CHAPTER TWO PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY Productivity, Competitiveness, and Strategy.

CHAPTER TWOPRODUCTIVITY, COMPETITIVENESS, AND STRATEGY

Productivity, Competitiveness,

and Strategy

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Inputs Land Labor Capital

Transformation/Conversion

process

Outputs Goods Services

Control

Feedback

FeedbackFeedback

Productivity = Outputs

Inputs

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Measures of ProductivityTable 2-1

Partial Output Output Output Outputmeasures 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

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• Why is productivity important at the national level?

• Why is productivity important at the firm level?

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Example10,000 units produced in a period

Sold for $10/unit

500 labor hours required during the period

Labor rate: $9/hr

Cost of raw material for the units produced : $5,000

Cost of purchased material for the units produced: $25,000

What is the labor productivity?

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Example--Labor Productivity

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Capital Quality

Technology Management

Factors Affecting Productivity

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Improving Productivity

• Develop productivity measures

• Determine critical operations, e.g., bottlenecks

• 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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OperationOperation

BottleneckOperation

BottleneckOperation

OperationOperation

OperationOperation

OperationOperation Figure 2-2

10 units /hour

10 units /hour

10 units /hour

10 units /hour

30 units /hour

An Example of a Bottleneck Operation

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Quality

Price

Time

Flexibility

Differentiation

Competitiveness

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Value

• This what the customer wants

Cost

ePerformanc Value

Cost

yFlexibilitSpeedQuality Value

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

Strategy TacticsMission

Mission/Strategy/Tactics

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Strategy• Mission

• Mission Statement

• Strategy

• Tactics

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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

Example 3

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Mission

Goals

Organizational strategy

Functional strategies

Finance Marketing Operations

Tactics Tactics Tactics

Finance operations

Marketingoperations

Operationsoperations

Figure 2-3

Planning and Decision Making Hierarchy

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Strategy Formulation• Order Qualifiers

• Order Winners

• Distinctive Competencies

• Environmental Scanning

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Examples of Strategies

• Traditional Strategies– Cost minimization– Product differentiation

• New Strategies– Quality-based strategies

• Focuses on quality in all phases of an organization

• Quality at the source

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

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JAN FEB MAR APR MAY JUN

Planning

Processing

Changeover On time!

Designing

Delivery

Time-based Strategies

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Company Strategy to be Supported

Operations Strategy

QualityProductProcessLocationLayoutHuman resourcesPurchasing and JITInventorySchedulingMaintenance

Marketing Strategy

ServiceDistributionPromotionPriceChannels of distributionProduct positioning

Finance Strategy

LeverageCost of capitalWorking capitalReceivablesPayablesFinancial ControlLines of Credit

Implementing Strategy via Specific Functional Strategies

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Operations Strategy Considerations• Consistent with

– Company strategy– Environmental demands– Competitive demands– Product life cycle

• Identifies and organizes the POM tasks• Makes the necessary choices within the POM

function• Creates competitive advantage

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0

Introductory Growth Mature Decline

Home Computer

Sal

es V

olu

me

Time

SmartPhones Color TV

Black & White TV

Stereo TV

PhasesProduct Life Cycle

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OPERATIONS