● Failing to consider customer wants

Chapter 2: Competitiveness, Strategy, and needs

and Productivity
Mission - Strategy - Tactics
Competitiveness
● How effectively an organization Strategy
meets the wants and needs of ● Mission. The reason for existence
customers relative to others that for an organization
offer similar goods or services ● Mission statement. States purpose
of an organization
Businesses Compete Using Marketing ● Goals. Provide detail and scope of
● Identifying consumer wants and mission
needs ● Strategies. Plans for achieving
● Pricing organizational goals
● Advertising and promotion ● Tactics. The methods and actions
taken to accomplish strategies
Business Compete Using Operations
● Product and service design
● Cost
● Location
● Quality
● Quick response
● Flexibility
● Inventory management
● Supply chain management
● Service and service quality
● Managers and workers

Why Some Organizations Fail Examples of Strategies:

● Too much emphasis on short-term ● Low cost
financial performance ● Scale-based strategies
● Failing to take advantage of ● Specialization
strengths and opportunities ● Flexible operations
● Neglecting operations strategy ● High quality
● Failing to recognize competitive ● Service
threats
● Too much emphasis in product and Strategy and Tactics
service design and not enough on Distinctive Competencies
improvement ● The special attributes or abilities that
● Neglecting investment in capital and give an organization a competitive
human resources edge.
● Failing to establish good internal
communication Strategy Factors
● Price
 ● Quality ● Economic conditions
● Time ● Political conditions
● Flexibility ● Legal environment
● Service ● Technology
● Location ● Competition
● Markets
Example of Operation Strategy ● Human resources
● Facilities and equipment
● Financial resources
● Customer
● Products and services
● Technology
● Suppliers

Operations Strategy
● The approach, consistent with
organization strategy, that is used to
guide the operations function.
Global Strategy
● Strategic decisions must be made
with respect to globalization Strategic OM Decisions
● 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

Strategy Formulation
● Distinctive competencies
● Environmental scanning
● SWOT
● Order qualifiers Quality and Time Strategies
○ Characteristics that
customers perceive as
● Quality-based strategies
minimum standards of
○ Focuses on maintaining or
acceptability to be
improving the quality of an
considered as a potential
organization’s products or
purchase
services
● Order winners
○ Characteristics of an ○ Quality at the source
organization’s goods or ● Time-based strategies
services that cause it to be ○ Focuses on reduction of time
perceived as better than the needed to accomplish tasks
competition

Key External Factors

Productivity
● Productivity
○ A measure of the effective
use of resources, usually
expressed as the ratio of
output to inputs
● Productivity ratios are used for
○ Planning workforce
requirements
○ Scheduling equipment
○ Financial analysis
● Partial measures
○ output/(single input)
● Multi-factor measures
○ output/(multiple inputs)
● Total measure
○ output/(total inputs)
Productivity = Outputs / Inputs
Productivity Growth = Current Period
Productivity - Previous Period Productivity /
Previous Period Productivity
Measures of Productivity
Example 3:
7040 Units Produced
Cost of labor of $1,000
Cost of materials: $520
Cost of overhead: $2000
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
Factors affecting Productivity
● Capital
● Quality
● Technology
● Management

Other Factors Affecting Productivity

● Standardization
● Quality
● Use of internet
● Computer viruses
Examples of Partial Productivity ● Searching for lost or misplaced
Measures items
 ● Scrap rates
● New workers
● Safety
● Shortage of IT workers
● Layoffs
● Labor turnover
● Design of the workspace
● Incentive plans that reward
productivity

Outsourcing
● Higher productivity in another
company is a key reason
organizations outsource work
● Improving productivity may reduce
the need for outsourcing

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