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McGraw-Hill/Irwin
Competitiveness, Strategy,
and Productivity
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Competitiveness:
How effectively an organization meets the
wants and needs of customers relative to
others that offer similar goods or services
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Businesses Compete Using Marketing
 Identifying consumer wants and needs
 Pricing
 Advertising and promotion
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Businesses Compete Using Operations
 Product and service design
 Cost
 Location
 Quality
 Quick response
 Flexibility
 Inventory management
 Supply chain management
 Service and service quality
 Managers and workers
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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
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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
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Mission/Strategy/Tactics
Mission
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Strategy
Tactics
Strategy
 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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Mission
 Mission
 The reason for an organization’s existence
 Mission statement
 States the purpose of the organization
 The mission statement should answer the question of
“What business are we in?”
Mission Statement
 McDonald's brand mission is to "be our customers' favorite place
and way to eat." Our worldwide operations have been aligned
around a global strategy called the Plan to Win centering on the
five basics of an exceptional customer experience -- People,
Products, Place, Price and Promotion. We are committed to
improving our operations and enhancing our customers'
experience.
 http://www.mcdonalds.com/corp/about/mcd_faq/student_research.html
JOHNSON & JOHNSON PACIFIC CONSUMER SERVICE CENTRE
 We will delight our consumers, treating each person who contacts us as if
they are our only consumer, providing them with a response which is
evidence of our interest and that leaves them with the clear understanding
that they are important to us.
UNIVERSITY OF MALAYA
 Mission To advance knowledge and learning through quality research and
education for the nation and for humanity.
Goals
 The mission statement serves as the basis for
organizational goals
 Goals
 Provide detail and the scope of the mission
 Goals can be viewed as organizational destinations
 Goals serve as the basis for organizational strategies
Strategies
 Strategy
 A plan for achieving organizational goals
 Serves as a roadmap for reaching the
organizational destinations
 Organizations have
 Organizational strategies
 Overall strategies that relate to the entire
organization
 Support the achievement of organizational goals
and mission
 Functional level strategies
 Strategies that relate to each of the functional
areas and that support achievement of the
organizational strategy
Tactics and Operations
 Tactics
 The methods and actions taken to
accomplish strategies
 The “how to” part of the process
 Provide guidance and directions for carrying
out actual operations
 Operations
 The actual “doing” part of the process
Planning and Decision Making
Figure 2.1
Mission
Organizational
Goals
Organizational Strategies
Functional Goals
Finance
Strategies
Tactics
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Operating
Procedures
Marketing
Strategies
Tactics
Operating
Procedures
Operations
Strategies
Tactics
Operating
Procedures
Strategy Example
Example 1
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:
 Goal:
 Strategy:
 Tactics:
 Operations:
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Live a good life
Successful career, good income
Obtain a college education
Select a college and a major
Register, buy books, take
courses, study
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
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Examples of Operations Strategies
Table 2.2
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Price
Low Cost
National first-class postage,
Carrefour, Jetstar
Quality
High-performance design Sony TV, Lexus, Disneyland
and/or high quality
Consistent quality
Time
Rapid delivery
On-time delivery
Coca-Cola, PepsiCo, Kodak,
McDonald’s restaurants, UPS
Pizza Hut, FedEx
Flexibility
Variety
Volume
Burger King
McDonald’s
Service
Superior customer
service
Disneyland, HewlettPackard, IBM
Location
Convenience
Supermarkets, dry cleaners
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

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Political, social, cultural, and economic differences
Strategy Formulation
 Distinctive competencies
 Environmental scanning
 SWOT
 Order qualifiers
 Order winners
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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

Characteristics such as price, delivery reliability,
delivery speed and quality can be order qualifiers or
order winners.
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Internal Factors & External Factors
Key External Factors
Key Internal Factors
 Economic conditions
 Human Resources
 Political conditions
 Facilities and
 Legal environment
 Technology
 Competition
 Markets
equipment
 Financial resources
 Customers
 Products and services
 Technology
 Suppliers
Operations Strategy
 Operations strategy: The approach consistent
with organization strategy, that is used to guide
the operations function.
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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
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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

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Time-Based Strategies
JAN
FEB
MAR
APR
MAY
JUN
Planning
Designing
Processing
Changeover
Delivery
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On time!
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

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Productivity
 Partial measures
 output/(single
input)
 Multi-factor measures
 output/(multiple inputs)
 Total measure
 output/(total inputs)
Output
Productivity =
Input
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Productivity Growth
Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
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Measures of Productivity
Table 2.5
Partial
measures
Multifactor
measures
Total
measure
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Output
Labor
Output
Output
Machine Capital
Output
Labor + Machine
Output
Energy
Output
Labor + Capital + Energy
Goods or Services Produced
All inputs used to produce them
Examples of Partial Productivity Measures
Table 2.6
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Labor
Productivity
Units of output per labor hour
Units of output per shift
Value-added per labor hour
Machine
Productivity
Units of output per machine hour
Dollar value of output per machine hour
Capital
Productivity
Units of output per dollar input
Dollar value of output per dollar input
Energy
Productivity
Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
Example 3
7040 Units Produced
Cost of labor: $1,000
Cost of materials: $520
Cost of overhead: $2000
What is the multifactor productivity?
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Ans. 2.0 units per dollar of input
Example 3: Solution
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MFP =
Output
Labor + Materials + Overhead
MFP =
(7040 units)
$1000 + $520 + $2000
MFP =
2.0 units per dollar of input
Process Yield
 Process yield is the ratio of output of good
product to input
 Defective product is not included in the output
 Service example:

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Ratio of cars rented to cars available to rent
Factors Affecting Productivity
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Capital
Quality
Technology
Management
Improving Productivity
1.
Develop productivity measures for all operations
2.
Determine critical (bottleneck) operations
3.
Develop methods for productivity improvements (ideas from
team of workers, engineers, managers)
4.
Establish reasonable goals for improvement
5.
Make it clear that management supports and encourages
productivity improvement. Consider rewards for
contributions.
6.
Measure and publicize improvements
Don’t confuse productivity with efficiency . Efficiency is a
narrower concept that pertains to getting the most out of a
fixed set of resources; Productivity is a broader concept
that pertains to effective use of overall resources.
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