Lesson 2: Competitiveness, Strategy and Productivity

Lesson Objectives:

At the end of the lessons, the students are expected to:

1. Explain the influence of operations on competitiveness

2. Identify the types of strategies and give examples of strategies in an
organization
3. Differentiate the internal and external factors used in environmental
scanning
4. Explain the importance of operations strategy and productivity in an
organization.

Competitiveness of an organization determines how effectively they meet

the wants and needs of the customers compared with other companies offering
similar products and services. Competitiveness is a relevant factor to evaluate if
a company is successful, average or failing.

Lesson 2.1 Influence of Operation on Competitiveness

The operation functions in the organization affect their competitiveness

which will bring about success and profitability. Operations affect the
competitiveness of an organization through the following:

1. Product and service design. The unique characteristics and features of a

product service is an important factor in the consumer buying behavior. Other
key factors include innovation and timely offering of the new products and
services.

2. Cost of an organization’s output is a key variable that affects pricing decisions

and profits. The company must see to it that they are minimizing costs so it will
make the price of their product competitive.
3. Location can be important in terms of cost and convenience for customers.
The location of the business or the store is an important competitive factor of the
business since most consumers are looking for accessibility and convenience in
going to the store.

4. Quality refers to materials, workmanship, design and service. The products

offered by different companies differ in the raw materials used, craftmanship,
creativity, design and after sale services.

5. Quick response can be a competitive advantage. One way is quickly bringing

new or improved products or services to the market. Any company which can
respond quickly to the needs and wants of the consumers are considered
competitive advantage. Innovations to improve the products like bringing new
designs, colors and styles are what the consumers are looking for.

6. Flexibility is the ability to respond to change. High flexibility can be a

competitive advantage in a changeable environment. Organizations which are
more flexible and can adjust to the needs of the consumers are considered to be
competitive advantage. Consumers always have other wants to cope with the
changing times so the companies have to be flexible and offer innovations in
their products and services to be more competitive.

7. Inventory management can be a competitive advantage by effectively

matching supplies of goods with demand. Inventory management is important
since customers demand should match with the number of supplies which the
company can offer, therefore their products should be available for the
customers.

8. Supply Chain management involves coordinating internal and external

operations to achieve timely and cost-effective delivery of goods throughout the
system. The coordination of all the middlemen who serves as link from
production to consumption should be properly managed in order to have timely
and cost effective in providing goods to the ultimate consumers.
9. Service involves after-sale activities customers perceive as value-adding such
as delivery, setup, warranty work and technical support. The after-sale services
which the company provides serve as one of their competitive advantages
compared with other companies.

10. Managers and workers are the people at the heart and soul of an
organization and if they are competent and motivated, they can provide a distinct
competitive edge by their skills and the ideas they create. Motivating the
manager and workers are the reasons why the organizations maximize their
profit and become sustainable. They must see to it that managers and workers
are motivated and engaged in performing their task so they can work effectively
to accomplish the objectives of an organization.
 Exercise 2.1

Direction: Answer the following question.

1. How does the following affect the competitiveness of an organization. Give an

example for each.

1.1. Location

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1.2 Quality
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1.3 Service
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Lesson 2.2 Types of Strategies and Examples of Strategies in an Organization

Each organization has different strategies and tactics used in their operation.
Different strategies are evaluated by companies to check which among them will
be the best or appropriate strategies to use in their operation.

Strategies are plans for achieving organizational goals. To be effective,

strategies must be designed to support the organization’s mission and goals.
Organizational strategies are the organization’s over-all strategies. Functional
strategies relate to each of the functional areas of the organization. The
functional strategies should support the overall strategies of the organization.
Tactics are the methods and actions taken to accomplish strategies.

EXAMPLES OF DIFFERENT STRATEGIES USED IN ORGANIZATIONS

1. Low-cost. Outsource operations to third-world countries that have cheaper

cost of labor
2. Scale-based strategies. Use capital-intensive methods to achieve maximum
output at lowest cost per unit.
3. Specialization. Focus on narrow product lines or limited service to achieve
higher quality.
4. Flexible operations. Focus on quick response and customization.
5. High quality. Focus on achieving higher quality than competitors.
6. Service. Focus on various aspects of service (eg. Helpfulness,
courteousness, reliability).
7. Sustainability. Focus on environmental-friendly and energy - efficient
operations.

Strategy Formulation is a process which takes into account the process of how
the organization’s compete and how an organization assess their own strengths
and weaknesses so they can take advantage and work on their distinctive
competencies.
Strategy formulation is almost always critical to the success of a strategy.

To formulate an effective strategy, senior managers must take into account the
distinctive competencies of the organizations and they must scan the
environment.

Distinctive Competencies are those special attributes or abilities possessed by

an organization that gives them a competitive edge.

Environmental Scanning is the process of being aware of the trends in

businesses and knowing the threats and opportunities for the company.
Generally these include competitors’ activities, changing consumer needs, legal,
economic, political and environmental issues, the potential for new markets etc.

Another key factor to consider when developing strategies is technological

change, which can present real opportunities and threats to the organization.
Technological changes occur in products (high definition TV, improved computer
chips, improved mobile phones, improved designs for earthquake-proof
structures); in services (faster order processing, faster delivery), and in
processes (robotics, automation, computer-assisted processing, point-of-sale
scanners and flexible manufacturing systems).

External Factors used in Environmental Scanning

1. Economic conditions. These include the general health and direction of the
economy, inflation rate, interest rate, tax laws and tariffs.

2. Political conditions. These include favorable or unfavorable attitudes

toward business, political stability or instability and wars.

3. Legal environment. This includes antitrust laws, government regulations,

trade restrictions, minimum wage laws, product liability laws and recent court
experience, labor laws and patents.

4. Technology. This includes the rate at which product innovations are

occurring, current and future process technology and design technology.
5. Competition. This includes the number and strength of competitors, the basis
of competition (price, quality, special features) and the ease of market entry.

6. Markets. This includes size, location, brand loyalties, ease of entry, potential
for growth, long-term stability and demographics.

Internal Factors in Environmental Scanning

1. Human resources. These include the skills and abilities of managers and
workers; special talents (creativity, designing, problem solving); loyalty to the
organization, expertise; dedication and experience.

2. Facilities and equipment. Capacities, location, age, and cost to maintain or

replace can have a significant impact on operations.

3. Financial resources. Cash flows, access to additional funding, debt burden

and cost capital are important considerations.

4. Customers. Loyalty, existing relationships and understanding of wants and

needs are important.

5. Products and services. These include existing products and services and
potential for new products and services.

6. Technology. This includes existing technology, the ability to integrate new

technology and the probable impact of technology on current and future
operations.

7. Suppliers. Supplier relationships, dependability of suppliers, quality, flexibility

and service are typical considerations.
 Exercise 2.2

Direction. Based on the concepts learned on strategies, answer the following

questions and use examples.

1. Explain how the following strategies are used by most companies.

1.1 Low cost

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1.2 Specialization

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1.3 Flexible Operation

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Lesson 2.3 Operations Strategy

Quality strategy is an important part of the organization’s strategy which

relates to the quality of the products and services they are offering. It is a part of
the market and productivity strategies and plays a very significant factor in the
profitability of an organization. The company must consider product innovations
in formulating quality strategy and the needs of the market and the abilities of the
service providers. Quality is the main concern of the company to stand out and
to beat the competition (Quality strategy, 2020)

Several factors are considered in the development of appropriate quality

strategy. These are the following:

 External environment has to be considered in developing the

appropriate strategy to be used in the company. External factors
include the political factors, economic factors, social factors,
technological, environment and legal factors. Other factors which
have to be considered in the choice of appropriate strategies are
the changing needs of customers, instability of the market, stiff
competition, lack of resources, integration and globalization.

 Internal environment includes the factors within the organization

which have to be considered like the skills and capabilities of the
people, the competencies of the marketing and management staff,
research and development staff and management information
system staff as well as technology used by the company at present.

Principles of Quality Strategy

The following principles are guides in formulating the quality strategies

1. Quality strategy must be complete and covers wide range.

2. The top management has to be aware of the existence of the quality
strategy and they have to support its implementation.
 3. Quality is essential part of the company’s process and it is considered the
source of all other values of the company.
4. New quality strategy has to be innovative and should adapt to the
organization’s culture.
5. The implementation of strategy needs the support of all the staff and there
should be full involvement in order to implement the new changes in
strategy.
6. The implementation of Total Quality Management is a must in adapting a
quality strategy. The leadership by quality as the main purpose is their
guiding principle where all the employees have to support and participate.
7. The new working methods which will use the talent and vigor is essential
to all the employees.
8. The implementation of quality strategy will reduce cost and increase
productivity.
9. Understanding the quality strategy among employees will mean the
application of the company’s mission to attain their purpose (Quality
strategy, 2020)

Time-based strategy is the strategy that focuses on reduction of time needed to

accomplish tasks. Examples of time reduction are the following:

1. Planning time. The time needed to react to a competitive threat, to develop

strategies and select tactics, to approve proposed changes to facilities, to
adopt new technologies etc.
2. Product/service design time. The time needed to develop and market new or
redesign products or services.
3. Processing time. The time needed to produce goods or provide services.
This can involve scheduling, repairing equipment, methods used, inventories,
quality, training etc.
4. Changeover time. The time needed to change from producing one type or
product or service to another. This may involve new equipment settings and
attachments, different methods, equipment, schedules or materials.
5. Delivery time. The time needed to fill orders.
6. Response time for complaints. These might be customer complaints about
quality, timing of deliveries and incorrect shipments. These might also be
complaints from employees about working conditions (eg. Safety, lighting,
heat or cold) equipment problems or quality problems.
 Exercise 2.3

Direction: Answer the following based on the concepts learned.

1. Cite the differences between product based strategy and time based strategy
by giving examples or situations.

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Lesson 2.4 Productivity

No matter how small or big the business is, it is essential to measure and
improve its productivity to enhance its gross profits and be competitive.
Continuous improvement in all the areas of business involves evaluating the
company’s current business practices to make some adjustments to its over all
management practices and systems.

Productivity is an index that measures output (goods and services) relative to

the input (labor, materials, energy and other resources) used to produce them.

Productivity = Output/Input

Productivity refers to the rate of output per unit of labor, capital or equipment
machines (input). We can measure it in different ways. We can measure the
productivity of a factory according to how long it takes to produce a specific good.
In the services sector, on the other hand, where units of goods do not exist, it is
harder to measure. Some service companies base their measurement on how
much revenue each worker generates. They then divide that amount by their
salary (Stevenson, 2014).
In a factory, you can measure it by dividing the total output by the number of
workers. Imagine a table factory that employs 200 people producing 4000 tables
per day. The productivity of each employee is:

4000 (tables) ÷ 200 (workers) = 20 tables per worker per day

Productivity in the manufacturing sector is easy to measure, it is the ratio of

output to input and therefore it is considered a measure of efficiency.

EIGHT STEPS TO IMPROVE PRODUCTIVITY

1. Examine Your Production Workflow

The production current workflow has to be examined across the

organization to continuously monitor the company’s activities and projects. This
includes monitoring the workforce, processes, technology, communication and
other management system throughout the organization. This strategy will
address some issues and challenges and to make corrections and adjustments.

2. Keep Informed of the Shop Processes

This process involved identifying the problems in the workflow so that

changes and improvements can be made in the production process. This
process may include adding more resources to different areas in the production
department, applying for ISO certification to maintain quality in their systems,
continuously evaluate the performance of the staff and continuously provide
training for them.

3. Invest in Employee Training and Continuous Education

Technology used in manufacturing is consistently changing and there are

always new techniques, machines and equipment needed to improve the
productivity of the employees. In order for the employees to become more
efficient, they have to attend to regular trainings for them to be updated with the
latest technology in production and to upgrade their skills.

4. Have Genuine Expectations

To enhance the production worker’s efficiency, it is important that

expectations have to be clearly cited, understood and realistic to contribute to the
worker’s efficiency and productivity. Pressures from customers, expectations and
deadlines which are stressful and not met can contribute to unrealistic goals.
Workers become dissatisfied when their safety are compromised.

5. Purchase of Smart Machine, Equipment and Tools

Employees in the production sites can be productive if their machines and

equipment are in good condition and highly technical. These equipment and
machines are expensive and requires training on the part of workers who will
operate it, however, despite its cost it will have a positive long-run effect because
of its utility value. Organizations often see that upgrading their machines, tools
and equipment in the production site will help the company sustain its
competitiveness in the market.

6. Invest in Maintenance

The new equipment, machines and tools can enhance the productivity,
however, proper maintenance is needed to ensure that they will be working and
will be used for a long period of time. It is relevant that employees are trained on
the proper use of those equipment, tools and machines and how to trouble shoot
in case there will be error or problems in using it. The workers have to be
familiarized also with the manual and the process of using those equipment.

7. Be Organized

Organizing the production plant is a must in the manufacturing business in

order not to waste time and money. To increase productivity, everything in the
plant has to be organized. There is always a place for everything and everyone
else in the production plant.

8. Collaborate

The production workflow will enhance productivity if there is a culture of

teamwork in the company. When all the workers are united to achieve a common
purpose and work as a team, productivity may increase because less time, effort
and money will be used by the company to accomplish the desired production
output. Each worker has to feel that he is an important part of the organization
and he is an asset to complete the task. This feeling will motivate them to work
more and be productive. For continuous improvement and productivity to take
place, the process, technology and people has to be taken cared of by the
management (Ltd., 2020)

PRODUCTIVITY in the SERVICE SECTOR

Service productivity is more difficult than manufacturing productivity. In

many situations, it is more difficult to measure and thus to manage, because it
involves logical activities and a high degree of variability. Medical diagnosis,
surgery, consulting, legal services, customer services and computer repair work
are examples. This makes productivity improvements more difficult to realize.

Factors that affect productivity in the organizations include: Fax machines,

automation, copiers, calculators, Internet, computers, Voice mail, mobile phones,
Email, computerized billing, software and others. Other factors which influence
productivity are

standardizing processes and procedures, quality differences, use of internet,

computer viruses, searching for lost or misplaced items wastes time, scrap rates,
new workers, safety, shortage of information technology workers and other
technical workers, layoffs, labor turnover, design of the workspace and incentive
plans (Stevenson, 2014).
 Exercise 2.4

Direction: Read and answer the question based on the concepts learned in the
lesson.

1. Explain some ways on how to improve productivity in the manufacturing

sectors. Give examples or situations.

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Summary

 The operation functions in the organization affect their

competitiveness which will bring about success and profitability.

 Each organization has different strategies and tactics used in their

operation. Different strategies are evaluated by companies to check
which among them will be the best or appropriate strategies to use in
their operation.

 Quality strategy is a important part of the strategy of an organization

which relates to the quality of the products and services they are
offering. It is a part of the market and productivity strategies and plays
a very significant factor in the profitability of an organization.

 No matter how small or big the business is, it is essential to measure

and improve its productivity to enhance its gross profits and be
competitive. Continuous improvement in all the areas of business
involves evaluating the company’s current business practices to make
some adjustments to its over all management practices and systems.

Reflect on how higher productivity can lead to lower unit

Learning
Activity costs, improved competitiveness, higher profits, higher
wages and economic growth. Give specific examples or
situations to substantiate the discussion.