1. Competitiveness, Strategy, and Productivity2
Competitiveness, Strategy, and Productivity

2. 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.

3. 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.

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

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

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

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

8. 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

9. 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

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

11. Strategy Mission Mission Statement Goals Strategies Tactics
The reason for 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

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

13. Strategy Example Mission: Live a good life
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

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

15. 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

16. Examples of Operations Strategies
Table 2.2
Banks, ATMs
Convenience
Location
Disneyland
Nordstroms
Superior customer service
Service
Burger King
Supermarkets
Variety
Volume
Flexibility
Express Mail, Fedex,
One-hour photo, UPS
Rapid delivery On-time delivery
Time
Sony TV
Lexus, Cadillac
Pepsi, Kodak, Motorola
High-performance design or high quality Consistent quality
Quality
U.S. first-class postage
Motel-6, Red Roof Inns
Low Cost
Price

17. 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

18. Strategy Formulation Distinctive competencies Environmental scanning
SWOT
Order qualifiers
Order winners

19. 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

20. Key External Factors Economic conditions Political conditions
Legal environment
Technology
Competition
Markets

21. Key Internal Factors Human Resources Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers

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

23. 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

24. 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

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

26. 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

27. Productivity Productiv ity = Outputs Inputs Partial measures
output/(single input)
Multi-factor measures
output/(multiple inputs)
Total measure
output/(total inputs)
Productiv
ity =
Outputs
Inputs

28. Productivity Growth Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity

29. Measures of Productivity
Table 2.4
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

30. Examples of Partial Productivity Measures
Table 2.5
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 labor hour
Units of output per shift
Value-added per labor hour
Labor Productivity

31. Example 3 7040 Units Produced Cost of labor of $1,000
Cost of materials: $520
Cost of overhead: $2000
What is the multifactor productivity?
Ans. 2.0 units per dollar of input

32. Example 3 Solution MFP = Output Labor + Materials + Overhead
MFP = (7040 units)
$ $520 + $2000
MFP = 2.0 units per dollar of input

33. 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

34. Factors Affecting Productivity
Capital
Quality
Technology
Management

35. Other Factors Affecting Productivity
Standardization
Quality
Use of Internet
Computer viruses
Searching for lost or misplaced items
Scrap rates
New workers

36. Other Factors Affecting Productivity
Safety
Shortage of IT workers
Layoffs
Labor turnover
Design of the workspace
Incentive plans that reward productivity

37. Outsourcing
Higher productivity in another company is a key reason organizations outsource work
Improving productivity may reduce the need for outsourcing

38. Improving Productivity
Develop productivity measures
Determine critical (bottleneck) operations
Develop methods for productivity improvements
Establish reasonable goals
Get management support
Measure and publicize improvements
Don’t confuse productivity with efficiency