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Chapter 2 Competitiveness Strategy Productivity

Chapter 2 Competitiveness Strategy Productivity. Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services. Businesses Compete In…. Marketing Consumer wants & needs Pricing Advertising & promotion.

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Chapter 2 Competitiveness Strategy Productivity

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  1. Chapter 2CompetitivenessStrategyProductivity Saba Bahouth – UCO

  2. Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services. Saba Bahouth – UCO

  3. Businesses Compete In… • Marketing • Consumer wants & needs • Pricing • Advertising & promotion Operations • Product and service design • Cost • Location • Quality • Quick response • Flexibility • Inventory management • Supply chain management • Managers and workers Saba Bahouth – UCO

  4. Why Some Organizations Fail • Emphasis on short-term financial performance • Neglecting strengths and opportunities • Neglecting operations strategy • Failing to recognize competitive threats • Neglecting process improvement • Neglecting investments in capital and human resources • Lack of good internal communications • Neglecting customer wants and needs Saba Bahouth – UCO

  5. Saba Bahouth – UCO

  6. Strategy Saba Bahouth – UCO

  7. Mission Strategy Tactics Mission/Strategy/Tactics Mission:The reason for existence for an organization Mission Statement:States the purpose of an organization Goals:Provide detail and scope of mission Strategy:Plans for achieving organizational goals Tactics:The methods and actions taken to accomplish strategies Saba Bahouth – UCO

  8. Planning and Decision Making • 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 a job Mission Goals OrganizationalStrategies Functional Goals Finance Strategies MarketingStrategies OperationsStrategies Tactics Tactics Tactics Operatingprocedures Operatingprocedures Operatingprocedures Saba Bahouth – UCO

  9. A strong competitive advantage is difficult to copy, often because of a firm’s culture, habits, or sunk costs. Strategy Analysis • Low-cost strategy firms: • Honda Motor Co. • Marriott's Fairfield Inns • Wal-Mart; Sam's Club • Can reshape industry • Southwest Airlines • McDonald’s • Warning: • Do not lower quality. • Wal-Mart vs. Target Businesses with quality goods usually have large market shares I-Pod and Samsung Quality is positively related to a higher return on investment Toyota and RR Profitability: Short term decrease; Long term increase – Quality is free (Philip Crosby) High quality producers can usually charge premiumprices Rolex and Mont Blanc Distinctive Competencies The special attributes or abilities that give an organization a competitive edge. Strategy Factors • Price • Quality • Time • Flexibility • Service • Location • Two types of time performance measures: • Speed of doing something (Fast delivery) • Reliability of doing something (On-time delivery) • Processing time: the time it takes to process/perform a task. • Queue time: the time spent waiting. • Cycle time: time from beginning of work to finish • ORtime between two units at output. • Lead time: time between release of an order and shipment. • Purchasing lead time: time required to obtain purchased item. Saba Bahouth – UCO

  10. Strategy Formulation • Distinctive competencies • Environmental scanning • SWOT • 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 Saba Bahouth – UCO

  11. Deciding Factors in Strategy Decisions • External Factors • Economic conditions • Political conditions • Legal environment • Technology • Competition • Markets Internal Factors • Human Resources • Facilities and equipment • Financial resources • Customers • Products and services • Technology • Suppliers Saba Bahouth – UCO

  12. Productivity Saba Bahouth – UCO

  13. Productivity • Productivity: A measure of the effective use of resources, usually expressed as the ratio of output to input • Productivity = Output / Input • Efficiency • the degree to which a process generates outputs with the minimal consumption of inputs • or • the degree to which a processgenerates a maximum amount of outputs for a given amount of inputs. • Effectiveness is doing the right things efficiently. Saba Bahouth – UCO

  14. Saba Bahouth – UCO

  15. Productivity • Partial measures: output/(single input) • Multi-factor measures: output/(multiple inputs) • Total measure: output/(total inputs) Partial Output OutputOutputOutputmeasures 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 Saba Bahouth – UCO

  16. Units of output per labor hour Units of output per shift Value-added per labor hour Labor Productivity Machine Productivity Units of output per 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 Saba Bahouth – UCO

  17. Productivity Growth Percentage Increase in Productivity Productivity Growth Saba Bahouth – UCO

  18. Other Factors Affecting Productivity • Standardization • Quality / Scrap rates / Rework • Use of Internet / Computer viruses • Searching for lost or misplaced items • Layoffs / New workers / Labor turnover • Safety • Shortage of IT workers • Design of the workspace • Incentive plans that reward quality and productivity Saba Bahouth – UCO

  19. Outsourcing Higher productivity in another company is a key reason organizations outsource work. Improving productivity may reduce the need for outsourcing. Same Company Same product: Mufflers Shanghai, China Versus Litchfield, Michigan Fortune, Sept 18, 2006 Saba Bahouth – UCO

  20. Simple Exercise 4 employees produced 1600 cameras Productivity = 1600/4 = 400 Cameras per employee 4 employees produced 1600 cameras in two days 4 employees produced 1600 cameras 3 worked 2 days, 1 worked 1.5 days, all 4 produced same number of cameras (ie. 400) Saba Bahouth – UCO

  21. Simple Exercise (Cont’d) 4 employees produced 1600 cameras in two days The company works 8 hours a day, 5 days a week, 52 weeks a year Workers get paid $14 an hour, and salary overheads are 200% Equipment yearly depreciation cost is $312,000 Material cost is $18 per camera This company charges dealers $30 per camera What is the Productivity? Saba Bahouth – UCO

  22. Thoughts about Productivity The 70s and the 80s were bad In the 70s and 80s: Manufacturing Productivity Growth:~4% per year Services Productivity Growth: ~0% per year Combined Productivity Growth: ~1% per year Now it is much better Saba Bahouth – UCO

  23. Negative Impact on Productivity • Workers and employees attitude • Less saving… more spending/consuming • More government regulations • Legal/lawyers cost • Increased demand for services • Emphasis on short term performance Saba Bahouth – UCO

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