Better quality, higher productivity,

lower costs, and the ability to

Competitiveness, Strategy, and respond quickly to customer needs
Productivity are more important than ever,
the bar is getting higher

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This chapter focuses on three separate, but Competitiveness:

related ideas that are vitally important to How effectively an organization meets the wants
business organizations and needs of customers relative to others that
Competitiveness offer similar goods or services
Organizations compete through some
Strategy
combination of their marketing and operations
Productivity
functions
What do customers want?
How can these customer needs best be satisfied?

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 Identifying consumer wants and/or needs 1. Product and service design
2. Cost
Pricing and quality
3. Location
Advertising and promotion 4. Quality
5. Quick response
6. Flexibility
7. Inventory management
8. Supply chain management
9. Service
10. Managers and workers

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1. Neglecting operations strategy

2. Failing to take advantage of strengths and
opportunities and/or failing to recognize
competitive threats
3. Too much emphasis on short-term
financial performance at the expense of
R&D

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4. Too much emphasis in product and service Mission
design and not enough on process design
and improvement Goals
5. Neglecting investments in capital and
human resources Organizational strategies
6. Failing to establish good internal
communications and cooperation Functional strategies
7. Failing to consider customer wants and
needs Tactics
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Mission

existence The mission statement serves as the basis for

organizational goals
Mission statement
Goals
States the purpose of the organization Provide detail and the scope of the mission
The mission statement should answer the Goals can be viewed as organizational destinations
Goals serve as the basis for organizational strategies

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Strategy
A plan for achieving organizational goals
Serves as a roadmap for reaching the Tactics
organizational destinations
The methods and actions taken to accomplish
strategies
Organizations have
Organizational strategies
Overall strategies that relate to the entire organization Operations
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

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Organizational Strategy Operations Strategy Examples of Companies or Services

Core competencies Low Price Low cost U.S. first-class postage

Wal-Mart
The special attributes or abilities that give an Responsiveness Short processing times

organization a competitive edge On-time delivery FedEx

To be effective core competencies and strategies need Differentiation:

High Quality
High performance design and/or
high quality processing
Sony TV

to be aligned Consistent quality Coca-Cola

Differentiation: Innovation 3M, Apple

Newness
Differentiation: Flexibility
Variety Volume

Differentiation: Superior customer service Disneyland

Service IBM

Differentiation: Convenience Supermarkets; mall stores

Location

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 Effective strategy formulation requires Order qualifiers
taking into account: Characteristics that customers perceive as
Core competencies minimum standards of acceptability for a
Environmental scanning product or service to be considered as a
SWOT potential for purchase
Successful strategy formulation also requires Order winners
taking into account:
Order qualifiers services that cause it to be perceived as better
Order winners than the competition

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Environmental scanning is
necessary to identify 1. Economic conditions
Internal factors
2. Political conditions
Strengths and weaknesses
External factors 3. Legal environment
Opportunities and threats 4. Technology
5. Competition
6. Markets

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 1. Human resources
Operations strategy
2. Facilities and equipment
The approach, consistent with
3. Financial resources
organization strategy, that is used to
4. Customers guide the operations function
5. Products and services
6. Technology
7. Suppliers
8. Other

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Decision Area What the Decisions Affect

Quality-based strategy
Product and service design Costs, quality, liability, and environmental issues Strategy that focuses on quality in all
Capacity Cost, structure, flexibility
phases of an organization
Process selection and layout Costs, flexibility, skill level needed, capacity
Pursuit of such a strategy is rooted in a
Work design Quality of work life, employee safety, productivity number of factors:
Location Costs, visibility Trying to overcome a poor quality reputation
Quality Ability to meet or exceed customer expectations Desire to maintain a quality image
Inventory Costs, shortages A desire to catch up with the competition
Maintenance Costs, equipment reliability, productivity A part of a cost reduction strategy
Scheduling Flexibility, efficiency

Supply chains Costs, quality, agility, shortages, vendor relations

Projects Costs, new products, services, or operating systems

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 Time-based strategies
Strategies that focus on the reduction Areas where organizations have
of time needed to accomplish tasks achieved time reductions:
It is believed that by reducing time, Planning time
costs are lower, quality is higher, Product/service design time
productivity is higher, time-to-market is
Processing time
faster, and customer service is improved
Changeover time
Delivery time
Response time for complaints

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Agile (active) operations

A strategic approach for competitive A top-down management system that
advantage that emphasizes the use of organizations can use to clarify their vision and
flexibility to adapt and prosper in an strategy and transform them into action
environment of change Develop objectives
Involves the blending of several core Develop metrics (measures) and targets for each
competencies: objective
Cost Develop initiatives to achieve objectives
Quality Identify links among the various perspectives
Reliability Finance
Flexibility Customer
Internal business processes
Learning and growth
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 Productivity
A measure of the effective use of resources,
usually expressed as the ratio of output to input
Productivity measures are useful for

time
Judging the performance of an entire industry or
country

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High productivity is linked to higher standards of

living
As an economy replaces manufacturing jobs with lower
productivity service jobs, it is more difficult to maintain
high standards of living
Higher productivity relative to the competition
leads to competitive advantage in the marketplace
Pricing and profit effects
For an industry, high relative productivity makes it
less likely it will be supplanted by foreign industry

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Units produced: 5,000
Standard price: $30/unit
Labor input: 500 hours
Cost of labor: $25/hour
Cost of materials: $5,000
Cost of overhead: 2x labor cost

What is the multifactor productivity? What is the implication of an unitless measure of productivity?

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Service sector productivity is difficult to measure and manage

because
It involves intellectual activities
It has a high degree of variability
A useful measure related to productivity is process yield
Where products are involved
Example: Labor productivity on the ABC assembly line was 25 units per hour in
2014. In 2015, labor productivity was 23 units per hour. What was the Ratio of output of good product to the quantity of raw material
productivity growth from 2014 to 2015? input
Where services are involved, process yield measurement is
often dependent on the particular process:
Ratio of cars rented to cars available for a given day
Ratio of student acceptances to the total number of students
approved for admission

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 1. Develop productivity measures for all operations
Methods
2. Determine critical (bottleneck) operations
3. Develop methods for productivity improvements
4. Establish reasonable goals
Capital Quality
5. Make it clear that management supports and encourages
productivity improvement
6. Measure and publicize improvements

Technology
7. productivity (output, yield, production) with
Management
efficiency (competence, effectivity, proficiency)

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