1. Competitiveness, Strategy, and Productivity
Y.-H. Chen, Ph.D.
International College
Ming-Chuan University

2. Business Goals Better quality Higher productivity Lower cost
The ability to quickly respond to customer needs
How to achieve these goals?

3. Competitiveness, Strategy, and Productivity
Competitiveness: How effective an organization is in the marketplace compared with other organizations that offer similar products or services.
Strategy: The plans that determine the direction an organization takes in pursuing its goals.
Productivity: The effective use of resources.

4. Competitiveness How to achieve competitiveness?
Identifying consumer wants and / or needs
Pricing and quality
Advertising and promotion

5. Operations and Competitiveness
How do operations affect competitiveness?
Product and service design
Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service
Managers and workers
Supply chain management: coordinating internal and external operations (buyers and suppliers) to achieve timely and cost-effective delivery of goods throughout the system.
Managers and workers: They need to competent, motivated, and creative.

6. Why some organizations fail?
Too much emphasis on short-term financial performance
Failing to take advantage of strengths and opportunities
Failing to recognize competitive threats
Neglecting operations strategy
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

7. Competitiveness Summary
What customers want?
What is the best way to satisfy those wants?

8. Strategies Plans for achieving organizational goals.
Can be long term, intermediate term, or short term.
Must be designed to support the organization’s missions and its goals.

9. Mission, Strategy, and Tactic
Mission: The reason for existence for an organization. The basis for organizational goals.
Mission Statement: A clear statement of purpose. (Table 2.1, p.39)
Strategy: A plan (roadmap) for achieving organizational goals.
Tactics: The methods or actions taken to accomplish strategies.
Strategies include organizational strategies and functional strategies. Organizational strategies relate to the overall organization; functional strategies relate to the functional areas of the organization.
Tactics provide guidance and direction for carrying out actual operations.

10. Mission, Strategy, and Tactics in Production / Operations Management
Goals
Organizational strategy
Functional strategies
Finance
Marketing
Operations
Tactics
operations

11. Mission, Strategy, and Tactic 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/Mission: 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

12. Strategy Formulation
Take into account the realities of operations' strength and weakness.
Capitalizing on strength and dealing with weakness. (This is generally ignored in a business.)
SWOT approach (strength, weakness, opportunity, and threat) critically examines factors that could have either positive or negative effects.

13. SWOT Analysis Strength Domain knowledge. Breadth of solution.
Business strategy.
Opportunity
Service to existing customers.
Improve resource util. by integrating products.
Strengths are our best weapons.
Weakness
Lack of trans. knowledge.
Frequent change of strategy.
Lack of customer references.
Overlapped products.
Threat
Network effect of company X.
Lack of product compatibility to legacy products.
Multiple business acquisition consumes resource.
Strengths and weaknesses have an internal focus and are typically evaluated by operations people.
Threats and opportunities have an external focus and are typically evaluated by marketing people.

14. Strategy Examples Distinctive competencies Environmental scanning
Technological change
Order qualifiers and order winners
Quality and time
Outsourcing
Globalization
Quality
Price
Time
Flexibility
Differentiation

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

16. Distinct Competitiveness Examples
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. Environmental Scanning Strategy
External factors
Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets
Internal factors
Human Resources
Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers
Take into account what competitors are doing or planning to do.

18. Technological Change Strategy
Technological changes occur in
Products
High-definition TV, improved computer chips, improved cellular telephone systems, and improved design of earthquake structures.
Services
Fast order processing and fast delivery.
Processes
Robotics, automation, computer-assisted processing, point-of-sale scanners, and flexible manufacturing systems.
Benefits are competitive edge.
Risks are incorrect choices, poor execution, and higher-than-expected operating costs.

19. Order Qualifiers and Order Winners Strategies
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. Quality and Time Strategies
Quality-based strategies focus on satisfying customers by integrating quality into all phases of the organization.
Time-based strategies focus on reducing the time required to accomplish various activities.
The rationale is that, by reducing time, cost is generally less, productivity is higher, quality tends to be higher, product innovation appears on the market sooner, and customer service is improved.
A company that can bring out new products three times faster than its competitors enjoys a huge advantage.
Areas of time reduction include planning, product/service design, processing, delivery, and response for complaints.

21. Outsourcing Strategy Reduce overhead Gain flexibility
Take advantage of suppliers’ expertise

22. Globalization Increased market share Risks May work only locally
Political or social upheaval
Coordination and management

23. Productivity Effective use of resources.
An index that measures output relative to the input.

24. Productivity Reality Check?
Productivity gains involves getting employees to work harder.
False. The fact is that many productivity gains in the past have come from technological improvements.
Productivity is the same as efficiency.
Efficiency is a narrow concept that pertains to getting the most out of a given set of resources; productivity is a broader concept that pertains to effective use of overall resources.
Examples of technology used to improve productivity are fax, computer, internet, automation, copier.
Example: An efficiency perspective on mowing a lawn given a hand mower would focus on the best way to use the hand mower; a productivity perspective would include the possibility of using a power mower.

25. Productivity Productivity is directly related to
Capital
Quality
Technology
Management
Productivity is directly related to
Competitiveness
Standard of living
Inflation
Productivity measures can be used to track performance over time.
When improvements are needed.
Productivity measures can be used to track performance over time.
Firm: A firm requiring less input can charge a lower price and increase its market share. With the same price, the firm can have greater profit.
Higher productivity improves the standard of living.
Government: Wage and price increase not accompanied by productivity increases the inflationary pressures on a nation's economy.
Productivity in service sector is difficult to measure due to its involvement with intellectual activities. Thus, the improvement of productivity in service is difficult to achieve. Examples are surgery, diagnosis, consulting, legal, customer service, repair.

26. Factors Affect Productivity
methods, capital, quality, technology, and management.
Examples:
Standardization, Internet, computer viruses, scrap rate, new worker, safety, short of IT skill, layoff, labor turnover, workplace design, training, equipment breakdown, material shortage.
Negative impacts on productivity:
A low propensity to save and a high propensity to consume.
Government regulations.
Increasing demand for services.
Managers are hesitant to commit funds for long periods of time because it reduces their flexibility to take advantages of other opportunities that might arise in the meantime.

27. Productivity Improvement
Establish reasonable goals
Develop productivity measures
Look at the system as a whole
Develop methods for achieving productivity improvement (e.g. quality circle)
Management support
Measure and publish results

28. Productivity Measures
Partial measures
output/(single input)
Multi-factor measures
output/(multiple inputs)
Total measure
output/(total inputs)

29. Productivity Measures
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. Productivity Measure 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?

31. Productivity Measure Example, Labor Productivity
10,000 units/500hrs = 20 units/hour
or we can arrive at a unitless figure
(10,000 unit* $10/unit)/(500hrs* $9/hr) = 22.22

32. Productivity Measure Example, Multifactor Productivity
MFP = Output
Labor + Materials
MFP = (10,000 units)*($10)
(500)*($9) + ($5000) + ($25000)
MFP = 2.90

33. Productivity Measure Example #1
Determine the productivity for these cases :
Four workers installed 720 square yards of carpeting in eight hours.
A machine produced 68 usable pieces in two hours.

34. Productivity Measure Example #1 Solution
Four workers installed 720 square yards of carpeting in eight hours.
A machine produced 68 usable pieces in two hours.
720 square yards
4 workers
720 square yards
4 workers x 8 hours/worker
Productivity= or
= 180 square yards/worker or 22.5 square yards/hour
68 pieces
2 hours
Productivity=
= 34 pieces/hour

35. Productivity Measure Example #2
Determine the multifactor productivity for the combined input using the following data:
Output: 1760 units
Input: Labor $1000, Material $520, Overhead $2000.

36. Productivity Measure Example #2 Solution
Output: 1760 units
Input: Labor $1000, Material $520, Overhead $2000.
Multifactor Productivity
Output
Labor + Material + Overhead =
1760 units
$ $520 + $2000 =
= 0.50 units/dollar

37. Productivity Measure Summary
Calculation of multifactor productivity requires a common unit of measurement.
It is best to treat productivities as approximate indicators rather than precise measurements.