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Competitiveness, Strategy, and Productivity

Chapter 2

How effectively an organization meets the needs of customers relative to others that offer similar goods or services

Fl ex ib i

Di ffe re


nti ati on


Mission Strategy Tactics

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

• Mission
– The reason for existence for an organization

• Mission Statement
– A clear statement of purpose

• Strategy
– A plan for achieving organizational goals

• Tactics
– The actions taken to accomplish strategies

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:

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 job

Planning and Decision Making
Figure 2-1
Mission Goals Organizational strategy Functional strategies Finance Marketing Operations

Tactics Finance operations

Tactics Marketing operations

Tactics Operations operations

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

• Environmental Scanning
– The considering of events and trends that present threats or opportunities for a company.

Examples of Distinctive Competencies
Price Quality
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 One-hour photo Burger King Supermarkets Disneyland Nordstroms Banks, ATMs

Time Flexibility Service Location

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

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

New Strategies
• Quality-based strategies
– Focuses on maintaining or improving the quality of an organization’s products or services – Quality at the source

• Time-based strategies
– Focuses on reduction of time needed to accomplish tasks

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






• Partial measures
– output/(single input)

• Multi-factor measures
– output/(multiple inputs)

• Total measure
– output/(total inputs)

Outputs Productivity = Inputs

Productivity Growth

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

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

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 Dollar value of output per labor hour

Units of output per machine hour Dollar value of output per 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

Example 1: Determine the productivity of these cases: a) Four workers installed 720 yards of carpeting in 8 hours. b) A machine produced 68 usable piece in two hours.

• Solution: • a) Productivity = (Yards of Carpet installed)/(Labor hours worked) = (720yr )/(4 workers x 8 hrs per worker)=22.5 yards/hr • b) Productivity = (usable pieces)/(Production time) = (68 pieces)/(2 hrs)=34 pieces/hr

10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr What is the labor productivity?

Cost of raw material: $5,000 Cost of purchased material: $25,000

Example--Labor Productivity
•10,000 units/500hrs = 20 units/hour or we can arrive at a unitless figure •(10,000 unit* $10/unit)/(500hrs* $9/hr) = 22.22 Can you think of any advantages or disadvantages of each approach?

Example--Multifactor Productivity
MFP = Output Labor + Materials (10,000 units)*($10) (500)*($9) + ($5000) + ($25000) 2.90


Figure 2-2

Annual Productivity Growth
6 Annual % Change 4 2 0 -2 77 79 81 83 85 87 89 91 93 95 97 99 Year

Factors Affecting Productivity





Factors Affecting Productivity
• • • • • • • Standardization Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers Cuts in health benefits

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

Improving Productivity

Bottleneck Operation
Figure 2-3

Operation Operation Operation Operation

Bottleneck Operation