Chapter 2
Competitiveness,
Strategic Planning,
and Productivity
Learning Objectives
LO1
LO2
LO3
List and discuss the primary ways that
organizations compete.
Describe a company’s strategic planning,
mission/vision/values; goals and objectives;
strategies, tactics and action plans; operations
strategy and it’s formulation; and generic
operations strategies.
Define and measure productivity, solve typical
problems, explain why measuring the productivity
of services is difficult, and describe factors
affecting productivity.
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Chapter Outline
 Competitiveness
 Strategic Planning
•
•
•
Mission, Vision, and Values
Goals, Objectives, Strategy,
Tactics, and Action Plans
Strategy Formulation
 Productivity
•
•
Productivity Measurement of Services
Factors that Affect Productivity
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Competitiveness:
The ability and performance of an organization in
the marketplace compared to other
organizations that offer similar goods or services.
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Competitiveness: Key Purchasing Criteria




Price is the amount a customer must pay for the good or
service. If all other factors are equal, customers will choose
the good or service that has the lowest price.
Quality refers to characteristics of a good or service that are
determined by its design, material, workmanship,
performance, consistency, customer service and innovation.
Variety is the choice of models and options available to
customers. The more variety, the wider the range of
potential customers.
Timeliness is the availability of goods or services when they
are needed by the customer.
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Order Qualifiers and Order Winners
Order qualifiers
•
•
Minimum standards of acceptability for purchase
Allow product to be considered
Order winners
•
•
Create perception of being better than the
competition
Allow product to be purchased
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Businesses Compete Using Operations:
Competitive Priorities
Cost
Quality
Flexibility
Delivery
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Competitive Priorities
Examples of competitive priorities used by companies.
Table 2-1
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Strategic Planning
 Balanced Scorecard
Framework
 SWOT analysis
Figure 2-2
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Mission/Vision/Values
 Mission
Where the organization is going now, products and markets
 Vision
Where the organization desires to be in the future
 Values
Shared beliefs of the organization’s stakeholders
 Goals and Objectives
Provide detail and scope of mission
 Strategies
Plans that determine direction for achieving organizational goals
 Tactics and Action Plans
The specific methods and actions taken to accomplish strategies
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Hierarchical Strategic Planning
Figure 2-3
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Hierarchical Strategy 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:
Goal:
Strategy:
Tactics:
Action plans:
Live a good life
Successful career, good income
Obtain a college education
Select a college and a major
Register, buy books, take
courses, study, graduate, get job
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Operations Strategy
Operations strategy – set of coordinated policies,
objectives, and action plans, directly affecting the
operations function
•
•
•
Consistent with organization strategy
Support competitive priorities
Aimed at securing a long-term sustainable
advantage over the competition
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Strategic Decision Categories
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Formulation of an Operations Strategy
1. Link organizational goals to the operations strategy
2. Categorize/segment customers into types and choose competitive
priority emphasis
3. Group product lines into types( high/low volume)
4. Conduct an operations audit to assess strengths/weakness and
competitive position
5. Assess degree of plant focus
6. Develop and deploy strategy for each decision category
objectives, policies, action plans
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Generic Operations Strategies:
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Quality and Time-based Strategies
Quality-based strategies
• Maintain or improve quality
• May use initiatives such as 6-sigma or
process re-engineering
Time-based strategies
Focuses on reduction of time needed to
accomplish tasks
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Productivity
 A measure of the effective use of resources, usually
expressed as the ratio of output to input
 One of the primary responsibilities of an operations
manager is to achieve productive use of an
organization’s resources
 Productivity ratios can be computed for:
• A worker
Outputs
• A department Productivity =
• An organization
Inputs
• A country
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Productivity Growth
Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
Management
Capital
Labour
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Measures of Productivity
• Partial measures
output
(single input)
Output
Labour
Output
Machine
Output
Capital
Output
Energy
• Multi-factor measures
output
(multiple inputs)
Output
Labour + Machine
Output
Labour + Capital + Energy
• Total measure
output
(total inputs)
Goods or Services Produced
All inputs used to produce them
Table 2-3
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Partial Productivity Measures
Labour
Productivity
Units of output per labour hour
Units of output per shift
Value-added per labour hour
Machine
Productivity
Units of output per machine hour
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
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Example: Multifactor Productivity
7040 Units Produced
Cost of labour of $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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Productivity Example: Solution
MFP =
Output
Labor + Materials + Overhead
MFP =
(7040 units)
$1000 + $520 + $2000
MFP =
2.0 units per dollar of input
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Productivity Measures are Useful
 Productivity  efficiency
 Used to:
• Track performance over time
• Determine areas for improvement
• Compare competitiveness
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Productivity Measurement of Services
Measurement of service productivity is
problematic because services :
•
•
•
Are intangible
Involve intellectual activities
Have output with a high degree of variability
How do you measure
an improved state of a customer?
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Factors Affecting Productivity
Methods
Management
Technology
Labour
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Chapter Summary

A company’s competitive priorities might be cost, quality,
flexibility, and/or delivery reliability.
• Identify order qualifiers and order winners
 Strategies are plans for directing the organization to achieve
its mission/vision/goals.
• An operations strategy is a coordinated set of policies,
objectives, and action plans related to the operations
function in nine strategic decision categories.
 Productivity is a measure of efficient use of resources that is:
• Affected by methods & management, equipment &
technology, and labour
• Difficult to measure for highly variable, intangible output of
services
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Learning Checklist
 Identify major competitive priorities.
 Define strategic planning, mission/vision/values,
and operations strategy.
 Identify nine strategic decision categories.
 List steps involved in formulating an operations
strategy.
 Define productivity and discuss how it is
measured.
 Describe factors affecting productivity.
 Explain why measuring productivity of services is
difficult.
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