Better Quality, Higher Productivity,
Lower Costs, Quick Response
Adeyl Khan, Faculty, BBA, NSU
Glossary
 Competitiveness:
 How effectively an organization meets the wants and
needs of customers relative to others that offer
similar goods or services
 Distinctive Competence (Ch1)
 The special attributes or abilities that give an
organization a competitive edge
Adeyl Khan, Faculty, BBA, NSU
2-2
Businesses compete using marketing
 Identifying consumer wants and needs
Make decision using this info
 Pricing, Advertising and promotion (inform buyers)

Operations make businesses competitive
 Product and service design ~ achieve match
 Cost ~ pricing, profit, productivity
 Location ~ cost, convenience
 Quality ~ satisfy intended purpose
 Quick response ~ satisfaction …
 Flexibility ~ volume, mix
 Inventory management ~ matching supply & demand
 Supply chain management ~ time, cost
 Service and service quality ~ delivery, setup, VA
 Managers and workers ~ competent & motivated
Adeyl Khan, Faculty, BBA, NSU
2-3
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
 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
Determine customer wants or need
Directing efforts toward meeting (exceeding) them
Adeyl Khan, Faculty, BBA, NSU
2-4
Mission
• The reason for existence for an organization
Mission Statement
• States the purpose of an organization
• Basis for org. goalGoals
• Provide detail and scope of mission
Strategies
• Plans for achieving organizational goals
• Timeframe- Long term, Intermediate term, Short term
Tactics
• The methods and actions taken to accomplish strategies
Adeyl Khan, Faculty, BBA, NSU
See Table 2.1
2-5
Mission/Strategy/Tactics
It is all about timeframe
Mission
Strategy
Tactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?
Adeyl Khan, Faculty, BBA, NSU
2-6
Planning and Decision Making
Figure 2.1
Mission
Goals
Organizational Strategies
Functional Goals
Finance
Strategies
Tactics
Operating
procedures
Adeyl Khan, Faculty, BBA, NSU
Marketing
Strategies
Tactics
Operating
procedures
Operations
Strategies
Tactics
Operating
procedures
2-7
Strategy | Example 1
 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:
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,
graduate, get job
Adeyl Khan, Faculty, BBA, NSU
2-8
Examples of Competitive Strategies
Low cost
Scale-based
strategies
Specialization
Flexible
operations
High quality
Service
…
Combinations
Adeyl Khan, Faculty, BBA, NSU
Table 2.1 P41
2-9
Examples of Operations Strategies
Price
Low Cost
Quality
High-performance design or Sony TV
high quality Consistent quality Lexus, Cadillac
Pepsi, Kodak, Motorola
Time
Rapid delivery
On-time delivery
Express Mail, Fedex,
One-hour photo, UPS
Flexibility
Variety
Volume
Burger King
Supermarkets
Service
Superior customer service
Disneyland
Nordstroms
Location
Convenience
Banks, ATMs
Adeyl Khan, Faculty, BBA, NSU
U.S. first-class postage
Motel-6, Red Roof Inns
Table 2.2
2-10
Strategic advantage- Distinctive Competencies
 Distinctive Competencies
 The special attributes or abilities that give an
organization a competitive edge.
 Examples include Price, Quality, Time, Flexibility,
Service, Location
 Do a SWOT analysis before formulating strategies
 Example: Xerox
 Modular design
 Bottom up pricing strategy!
Adeyl Khan, Faculty, BBA, NSU
2-11
Operations Strategy
 The approach, consistent with the organizational
strategy, that is used to guide the operations
functions.
 Narrow scope
 Shorter span
 Vs. Marketing S., Financial S.
 Comparison of mission, org. strategy and op.
strategy
 Table 2.3 P42 for
Adeyl Khan, Faculty, BBA, NSU
12
Strategic 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
Adeyl Khan, Faculty, BBA, NSU
2-13
Strategy Formulation
 Distinctive competencies
 Environmental scanning
 Competitors- current and future plans
 SWOT
 Internal SW and External OT
 Consider Order qualifiers and Order winners
Order qualifiers
• Characteristics that customers
perceive as minimum
standards of acceptability to be
considered as a potential
purchase
Adeyl Khan, Faculty, BBA, NSU
Price
Reliability
Order winners
• Characteristics of an
organization’s goods or
services that cause it to be
perceived as better than the
competition
Speed
Quality
2-14
Key
External
Factors
•
•
•
•
•
•
Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets
Key
Internal
Factors
•
•
•
•
•
•
•
Human Resources
Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers
Strategy of Mr.
Dell- Inventory of
computer parts
Adeyl Khan, Faculty, BBA, NSU
Growth of Boston
Market and
absorption by
MacDonald
2-15
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
Adeyl Khan, Faculty, BBA, NSU
2-16
Time-based Strategies
JAN
FEB
MAR
APR
MAY
JUN
Planning
Designing
Processing
Changeover
On time!
Delivery
Adeyl Khan, Faculty, BBA, NSU
2-17
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
Output
 Scheduling equipment
Productivity
 Financial analysis
Input
Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
Adeyl Khan, Faculty, BBA, NSU
2-18
Measures of Productivity
Multi-factor
measures
Partial measures
• output/(single
input)
Partial
measures
Multifactor
measures
Total
measure
Adeyl Khan, Faculty, BBA, NSU
Total measure
• output/(multiple
inputs)
Output
Labor
Output
Output
Machine Capital
Output
Labor + Machine
• output/(total
inputs)
Output
Energy
Output
Labor + Capital + Energy
Goods or Services Produced
All inputs used to produce them
Table 2.4
2-19
Examples of Partial Productivity
Measures
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
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
Adeyl Khan, Faculty, BBA, NSU
Table 2.5
2-20
Example 3
7040 Units Produced
Cost of labor of $1,000
Cost of materials: $520
Cost of overhead: $2000
Adeyl Khan, Faculty, BBA, NSU
What is the
multifactor
productivity?
2-21
Example 3 Solution
MFP =
Output
Labor + Materials + Overhead
MFP =
(7040 units)
$1000 + $520 + $2000
MFP =
2.0 units per dollar of input
Adeyl Khan, Faculty, BBA, NSU
2-22
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
Adeyl Khan, Faculty, BBA, NSU
2-23
Key Factors
Affecting
Productivity
•
•
•
•
Capital
Quality
Technology
Management
Adeyl Khan, Faculty, BBA, NSU
Other Factors
•
•
•
•
•
Standardization
Quality ?
Use of Internet
Computer viruses
Searching for lost
or misplaced items
• Scrap rates
• New workers
• Safety
Other Factors
• Shortage of IT
workers
• Layoffs
• Labor turnover
• Design of the
workspace
• Incentive plans
that reward
productivity
2-24
Improving Productivity
• Develop productivity measures
• Determine critical (bottleneck)
operations
• Develop methods for productivity
improvements
• Establish reasonable goals
• Get management support
• Measure and publicize improvements
• Don’t confuse productivity with
efficiency
Adeyl Khan, Faculty, BBA, NSU
2-25
Taking advantage of productivity
- Outsourcing
 Higher productivity in another company is a key
reason organizations outsource work
 Improving productivity may reduce the need for
outsourcing
Adeyl Khan, Faculty, BBA, NSU
2-26
CW-Ch2
 Example 2
 Example 3
Adeyl Khan, Faculty, BBA, NSU
2-27
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
Adeyl Khan, Faculty, BBA, NSU
2-28
IOA Covering Ch1-2
Duration: 3rd June 6th June
Adeyl Khan, Faculty, BBA, NSU
2-29
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.
Adeyl Khan, Faculty, BBA, NSU
2-30
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.
Adeyl Khan, Faculty, BBA, NSU
2-31