Productivity 18 Output Output Labour Machine Capital Energy Output Output Labour + Machine Labour + Capital + Energy Goods or Services Produced All inputs used to produce them  Multi-factor measures output (multiple inputs)  Total measure output (total inputs)  Partial measures output (single input)

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 Partial Productivity Measures 19 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 machine hour Machine Productivity Units of output per labour hour Units of output per shift Value-added per labour hour Labour Productivity

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO Units Produced Cost of labour of $1,000 Cost of materials: $520 Cost of overhead: $2000 Example: Multifactor Productivity 20 What is the multifactor productivity? Ans. 2.0 units per dollar of input

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 Productivity Example: Solution 21 MFP =Output Labor + Materials + Overhead MFP =(7040 units) $ $520 + $2000 MFP =2.0 units per dollar of input

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 Productivity Measures are Useful  Productivity  efficiency  Used to:  track performance over time  determine areas for improvement  compare competitiveness 22

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 Productivity Measurement of Services  Measurement of service productivity is problematic because services :  are intangible  involve intellectual activities  have output with a high degree of variability 23 How do you measure an improved state of a customer??

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 Factors Affecting Productivity 24 MethodsManagementTechnologyLabour

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. 25  A company’s competitive priorities might be cost, quality, flexibility, and/or delivery reliability  identify order qualifiers and order winners.  Strategies are plans for directing the organization to achieve its mission/vision/goals.  An operations strategy is a coordinated set of policies, objectives, and action plans related to the operations function in nine strategic decision categories  Productivity is a measure of efficient use of resources that is:  affected by methods & management, equipment & technology, and labour  difficult to measure for highly variable, intangible output of services LO 3 LO 2 LO 1 Chapter Summary

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Checklist  Identify major competitive priorities.  Define strategic planning, mission/vision/values, and operations strategy.  List steps involved in formulating an operations strategy.  Define productivity and discuss how it is measured.  Describe factors affecting productivity.  Explain why measuring productivity of services is difficult. 26