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Chapter 2

Chapter 2. Competitiveness, Strategy, and Productivity. Competitiveness: How effectively an organization meets the needs of customers relative to others that offer similar goods or services. Price. Flexibility. Quality. Service. Differentiation. Time. Competitiveness. Mission.

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Chapter 2

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  1. Chapter 2 Competitiveness, Strategy, and Productivity

  2. Competitiveness: How effectively an organization meets the needs of customers relative to others that offer similar goods or services

  3. Price Flexibility Quality Service Differentiation Time Competitiveness

  4. Mission Strategy Tactics Mission/Strategy/Tactics How does mission, strategies and tactics relate to decision making and distinctive competencies?

  5. Strategy • Mission • The reason for existence for an organization • Mission Statement • A clear statement of purpose • Strategy • A plan for achieving organizational goals • Tactics • The actions taken to accomplish strategies

  6. Strategy Example Example 1 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

  7. Figure 2-1 Mission Goals Organizationalstrategy Functional strategies Finance Marketing Operations Tactics Tactics Tactics Operations operations Finance operations Marketing operations Planning and Decision Making

  8. Strategy Formulation • Distinctive Competencies • The special attributes or abilities that give an organization a competitive edge. • Environmental Scanning • The considering of events and trends that present threats or opportunities for a company.

  9. Price Low Cost U.S. first-class postage Motel-6, Red Roof Inns Quality High-performance design or high quality Consistent quality Sony TV Lexus, Cadillac Pepsi, Kodak, Motorola Time Express Mail One-hour photo Rapid deliveryOn-time delivery Flexibility Variety Volume Burger King Supermarkets Service Superior customer service Disneyland Nordstroms Location Convenience Banks, ATMs Examples of Distinctive Competencies

  10. Key External Factors • Economic conditions • Political conditions • Legal environment • Technology • Competition • Markets

  11. Key Internal Factors • Human Resources • Facilities and equipment • Financial resources • Customers • Products and services • Technology • Suppliers

  12. New 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

  13. JAN FEB MAR APR MAY JUN Planning Designing Processing On time! Changeover Delivery Time-based Strategies

  14. Productivity • Partial measures • output/(single input) • Multi-factor measures • output/(multiple inputs) • Total measure • output/(total inputs)

  15. Productivity Growth = Current Period Productivity – Previous Period Productivity Previous Period Productivity Productivity Growth

  16. 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 Measures of Productivity Table 2-4

  17. Labor Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Machine Productivity Units of output per machine hour machine hour Capital Productivity Units of output per dollar input Dollar value of output per dollar input Energy Productivity Units of output per kilowatt-hour Dollar value of output per kilowatt-hour Examples of Partial Productivity Measures Table 2-5

  18. 10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr Cost of raw material: $5,000 Cost of purchased material: $25,000 What is the labor productivity? Example

  19. Example--Labor Productivity • 10,000 units/500hrs = 20 units/hour or we can arrive at a unitless figure • (10,000 unit* $10/unit)/(500hrs* $9/hr) =22.22 Can you think of any advantages or disadvantages of each approach?

  20. Example--Multifactor Productivity MFP = Output Labor + Materials MFP = (10,000 units)*($10) (500)*($9) + ($5000) + ($25000) MFP = 2.90

  21. Figure 2-2

  22. Capital Quality Technology Management Factors Affecting Productivity

  23. Factors Affecting Productivity • Standardization • Use of Internet • Computer viruses • Searching for lost or misplaced items • Scrap rates • New workers • Cuts in health benefits

  24. Factors Affecting Productivity • Safety • Shortage of IT workers • Layoffs • Labor turnover • Design of the workspace • Incentive plans that reward productivity

  25. 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

  26. Operation Operation Bottleneck Operation Operation Operation Bottleneck Operation Figure 2-3

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