Competitiveness, Strategy, and Productivity
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McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
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Competitiveness, Strategy, and Productivity
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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.
NEW PRACTICUM SCHEDULE SEMESTER SIX (6)
EMPLOYER SUGGESTION JOB OPPORTUNITIES STUDENTS WERE OFFERED BUT CANNOT
ENTER THE JOB MARKET SUGGEST PRIVATE ORGANIZATION
COMMENCE IMMEDIATELY CANCEL IF ARRANGEMENT HAS BEEN
RULES FOR STUDENT WEAR ONLY DECENT CLOTHES
NO T-SHIRT NO SHORT NO JEANS
WEAR ONLY SHOES. NO SANDAL/ SLIPPER
SWITCH OFF HP ATTENDANCE IS COMPULSORY
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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
How do mission, strategies and tactics relate todecision making and distinctive competencies?
Strategy TacticsMission
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Strategy Mission
Explains the existence for an organization
Mission Statement States the purpose of an organization
Goals Provide detail and scope of mission
Strategies Plans for achieving organizational goals
Tactics The methods and actions taken to accomplish strategies
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Planning and Decision Making
Mission
Organizational Goals
Organizational Strategies
Functional GoalsFinance
StrategiesMarketingStrategies
OperationsStrategies
Tactics Tactics Tactics
OperatingProcedures
OperatingProcedures
OperatingProcedures
Figure 2.1
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Strategy Example
Jun Hee 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
Example 1
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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 anorganization a competitive edge.
Strategy Factors Price Quality Time Flexibility Service Location
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Supermarkets, dry cleaners ConvenienceLocation
Disneyland, Hewlett-Packard, IBM
Superior customer service
Service
Burger KingMcDonald’s
VarietyVolume
Flexibility
Coca-Cola, PepsiCo, Kodak, McDonald’s restaurants, UPSPizza Hut, FedEx
Rapid deliveryOn-time delivery
Time
Sony TV, Lexus, DisneylandHigh-performance design and/or high quality Consistent quality
Quality
National first-class postage, Carrefour, Jetstar
Low CostPrice
Examples of Operations StrategiesTable 2.2
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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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Operations Strategy Operations strategy: The approach
consistent with organization strategy, that is used to guide the operations function.
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Strategic OM DecisionsDecision Area Affects
Product and service design Costs, quality liability and environmental
Capacity Cost structure, flexibility
Process selection and layout Costs, flexibility, skill level, capacity
Work design Quality of work life, employee safety, productivity
Location Costs, visibility
Quality Ability to meet or exceed customer expectations
Inventory Costs, shortages
Maintenance Costs, equipment reliability, productivity
Scheduling Flexibility, efficiency
Supply chains Costs, quality, agility, shortages, vendor relations
Projects Costs, new products, services, or operating systems
Table 2.4
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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 Time-based strategies
Focuses on reduction of time needed to accomplish tasks
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Time-Based Strategies
JAN FEB MAR APR MAY JUN
Planning
Processing
Changeover On time!
Designing
Delivery
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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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Food Processor
Inputs Processing Outputs
Labor Cleaning Canned vegetables Metal sheets Making cans
Water CuttingEnergy Cooking
PackingLabeling
Table 1.2
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Productivity
Partial measures output/(single input)
Multi-factor measures output/(multiple inputs)
Total measure output/(total inputs)
Productivity = OutputInput
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Productivity
Determine the productivity of the following; Four workers installed 720 square yards of
carpeting in 8 hours. A machine produced 68 usable pieces in 2 hours. A company that processes fruits and vegetables is
able to produce 400 cases of canned peaches in half hour with 4 workers. What is labour productivity
Productivity = OutputInput
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Productivity Growth
Current Period Productivity – Previous Period ProductivityPrevious Period Productivity
Productivity Growth =
If Productivity increased from 80 to 84, find the growth rate.
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Measures of ProductivityTable 2.5
Partial Output Output Output Outputmeasures Labor Machine Capital Energy
Multifactor Output Outputmeasures Labor + Machine Labor + Capital + Energy
Total Goods or Services Producedmeasure All inputs used to produce them
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Units of output per kilowatt-hourDollar value of output per kilowatt-hour
Energy Productivity
Units of output per dollar inputDollar value of output per dollar input
Capital Productivity
Units of output per machine hourDollar value of output per machine hour
Machine Productivity
Units of output per labor hourUnits of output per shiftValue-added per labor hour
Labor Productivity
Examples of Partial Productivity MeasuresTable 2.6
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Example
7040 Units Produced
Cost of labor: $1,000
Cost of materials: $520
Cost of overhead: $2000
What is the multifactor productivity?
Ans. 2.0 units per dollar of input
Determine the multifactor productivity using the following data:
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Example : Solution
MFP = OutputLabor + Materials + Overhead
MFP = (7040 units)$1000 + $520 + $2000
MFP = 2.0 units per dollar of input
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Question
1. A wrapping paper company produced 2,000 rolls of paper one day. Standard price in RM1/roll. Labour cost was RM160, material cost was RM50, and overhead was RM320. Determine the multifactor productivity
2. Suppose that a company produced 300 standard bookcases last week using 8 workers and it produced 240 standard bookcases this week using 6 workers. In which period was the productivity higher?
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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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Improving Productivity Develop productivity measures Determine critical (bottleneck) operations Develop methods for productivity
improvements Establish reasonable goals Get management support Measure and publicize improvements Do not confuse productivity with efficiency
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