Chapter 2 Competitiveness, Strategy, and Productivity

1. Chapter 2Competitiveness, Strategy, and Productivity Better Quality, Higher Productivity, Lower Costs, Quick Response

2. Glossary • Competitiveness: • How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services • Distinctive Competence (Ch1) • The special attributes or abilities that give an organization a competitive edge

3. Businesses compete using marketing • Identifying consumer wants and needs • Make decision using this info • Pricing, Advertising and promotion (inform buyers) Operations make businesses competitive • Product and service design ~ achieve match • Cost ~ pricing, profit, productivity • Location ~ cost, convenience • Quality ~ satisfy intended purpose • Quick response ~ satisfaction … • Flexibility ~ volume, mix • Inventory management ~ matching supply & demand • Supply chain management ~ time, cost • Service and service quality ~ delivery, setup, VA • Managers and workers ~ competent & motivated

4. 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 • 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 Determine customer wants or need Directing efforts toward meeting (exceeding) them

5. See Table 2.1

6. Mission Strategy Tactics Mission/Strategy/TacticsIt is all about timeframe How does mission, strategies and tactics relate to decision making and distinctive competencies?

7. Planning and Decision Making Figure 2.1 Mission Goals OrganizationalStrategies Functional Goals Finance Strategies MarketingStrategies OperationsStrategies Tactics Tactics Tactics Operatingprocedures Operatingprocedures Operatingprocedures

8. 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 Strategy | Example 1

9. Examples of Competitive Strategies Table 2.1 P41

10. 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, Fedex, One-hour photo, UPS Rapid deliveryOn-time delivery Flexibility Variety Volume Burger King Supermarkets Service Superior customer service Disneyland Nordstroms Location Convenience Banks, ATMs Examples of Operations Strategies Table 2.2

11. Strategic advantage- Distinctive Competencies • Distinctive Competencies • The special attributes or abilities that give an organization a competitive edge. • Examples include Price, Quality, Time, Flexibility, Service, Location • Do a SWOT analysis before formulating strategies • Example: Xerox • Modular design • Bottom up pricing strategy!

12. Operations Strategy • The approach, consistent with the organizational strategy, that is used to guide the operations functions. • Narrow scope • Shorter span • Vs. Marketing S., Financial S. • Comparison of mission, org. strategy and op. strategy • Table 2.3 P42 for

13. Strategic OM Decisions

14. Distinctive competencies Environmental scanning Competitors- current and future plans SWOT Internal SW and External OT Consider Order qualifiers and Order winners Strategy Formulation

16. Quality and Time Strategies

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

18. 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 Current Period Productivity – Previous Period Productivity Previous Period Productivity Output Productivity Productivity Input Productivity Growth =

19. Measures of Productivity 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 Table 2.4

20. 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

21. Example 3 7040 Units Produced Cost of labor of $1,000 Cost of materials: $520 Cost of overhead: $2000 What is the multifactor productivity?

22. Example 3 Solution MFP = Output Labor + Materials + Overhead MFP = (7040 units) $1000 + $520 + $2000 MFP = 2.0 units per dollar of input

23. 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 Process Yield

26. Taking advantage of productivity- Outsourcing • Higher productivity in another company is a key reason organizations outsource work • Improving productivity may reduce the need for outsourcing

27. CW-Ch2 • Example 2 • Example 3

28. 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 Global Strategy

29. Assignment IOA Covering Ch1-2 Duration: 3rd June 6th June

30. 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. Learning Objectives

31. 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. Learning Objectives