Competitiveness, Strategy, and Productivity

McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

2

Competitiveness, Strategy, and Productivity

2-2

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.

2-3

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

2-6

Competitiveness:

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

2-7

Businesses Compete Using Marketing

Identifying consumer wants and needs Pricing Advertising and promotion

2-8

Businesses Compete Using Operations

Product and service design Cost Location Quality Quick response

2-9

Businesses Compete Using Operations

Flexibility Inventory management Supply chain management Service and service quality Managers and workers

2-10

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

2-11

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

2-12

Mission/Strategy/Tactics

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

Strategy TacticsMission

2-13

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

2-14

Planning and Decision Making

Mission

Organizational Goals

Organizational Strategies

Functional GoalsFinance

StrategiesMarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

OperatingProcedures

OperatingProcedures

OperatingProcedures

Figure 2.1

2-15

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

2-16

Examples of Strategies Low cost Scale-based strategies Specialization Flexible operations High quality Service

2-17

Strategy and Tactics Distinctive Competencies

The special attributes or abilities that give anorganization a competitive edge.

Strategy Factors Price Quality Time Flexibility Service Location

2-18

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

2-19

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

2-20

Strategy Formulation Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners

2-21

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

2-22

Operations Strategy Operations strategy: The approach

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

2-23

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

2-24

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

2-25

Time-Based Strategies

JAN FEB MAR APR MAY JUN

Planning

Processing

Changeover On time!

Designing

Delivery

2-26

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

1-27

Food Processor

Inputs Processing Outputs

Labor Cleaning Canned vegetables Metal sheets Making cans

Water CuttingEnergy Cooking

PackingLabeling

Table 1.2

2-28

Productivity

Partial measures output/(single input)

Multi-factor measures output/(multiple inputs)

Total measure output/(total inputs)

Productivity = OutputInput

2-29

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

2-30

Productivity Growth

Current Period Productivity – Previous Period ProductivityPrevious Period Productivity

Productivity Growth =

If Productivity increased from 80 to 84, find the growth rate.

2-31

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

2-32

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

2-33

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:

2-34

Example : Solution

MFP = OutputLabor + Materials + Overhead

MFP = (7040 units)$1000 + $520 + $2000

MFP = 2.0 units per dollar of input

2-35

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?

2-36

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

2-37

Factors Affecting Productivity

Capital Quality

Technology Management

2-38

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