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Competitiveness, Strategy, and Productivity

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.

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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.
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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

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Businesses Compete Using Marketing
 Identifying consumer wants and needs  Pricing  Advertising and promotion

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Businesses Compete Using Operations
 Product and service design  Cost  Location  Quality  Quick response

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Businesses Compete Using Operations
     Flexibility Inventory management Supply chain management Service and service quality Managers and workers

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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

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Why Some Organizations Fail
 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
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Mission/Strategy/Tactics
Mission Strategy Tactics

How does mission, strategies and tactics relate to decision making and distinctive competencies?

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Strategy
 Mission

The reason for existence for an organization States the purpose of an organization Provide detail and scope of mission

 Mission Statement

 Goals

Strategies
 Plans for achieving organizational goals

 Tactics

The methods and actions taken to accomplish strategies
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Planning and Decision Making
Figure 2.1
Mission Goals Organizational Strategies Functional Goals Finance Strategies Marketing Strategies Operations Strategies

Tactics Operating procedures

Tactics Operating procedures

Tactics Operating procedures
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Strategy Example
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:  Goal:  Strategy:  Tactics:  Operations:
job

Live a good life
Successful career, good income Obtain a college education Select a college and a major Register, buy books, take courses, study, graduate, get

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Examples of Strategies
      Low cost Scale-based strategies Specialization Flexible operations High quality Service

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Strategy and Tactics
 Distinctive Competencies
The special attributes or abilities that give an organization a competitive edge.

Strategy Factors
     

Price Quality Time Flexibility Service Location

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Examples of Operations Strategies
Table 2.2

Price Quality Time Flexibility Service Location

Low Cost

U.S. first-class postage Motel-6, Red Roof Inns

High-performance design Sony TV or high quality Consistent Lexus, Cadillac quality Pepsi, Kodak, Motorola Rapid delivery On-time delivery Variety Volume Superior customer service Convenience Express Mail, Fedex, One-hour photo, UPS Burger King Supermarkets Disneyland Nordstroms Banks, ATMs
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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
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Strategy Formulation
     Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners

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Strategy Formulation
 Order qualifiers
 Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase

 Order winners
 Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition

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Key External Factors
      Economic conditions Political conditions Legal environment Technology Competition Markets

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Key Internal Factors
       Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers

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Operations Strategy
 Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function.

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Strategic OM Decisions
Table 2.4

Decision Area
Product and service design Capacity Process selection and layout Work design Location Quality Inventory Maintenance Scheduling Supply chains Projects

Affects
Costs, quality liability and environmental Cost structure, flexibility Costs, flexibility, skill level, capacity Quality of work life, employee safety, productivity Costs, visibility Ability to meet or exceed customer expectations Costs, shortages Costs, equipment reliability, productivity Flexibility, efficiency Costs, quality, agility, shortages, vendor relations Costs, new products, services, or operating systems
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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 Focuses on reduction of time needed to accomplish tasks
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 Time-based strategies

Time-based Strategies
JAN
Planning Designing Processing Changeover Delivery On time!

FEB

MAR

APR

MAY

JUN

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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  Scheduling equipment  Financial analysis

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Productivity
 Partial measures

output/(single input) output/(multiple inputs) output/(total inputs)

 Multi-factor measures

 Total measure

Outputs Productivity = Inputs
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Productivity Growth

Productivity Growth =
Current Period Productivity – Previous Period Productivity Previous Period Productivity

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Measures of Productivity
Table 2.4

Partial measures Multifactor measures Total measure

Output Labor

Output Output Machine Capital

Output Energy

Output Labor + Machine

Output Labor + Capital + Energy

Goods or Services Produced All inputs used to produce them

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Examples of Partial Productivity Measures
Table 2.5

Labor Productivity Machine Productivity Capital Productivity Energy Productivity

Units of output per labor hour Units of output per shift Value-added per labor hour Units of output per machine hour machine hour Units of output per dollar input Dollar value of output per dollar input Units of output per kilowatt-hour Dollar value of output per kilowatt-hour

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Example 3
7040 Units Produced Cost of labor of $1,000 Cost of materials: $520 Cost of overhead: $2000 What is the multifactor productivity? Ans. 2.0 units per dollar of input
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Example 3 Solution
MFP = Output Labor + Materials + Overhead (7040 units) $1000 + $520 + $2000 2.0 units per dollar of input

MFP = MFP =

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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

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Factors Affecting Productivity
Capital Quality

Technology

Management

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Other Factors Affecting Productivity
       Standardization Quality Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers

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Other Factors Affecting Productivity
      Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity

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

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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

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