2-1 Competitiveness, Strategy, and Productivity

What considers a competitive company?

Why do some firms compete successfully
and others not so successfully?
How does strategy influence or impact
organizational performance?
2-2 Competitiveness, Strategy, and Productivity
Businesses Compete Using Marketing

Competitiveness,
Strategy,
and Productivity
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Learning Objectives
2-4 Competitiveness, Strategy, and Productivity
Businesses Compete Using Marketing

Competitiveness
effectiveness

Strategy
plans

Productivity
use of resources
2-5 Competitiveness, Strategy, and Productivity
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Competitiveness:
• How effectively an organization meets the wants and
needs of customers relative to others that offer similar
goods or services.
• Firms compete through some combination of their
marketing and operations functions.
2-6 Competitiveness, Strategy, and Productivity
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Businesses Compete Using Marketing

 Identifying consumer wants and

needs
 Pricing
 Advertising and promotion
2-7 Competitiveness, Strategy, and Productivity
Businesses Compete Using Marketing
Businesses Compete Using Operations

Flexibility * Inventory management * Supply chain

management * Service * Managers and workers
2-8 Competitiveness, Strategy, and Productivity
Businesses Compete Using Marketing
Businesses Compete Using Operations

• Product & Service Design – match between

financial resources, operations capabilities, etc. and
consumer wants and needs
• Cost – output cost affects pricing and profit
• Location – cost and convenience for customers
• Quality – customers’ perception of how well P/S
will satisfy its intended purpose
• Quick Response – bringing new/improved P/S
to the market, quickly deliver P/S, promptly handle
customer complaints
2-9 Competitiveness, Strategy, and Productivity
Businesses Compete Using Marketing
Other Areas
Businesses Compete Using Operations

• Flexibility – ability to respond to change

• Inventory management – match supply with
demand
• Supply chain management – coordinating
internal and external operations
• Service – after-sale activities
• Managers and workers – skills and ideas
2-10 Competitiveness, Strategy, and Productivity
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Why Do You Think Some
Organizations Fail?
2-11 Competitiveness, Strategy, and Productivity
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Reasons Why Some Organizations Fail

• Putting too much emphasis on short-term financial

performance
• Failing to take advantage of strengths and
opportunities
• Neglecting operations strategy
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Why Some Organizations Fail (cont.)

• 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
2-13 Competitiveness, Strategy, and Productivity

2 Keys in Successfully Competing

Businesses Compete Using Marketing

1. What Do Customers want?

2. What is the best way to satisfy those wants?
2-14 Competitiveness, Strategy, and Productivity
Businesses Compete Using Marketing

1. What Do Customers want?

2. What is the best way to satisfy those wants?
2-15 Competitiveness, Strategy, and Productivity
2-16 Competitiveness, Strategy, and Productivity

Businesses Compete Using

Businesses Compete Using

Businesses Compete
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Strategy, Marketing
Productivity

Strategy
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Strategy, Marketing
Productivity

– plans for achieving organizational goals

– can be long-term, intermediate-term, or
short-term
– designed to support organization’s mission
and its goals
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Strategy, Marketing
Productivity

• Mission
- reason for existence
- “What business are we in?”
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Strategy, Marketing
Productivity

Merck

The mission of Merck is to provide society

with superior products and services—
innovations and solutions that improve the
quality of life and satisfy customer needs—to
provide employees with meaningful work
and advancement opportunities and
investors with a superior rate of return.
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Strategy, Marketing
Productivity

PepsiCo

Our mission is to be the world's premier consumer

products company focused on convenient foods and
beverages. We seek to produce financial rewards to
investors as we provide opportunities for growth and
enrichment to our employees, our business partners and
the communities in which we operate. And in everything
we do, we strive for honesty, fairness and integrity.
Businesses Compete
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Strategy, Marketing
Productivity

• Goals
- describe in more detail the scope of the mission
- serve as foundation of organizational strategies
Businesses
2-23 Compete
Competitiveness, Usingand
Strategy, Marketing
Productivity
Businesses Compete Using Marketing
Mission

Goals

Organizational
– Overall strategies which relate to the
Strategies entire organization

Functional – Relate to each of the functional areas of

Strategies the organization

Tactics – Are methods and actions taken to accomplish

strategies

Operations – Most specific and detailed plans and

Procedures decision making
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Productivity

Planning and Decision Making

 Sample Missions
Sample OM Department Missions
Product design To design and produce products and
services with outstanding quality and
inherent customer value.
Quality management To attain the exceptional value that is
consistent with our company mission and
marketing objectives by close attention to
design, procurement, production, and field
service operations

Process design To determine, design, and produce the

production process and equipment that will
be compatible with low-cost product, high
quality, and good quality of work life at
economical cost.

Businesses Compete
© 2014 Pearson Education Using Marketing 2 - 25
 Sample Missions
Sample OM Department Missions
Location To locate, design, and build efficient and
economical facilities that will yield high
value to the company, its employees, and the
community.
Layout design To achieve, through skill, imagination, and
resourcefulness in layout and work methods,
production effectiveness and efficiency
while supporting a high quality of work life.

Human resources To provide a good quality of work life, with

well-designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange
for outstanding individual contribution from
employees at all levels.

Figure 2.3
© 2014 Pearson Education 2 - 26
 Sample Missions
Sample OM Department Missions
Supply-chain To collaborate with suppliers to develop
management innovative products from stable, effective,
and efficient sources of supply.
Inventory To achieve low investment in inventory
consistent with high customer service levels
and high facility utilization.
Scheduling To achieve high levels of throughput and
timely customer delivery through effective
scheduling.
Maintenance To achieve high utilization of facilities and
equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.

Figure 2.3
© 2014 Pearson Education 2 - 27
Businesses Compete
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Productivity

Mission – Actual Operations

Hierarchy Example

Tsintah is a high school student in ABC School. He

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
2-29 Competitiveness, Strategy, and Productivity
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Productivity

Different Strategies

• Low cost
• Scale-based
• Specialization
• Flexible operations
• High quality
• Service
• Sustainability
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Productivity

Different Strategies

• Low cost - offers a relatively low price to stimulate

demand and gain market share.
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Productivity

Example of Low Cost

offers cheap but stylish furniture

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Productivity

Different Strategies

• Scale-based – use of capital-intensive methods

• Specialization - focus on narrow product lines
• Flexible operations - quick response and/or
customization
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Productivity

Different Strategies

• High quality - focus on achieving higher quality than

competitors
• Service - focus on various aspects of service
• Sustainability - focus on environmental-friendly and
energy-efficient operations
 OM’s Contribution to Strategy
10 Operations Competitive
Decisions Strategy Example Advantage

Product DIFFERENTIATION:
Innovative design Safeskin’s innovative gloves
Broad product line Fidelity Security’s mutual funds
Quality After-sales service Caterpillar’s heavy equipment
service
Process Experience Hard Rock Café’s dining
experience

Location COST LEADERSHIP:

Low overhead Franz-Colruyt’s warehouse-type Differentiation
stores
Layout (better)
Effective capacity Southwest Airline’s / CebuPac
use aircraft utilization
Human
resource Inventory Walmart’s sophisticated Response
management distribution system (faster)
Supply chain Cost
RESPONSE: leadership
Inventory Flexibility Hewlett-Packard’s response to (cheaper)
volatile world market
Reliability FedEx’s “absolutely, positively,
Scheduling on time”
Quickness Pizza Hut’s 5-minute guarantee
at lunchtime
Maintenance

Businesses Compete
© 2014 Pearson Education Using Marketing 2 - 35
Businesses Compete
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Strategy, Marketing
Productivity

Guess what strategy

these companies are using
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Productivity

Strategy Formulation • process by which an

organization chooses the most
appropriate courses of action
to achieve its defined goals
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Productivity

Strategy Formulation • Distinctive competencies

• Environmental scanning
• SWOT Analysis
• Order qualifiers
• Order winners
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Productivity

Strategy Formulation (cont.)

• Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.

Price Quality Time

Flexibility Service Location

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Productivity

Strategy and Distinctive Competencies Aligned

Organization Operations
Strategy Strategy Examples

Low Price Low cost Cebu Pacific, Southwest

Airlines, TGP

High Quality High-performance design or Sony TV

(Differentiation) high quality, consistent Lexus, Cadillac
quality Kodak, Motorola

Time Rapid delivery Express Mail

On-time delivery Fedex, One-hour photo

Flexibility Variety Burger King

Volume Supermarkets
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Productivity

Examples of Distinctive Competencies

Organization Operations
Strategy Strategy Examples

Service Superior customer service Disneyland

Location Convenience Banks, ATMS

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Productivity
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Productivity

Strategy Formulation
• Order qualifiers
 minimum standards of acceptability to be
considered as a potential purchase
• Order winners
 characteristics of goods/services perceived as
better than the competition
• Environmental scanning
 monitoring of events that present either threats or
opportunities
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Productivity

SWOT Analysis