2

Competitiveness,
Strategy,
and Productivity

McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
 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.

2-2
 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.
2-3
Competitiveness:

How effectively an organization meets the

wants and needs of customers relative to
others that offer similar goods or services

2-4
 Businesses Compete Using
Marketing
 Identifying consumer wants and needs
 Pricing
 Advertising and promotion

2-5
 Businesses Compete Using
Operations
 Product and service design
 Cost
 Location
 Quality
 Quick response

2-6
 Businesses Compete Using
Operations
 Flexibility
 Inventory management
 Supply chain management
 Service and service quality
 Managers and workers

2-7
 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

2-8
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

2-9
 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

2-10
 Productivity

 Partial measures
 output/(single input)
 Multi-factor measures
 output/(multiple inputs)
 Total measure
 output/(total inputs)
Outputs
Productivity =
Inputs

2-11
 Productivity Growth

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

2-12
 Measures of Productivity
Table 2.4

Partial Output Output Output Output

measures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them

2-13
 Examples of Partial Productivity Measures
Table 2.5

Labor Units of output per labor hour

Units of output per shift
Productivity Value-added per labor hour

Machine Units of output per machine hour

machine hour
Productivity
Capital Units of output per dollar input
Dollar value of output per dollar input
Productivity
Energy Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
Productivity
2-14
 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
2-15
 Example 3 Solution

MFP = Output
Labor + Materials + Overhead

MFP = (7040 units)

$1000 + $520 + $2000

MFP = 2.0 units per dollar of input

2-16
 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

2-17
Factors Affecting Productivity

Capital Quality

Technology Management

2-18
 Other Factors Affecting Productivity

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

2-19
 Other Factors Affecting Productivity

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

2-20
 Outsourcing
 Higher productivity in another company is a
key reason organizations outsource work
 Improving productivity may reduce the need
for outsourcing

2-21
 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
2-22