Copyright © 2014 by McGraw-Hill Education (Asia). All rights reserved.
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Competitiveness, Strategy, and Productivity
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Learning ObjectivesLearning 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.
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Learning ObjectivesLearning 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.
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How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services
CompetitivenessCompetitiveness
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Businesses Compete Businesses Compete Using MarketingUsing Marketing
Identifying consumer wants and needs Pricing Advertising and promotion
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Businesses Compete Businesses Compete Using OperationsUsing Operations
Product and service design Cost Location Quality Quick response
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Businesses Compete Businesses Compete Using OperationsUsing Operations
Flexibility Inventory management Supply chain management Service and service quality Managers and workers
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Why Some Organizations FailWhy Some Organizations Fail
Too much emphasis on short-term financial performance
Failing to take advantage of strengths and opportunities and/or to recognize competitive threats
Neglecting operations strategy Too much emphasis in product and
service design and not enough on process design and improvement
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Why Some Organizations FailWhy Some Organizations Fail
Neglecting investments in capital and human resources
Failing to establish good internal communications and inter-functional cooperation
Failing to consider customer wants and needs
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Mission/Strategy/TacticsMission/Strategy/Tactics
How do mission, strategies and tactics relate todecision making and distinctive competencies?
StrategyStrategy TacticsTacticsMissionMission
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StrategyStrategy
Mission 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
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Planning and Decision MakingPlanning and Decision Making
Mission
Organizational Goals
Organizational Strategies
Functional Goals
Finance Strategies
MarketingStrategies
OperationsStrategies
Tactics Tactics Tactics
OperatingProcedures
OperatingProcedures
OperatingProcedures
Figure 2.1
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Strategy ExampleStrategy Example
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
Example 1
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Examples of StrategiesExamples of Strategies
Low cost Scale-based strategies Specialization Flexible operations High quality Service
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Strategy and TacticsStrategy and Tactics
Distinctive CompetenciesThe special attributes or abilities that give anorganization a competitive edge.
Strategy Factors Price Quality Time Flexibility Service Location
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Supermarkets, dry cleaners ConvenienceLocationLocation
Disneyland, Hewlett-Packard, IBM
Superior customer service
ServiceService
Burger KingMcDonald’s
VarietyVolume
FlexibilityFlexibility
Coca-Cola, PepsiCo, Kodak, McDonald’s restaurants, UPSPizza Hut, FedEx
Rapid deliveryOn-time delivery
TimeTime
Sony TV, Lexus, Disneyland
High-performance design and/or high quality Consistent quality
QualityQuality
National first-class postage, Carrefour, Jetstar
Low CostPricePrice
Examples of Operations StrategiesExamples of Operations StrategiesTable 2.2
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Strategy FormulationStrategy Formulation
Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners
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Strategy FormulationStrategy Formulation
Order qualifiers 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
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Economic conditions Political conditions Legal environment Technology Competition Markets
Key External FactorsKey External Factors
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Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers Others (patents, labor relations, image,
etc)
Key Internal FactorsKey Internal Factors
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Global StrategyGlobal 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
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Operations StrategyOperations Strategy
Operations strategy: The approach consistent with organization strategy, that is used to guide the operations function.
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Strategic OM DecisionsStrategic OM Decisions
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
Table 2.4
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Quality and Time StrategiesQuality 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
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Time-Based StrategiesTime-Based Strategies
JAN FEB MAR APR MAY JUN
Planning
Processing
Changeover On time!
Designing
Delivery
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ProductivityProductivity
Productivity 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
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ProductivityProductivity
Partial measures output/(single input)
Multi-factor measures output/(multiple inputs)
Total measure output/(total inputs)
Productivity = Output
Input
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Productivity GrowthProductivity Growth
Current Period Productivity – Previous Period ProductivityPrevious Period Productivity
Productivity Growth =
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Measures of ProductivityMeasures of ProductivityTable 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
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Units of output per kilowatt-hourDollar value of output per kilowatt-hour
Energy Productivity
Units of output per dollar inputDollar value of output per dollar input
Capital Productivity
Units of output per machine hourDollar value of output per machine hour
Machine Productivity
Units of output per labor hourUnits of output per shiftValue-added per labor hour
Labor Productivity
Examples of Partial Productivity MeasuresExamples of Partial Productivity MeasuresTable 2.6
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Example 3Example 3
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
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Example 3: SolutionExample 3: Solution
MFP = OutputLabor + Materials + Overhead
MFP = (7040 units)$1000 + $520 + $2000
MFP = 2.0 units per dollar of input
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Process YieldProcess 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
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Factors Affecting ProductivityFactors Affecting Productivity
Capital Quality
Technology Management
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Standardization Quality differences Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers
Other Factors Affecting ProductivityOther Factors Affecting Productivity
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Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity
Other Factors Affecting ProductivityOther Factors Affecting Productivity
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OutsourcingOutsourcing
Higher productivity in another company is a key reason organizations outsource work
Improving productivity may reduce the need for outsourcing
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Improving ProductivityImproving 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