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CHAPTER 02
COMPETITIVENESS, STRATEGY, AND PRODUCTIVITY
Teaching Notes
The topics covered in this chapter can be used to help get your course in OM off to an interesting start.
Most of your students are aware that U.S. firms are having a difficult time competing with foreign firms
in both the domestic and international markets. Many of them have grown up using products produced by
foreign firms on an everyday basis and they have developed a great deal of respect for the quality of their
products. Students are probably as familiar with names like Minolta, Honda, Toyota, Sony, BP Oil, Nestlé
& BIC as they are with Ford, GM, GE, IBM, Texaco, Hershey, and Parker.
I think students will relate to the fact that companies must be productive to be competitive and that to be
competitive they must have some well thought out approach, plan, or strategy on how to achieve this
position. In other words, students will be able to understand why it is important to learn what productivity
really is, how we measure it, what factors affect it, and how firms can improve their productivity.
Students will become aware that business firms compete with each other in a variety of ways and will
study the key competitive factors, which are of primary concern in today’s global business environment.
Finally, the students will focus on operations strategy with special attention being given to some of the
newer strategies based on quality, time, and lean production systems.
Reading: Why Productivity Matters
1. Higher productivity relative to competitors is very important for a nation because it provides the
nation with a competitive advantage in the marketplace. Productivity increases add value to the
economy while controlling inflation. In addition, higher productivity provides the basis for a
sustainable long-term growth in the economy. It allows companies to undercut competitors’
prices to improve their market share or to realize higher profit margin at the same price level.
Relative higher productivity also makes it more difficult for foreign companies to compete.
2. In general, service jobs have lower productivity than their manufacturing counterparts do because
service productivity is very difficult to measure and, consequently, difficult to improve. In many
cases, service jobs include intellectual activities and a high degree of variability, which makes
productivity improvements difficult to achieve. Manufacturing jobs, on the other hand, lend
themselves to productivity improvements mainly because they are able to utilize computer-based
technology such as robotics to increase worker productivity.
3. Higher productivity allows companies to undercut competitors’ prices to improve their market
share, or to realize higher profit margin at the same price level. Relative higher productivity also
makes it more difficult for foreign companies to enter a new market because it is difficult for
them to compete against companies that have relatively higher productivity.
2-1
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2. The Dutch growers’ supply chain is an important factor because a Dutch trading company works
closely with supermarket chains in Europe so that farmers are able to sell their output in high
volume, which enables Dutch farmers to match supply and demand closely.
6. Strategy is the basic approach used by an organization to achieve its goal. Tactics are the methods
and actions that are taken to accomplish strategies and carry out operations.
2-2
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Education.
Chapter 02 - Competitiveness, Strategy, and Productivity
7. Organization strategy provides the overall direction for the organization and is broad in scope,
e.g., low cost, scale-based strategies, specialization, newness, flexible operations, high quality,
service, or sustainability. Operations strategy is narrower in scope, dealing primarily with the
operations aspect of the organization. Operations strategy must be consistent with organization
strategy and deals with products, processes, methods, operating resources, quality, costs, lead
times, and scheduling.
8. Time-based strategies are approaches that focus on reducing the time needed to conduct the
various activities in a process. The rationale is that by reducing time, costs are generally lower,
productivity is higher, quality tends to be higher, product innovations appear on the market
earlier, and customer service is improved. Examples of time-based strategies include reductions
in any three of the following: planning time, product/service design time, processing time,
changeover time, delivery time, or response time for complaints.
9. a. Productivity is the ratio of output to input.
b. Productivity measures are used to judge the effective use of resources by countries,
companies, and units within companies.
c. High productivity rates relative to competitors can mean competitive advantages for
companies. For countries, high productivity rates can reduce the risk of inflation and generate
high standards of living for the country as a whole.
d. Operations.
e. Efficiency relates to a fixed set of tools or conditions. Productivity is wider in scope.
Efficiency can be improved by better use of existing labor and equipment. Productivity can
be improved by changing work methods, but also by changing equipment or conditions. The
example of cutting grass with a pair of scissors is a good one: An efficiency approach would
focus on the best way to use the scissors; a productivity approach would focus on use of a
lawn mower. Note: Use of a mower, while more productive than the use of scissors, still may
have room for improvement in its efficiency.
10. Factors affecting productivity include the following: Methods, capital, quality, technology, and
management.
Ways productivity can be improved include the following: Using productivity measures for all
operations; eliminating bottlenecks; soliciting ideas from workers; forming work teams; studying
other firms; reexamining work methods; establishing reasonable goals for improvement;
obtaining support from management; measuring, rewarding, and publicizing improvements; and
finally, not confusing productivity with efficiency because productivity is a much broader
concept than efficiency is.
11. The Japanese worker is probably working smarter, if not harder, than U.S. workers are. By
working smarter, we mean the Japanese are using more productive work methods than American
workers are. One way that the Japanese accomplish this is by using time-based strategies that
focus on reducing the time needed to accomplish various tasks. Some of the areas in which their
organizations benefit from time reduction are planning time, design time, processing time,
changeover time, delivery time, and response time for complaints.
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Edinburgh; John Brisbane of Bishoptoun, in Cunninghame; Alexander
Frazer of Durris, Kincardine; Alexander Halyburton of Pitcur, in Angus;
John Buchanan of Auchmar and Arnprior; John Norrie of Finarsie,
Aberdeenshire; Gilbert MacIlvayne of Grummet, Argyle; Thomas Corrie
of Kelwood, James Montfoyd of Montfoyd, Bernard Mure of Park, John
Crawford of Giffertland, Quentin Hunter of Hunterstoun, Ayrshire;
Robert Bothwick of Gordonshall, John Ramsay of Arbekie, John Strang
of Balcaskie, William Barclay of Rhyud, David Reid of Aikenhead,
James Wemyss of Myrecairnie, Andrew Anstruther (younger) of that ilk,
Alexander Inglis of Tarvet, John Airth of Strathour-Wester, David
Wemyss of Caskieberry, Stephen Duddingston of Kildinington, Fife;
Ludovic Thornton of that ilk, Forfarshire; Cuthbert Aschennan of Park,
John Gordon of Blaiket, John Ramsay of Sypland, Kirkcudbright;
Thomas Hamilton of Priestfield, near Edinburgh; David Anderson of
Inchcannon, in the barony of Errol; John Kincaid of Wester Lawes, in the
barony of Kinnaird; John Leckie of that ilk, Stirlingshire; John Macdoull
of Garthland, Wigton; Patrick Bissett of Lessindrum; Walter Macfarlane
of Tarbet; Richard Melville of Baldovie, parson of Marytown; David
Arbuthnot (younger) of that ilk, parson of Menmure; William Johnston
of that ilk; Robert Munro of Foulis; John Murray of Abercairnie; David
Murray of Auchtertyre; John Halket of Pitfirran; David and Robert
Boswal, sons of the laird of Balmuto; Allan Lockhart of the Lee; Duncan
Macfarlane of that ilk; Finlay Mhor, Farquharson of Invercauld, royal
standard-bearer; George Henderson of Fordelhenderson; Alexander
Skene of that ilk; James Innes of Rathmackenzie; Robert Leslie of
Wardes; John Kinnaird of that ilk; William Cunninghame of
Glengarnock; John and Arthur Forbes, sons of the Red Laird of Pitsligo;
Cuthbert Hamilton of Candor, David Hamilton of Broomhill;[*] Gabriel
Cunninghame of Craigends; John and Robert, sons of Sir Walter Lindsay
of Edzell, who fell at Flodden; John Ogilvie of Durn; John Hamilton,
merchant in the West Bow, Edinburgh; Walter Cullen, bailie of
Aberdeen, and twenty-eight burghers of that city.
[*] Two brothers, slain when attempting to rescue the Lord Semple, who was
taken prisoner.
The seven sons of Sir Thomas Urquhart of Cromarty are also said to
have fallen, in this disastrous field; but their names do not appear in the
"Scottish Baronage."
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