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Competitiveness, Strategy,
and Productivity
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.
2-2
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.
2-3
Competitiveness:
2-4
Businesses Compete Using
Marketing
Identifying consumer wants and needs
Pricing
Advertising and promotion
2-5
Businesses Compete Using
Operations
Product and service design
Cost
Location
Quality
Quick response
2-6
Businesses Compete Using
Operations
Flexibility
Inventory management
Supply chain management
Service and service quality
Managers and workers
2-7
Why Some Organizations Fail
2-8
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
2-9
Mission/Strategy/Tactics
2-10
Strategy
Mission
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
2-11
Planning and Decision Making
Figure 2.1
Mission
Goals
Organizational Strategies
Functional Goals
2-12
Strategy Example
Example 1
2-13
Examples of Strategies
Low cost
Scale-based strategies
Specialization
Flexible operations
High quality
Service
2-14
Strategy and Tactics
Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.
Strategy Factors
Price
Quality
Time
Flexibility
Service
Location
2-15
Examples of Operations Strategies
Table 2.2
Price Low Cost U.S. first-class postage
Motel-6, Red Roof Inns
2-16
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
2-17
Strategy Formulation
Distinctive competencies
Environmental scanning
SWOT
Order qualifiers
Order winners
2-18
Strategy 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
2-19
Key External Factors
Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets
2-20
Key Internal Factors
Human Resources
Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers
2-21
Operations Strategy
Operations strategy – The approach,
consistent with organization strategy,
that is used to guide the operations
function.
2-22
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
Planning
Designing
Processing
Changeover On time!
Delivery
2-25
Productivity
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
2-26
Productivity
Partial measures
output/(single input)
Multi-factor measures
output/(multiple inputs)
Total measure
output/(total inputs)
Outputs
Productivity =
Inputs
2-27
Productivity Growth
Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
2-28
Measures of Productivity
Table 2.4
2-29
Examples of Partial Productivity
Measures
Table 2.5
MFP = Output
Labor + Materials + Overhead
2-32
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
2-33
Factors Affecting Productivity
Capital Quality
Technology Management
2-34
Other Factors Affecting Productivity
Standardization
Quality
Use of Internet
Computer viruses
Searching for lost or misplaced items
Scrap rates
New workers
2-35
Other Factors Affecting Productivity
Safety
Shortage of IT workers
Layoffs
Labor turnover
Design of the workspace
Incentive plans that reward productivity
2-36
Outsourcing
Higher productivity in another company is a
key reason organizations outsource work
Improving productivity may reduce the need
for outsourcing
2-37
Improving Productivity