Operations Management

Chapter-2

Competitiveness,
strategy, productivity
 Competitiveness

How effectively an organization meets the wants and

needs of customers relative to others that offer similar
goods or services.
Businesses Compete Using Marketing

1. Identifying consumer wants and needs

2. Pricing
3. Advertising and promotion
Businesses Compete Using Operations

1. Product and service design

2. Cost
3. Location
4. Quality
5. Quick response
6. Flexibility
7. Inventory management
8. Supply chain management
9. Service
 Why Some Organizations Fail

1. Too much emphasis on short-term financial performance

2. Failing to take advantage of strengths and opportunities
3. Failing to recognize competitive threats
4. Neglecting operations strategy
5. Too much emphasis in product and service design and not
enough on improvement
6. Neglecting investments in capital and human resources
7. Failing to establish good internal communications
8. Failing to consider customer wants and needs
 Mission/Strategy/Tactics

Mission Strategy Tactics

How does mission, strategies and tactics

relate to
decision making and distinctive
competencies?
 Strategy
1. Strategies
Plans for achieving organizational goals
2. Mission
The reason for existence for an organization
3. Mission Statement
Answers the question “What business are we in?”
4. Goals
Provide detail and scope of mission
5. Tactics
The methods and actions taken to accomplish strategies
 Strategy Example

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: Live a good life
 Goal: Successful career, good income
 Strategy: Obtain a college education
 Tactics: Select a college and a major
 Operations: Register, buy books, take
courses, study, graduate, get job
 Strategy and Tactics

Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.
 Price
 Quality
 Time
 Flexibility
 Service
 Location
Examples of Distinctive Competencies

Price Low Cost U.S. first-class postage

Motel-6, Red Roof Inns

Quality High-performance design Sony TV

or high quality Consistent Lexus, Cadillac
quality Pepsi, Kodak, Motorola
Time Rapid delivery Express Mail, Fedex,
On-time delivery One-hour photo, UPS
Flexibility Variety Burger King
Volume Supermarkets
Service Superior customer Disneyland
service Nordstroms
Location Convenience Banks, ATMs
 Operations Strategy

Operations strategy – The approach, consistent

with organization strategy, that is used to guide
the operations function.
 Strategy Formulation

1. Distinctive competencies
2. Environmental scanning
3. SWOT
4. Order qualifiers
5. Order winners

 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
 Key External Factors

1. Economic conditions
2. Political conditions
3. Legal environment
4. Technology
5. Competition
6. Markets
 Key Internal Factors

1. Human Resources
2. Facilities and equipment
3. Financial resources
4. Customers
5. Products and services
6. Technology
7. Suppliers
 Quality and Time Strategies

Quality-based strategies
Focuses on maintaining or
improving the quality of an
organization’s products or
services.

Time-based strategies
Focuses on reduction of time
needed to accomplish tasks.
 Productivity

Productivity
A measure of the effective use of resources, usually
expressed as the ratio of output to input

Productivity ratios are used for

1. Planning workforce requirements

2. Scheduling equipment
3. Financial analysis
 Productivity Measurement

1. Partial measures
output/(single input)
2. Multi-factor measures
output/(multiple inputs)
3. Total measure
output/(total inputs)

Outputs
Productivity =
Inputs
Factors Affecting Productivity

Capital Quality

Technology Management
Other Factors Affecting Productivity
1. Standardization
2. Quality
3. Use of Internet
4. Computer viruses
5. Searching for lost or misplaced items
6. Scrap rates
7. New workers
8. Safety
9. Shortage of IT workers
10. Layoffs
11. Labor turnover
12. Design of the workspace
13. Incentive plans that reward productivity
 Improving Productivity

1. Develop productivity measures

2. Determine critical (bottleneck) operations
3. Develop methods for productivity improvements
4. Establish reasonable goals
5. Get management support
6. Measure and publicize improvements
7. Don’t confuse productivity with efficiency