2
Competitiveness,
Strategy, and Productivity
Copyright © 2014 by McGraw-Hill Education (Asia). All rights reserved.

 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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 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
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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
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Businesses Compete
Using Operations
 Flexibility
 Inventory management
 Supply chain management
 Service and service quality
 Managers and workers
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 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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 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 Tactics
How do mission, strategies and tactics relate to decision making and distinctive competencies?
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 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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Figure 2.1
Tactics
Operating
Procedures
Mission
Organizational
Goals
Organizational Strategies
Finance
Strategies
Functional Goals
Marketing
Strategies
Operations
Strategies
Tactics
Operating
Procedures
Tactics
Operating
Procedures
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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:
Live a good life
Successful career, good income
 Strategy:
 Tactics:
Obtain a college education
Select a college and a major
 Operations: Register, buy books, take courses, study
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 Low cost
 Scale-based strategies
 Specialization
 Flexible operations
 High quality
 Service
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 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
Price Low Cost National first-class postage,
Carrefour, Jetstar
Quality
Time
Flexibility
Service
Location
High-performance design and/or high quality
Consistent quality
Sony TV, Lexus, Disneyland
Rapid delivery
On-time delivery
Variety
Volume
Coca-Cola, PepsiCo, Kodak,
McDonald’s restaurants, UPS
Pizza Hut, FedEx
Burger King
McDonald’s
Superior customer service
Convenience
Disneyland, Hewlett-
Packard, IBM
Supermarkets, dry cleaners
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 Distinctive competencies
 Environmental scanning
 SWOT
 Order qualifiers
 Order winners
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 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
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 Human Resources
 Facilities and equipment
 Financial resources
 Customers
 Products and services
 Technology
 Suppliers
 Others (patents, labor relations, image, etc)
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 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 strategy: The approach consistent with organization strategy, that is used to guide the operations function.
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Table 2.4
Decision Area Affects
Product and service design
Capacity
Costs, quality liability and environmental
Cost structure, flexibility
Process selection and layout Costs, flexibility, skill level, capacity
Work design
Location
Quality
Inventory
Maintenance
Scheduling
Supply chains
Projects
Quality of work life, employee safety, productivity
Costs, visibility
Ability to meet or exceed customer expectations
Costs, shortages
Costs, equipment reliability, productivity
Flexibility, efficiency
Costs, quality, agility, shortages, vendor relations
Costs, new products, services, or operating systems
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 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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JAN FEB MAR APR
Planning
Designing
Processing
MAY JUN
Changeover
Delivery
On time!
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 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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 Partial measures
 output/(single input)
 Multi-factor measures
 output/(multiple inputs)
 Total measure
 output/(total inputs)
Productivity =
Output
Input
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Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
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Table 2.5
Partial Output Output Output Output measures Labor Machine Capital Energy
Multifactor measures
Output Output
Labor + Machine Labor + Capital + Energy
Total measure
Goods or Services Produced
All inputs used to produce them
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Examples of Partial Productivity Measures
Table 2.6
Labor
Productivity
Machine
Productivity
Capital
Productivity
Energy
Productivity
Units of output per labor hour
Units of output per shift
Value-added per labor hour
Units of output per machine hour
Dollar value of output per machine hour
Units of output per dollar input
Dollar value of output per dollar input
Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
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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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MFP = Output
Labor + Materials + Overhead
MFP = (7040 units)
$1000 + $520 + $2000
MFP = 2.0 units per dollar of input
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 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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Capital Quality
Technology Management
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Other Factors Affecting Productivity
 Standardization
 Quality differences
 Use of Internet
 Computer viruses
 Searching for lost or misplaced items
 Scrap rates
 New workers
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Other Factors Affecting Productivity
 Safety
 Shortage of IT workers
 Layoffs
 Labor turnover
 Design of the workspace
 Incentive plans that reward productivity
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 Higher productivity in another company is a key reason organizations outsource work
 Improving productivity may reduce the need for outsourcing
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 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
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