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Lecture 2 Competitiveness, Strategy, and Productivity

This document discusses key concepts related to competitiveness, strategy, and productivity. It begins by outlining the importance of quality, productivity, costs, and responsiveness to customers. The main topics covered include competitiveness, strategic planning including mission, goals, strategies and tactics, core competencies, environmental scanning, operations strategy, quality-based strategies, time-based strategies, agile operations, and productivity. Key frameworks like the balanced scorecard are also summarized.

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sanaullahbndg
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88 views

Lecture 2 Competitiveness, Strategy, and Productivity

This document discusses key concepts related to competitiveness, strategy, and productivity. It begins by outlining the importance of quality, productivity, costs, and responsiveness to customers. The main topics covered include competitiveness, strategic planning including mission, goals, strategies and tactics, core competencies, environmental scanning, operations strategy, quality-based strategies, time-based strategies, agile operations, and productivity. Key frameworks like the balanced scorecard are also summarized.

Uploaded by

sanaullahbndg
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Lecture 2

Competitiveness, Strategy, and


Productivity
A Cold Hard Fact
Better quality, higher productivity, lower costs,
and the ability to respond quickly to customer
needs are more important than ever, and...
the bar- is getting higher
Lecture Focus
• Three separate, but related ideas that are
vitally important to business organizations
– Competitiveness
– Strategy
– Productivity
Competitiveness
• Competitiveness:
– How effectively an organization meets the wants
and needs of customers relative to others that
offer similar goods or services
– Organizations compete through some
combination of their marketing and operations
functions
Marketing's Influence
• Identifying consumer wants and/or needs
• Pricing and quality
• Advertising and promotion
Businesses Compete Using Operations
1. Product and service design
2. Cost
3. Location
4. Quality
5. Quick response
6. Flexibility
7. Inventory management
8. Supply chain management
9. Service
10. Managers and workers
Why Some Organizations Fail
1. Neglecting operations strategy
2. Failing to take advantage of strengths and opportunities
and/ or failing to recognize competitive threats
3. Too much emphasis on short-term financial performance
at the expense of R&D
4. Too much emphasis in product and service design and not
enough on process design and improvement
5. Neglecting investments in capital and human resources
6. Failing to establish good internal communications and
cooperation
7. Failing to consider customer wants and needs
Hierarchical Planning
Mission

Goals

Organizational Strategies

Functional Strategies

Tactics
Mission
• Mission — The reason for an organization's
existence
• Mission statement
– States the purpose of the organization
– The mission statement should answer the
question of “What business are we in?”
FedEx Mission Statement
• FedEx Corporation will produce superior financial
returns for its shareowners by providing
high-value-added logistics, transportation, and
related business services through focused operating
companies, Customer requirements will be met in the
highest quality manner appropriate to each market
segment served. FedEx will strive to develop mutually
rewarding relationships with its team members,
partners. and suppliers. Safety will be the first
consideration in all operations. Corporate activities
will be conducted to the highest ethical and
professional standards.
• https-ilabout.van.fedex.cornigur-storyfi
Goals
• The mission statement serves as the basis for
organizational goals
• Goals
– Provide detail and the scope of the mission
• Goals can be viewed as organizational destinations
– Goals serve as the basis for organizational
strategies
Strategies
• Strategy
– A plan for achieving organizational goals
• Serves as a roadmap for reaching the organizational
destinations - Organizations have
• Organizational strategies
– Overall strategies that relate to the entire organization
– Support the achievement of organizational goals and
mission
• Functional level strategies
• Strategies that relate to each of the functional areas
and that support achievement of the organizational
strategy
Tactics and Operations
• Tactics
– The methods and actions taken to accomplish
strategies
– The “how to” part of the process
• Operations
– The actual “doing” part of the process
Core Competencies
• Core Competencies
– The special attributes or abilities that give an
organization a competitive edge
• To be effective core competencies and
strategies need to be aligned
Sample Operations Strategies
Organizational Operations Examples of
Strategy Strategy Companies or Services
US First Class Postage
Low Price Low Cost
Walmart
Short processing times McDonald's restaurants
Responsiveness
On-time delivery FedEx

High performance design


High Quality Sony TV
and/or high quality processing

3M
Newness Innovation
Apple

Variety Burger King (“Have it your way”)


Volume
McDonald’s (“Buses Welcome”)

Superior customer
Service IBM
Service
Supermarkets
Location Convenience
Mall Stores
Strategy Formulation
• Effective strategy formulation requires taking
into account:
– Core competencies
– Environmental scanning
• SWOT
• Successful strategy formulation also requires
taking into account:
– Order qualifiers
– Order winners
Strategy Formulation
• Order qualifiers
– Characteristics that customers perceive as
minimum standards of acceptability for a product
or service to be considered as a potential for
purchase
• Order winners
– Characteristics of an organization's goods or
services that cause it to be perceived as better
than the competition
Environmental Scanning
• Environmental Scanning is necessary to
identify
– Internal Factors
• Strengths and Weaknesses
– External Factors
• Opportunities and Threats
Key External Factors
1. Economic conditions
2. Political conditions
3. Legal environment
4. Technology
5. Competition
6. Markets
Key Internal Factors
1. Human Resources
2. Facilities and equipment
3. Financial resources
4. Customers
5. Products and services
6. Technology
7. Suppliers
8. Other
Operations Strategy
• Operations strategy
– The approach consistent with organization
strategy that is used to guide the operations
function
Strategic OM Decision Areas
Decision Area What the Decisions Affects

Product and service design Costs, quality, liability and environmental issues

Capacity Cost, structure, flexibility

Process selection and layout Costs, flexibility, skill level needed, capacity

Work design Quality of work life, employee safety. productivity

Location Cost, 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 Cost, new products, services, operating systems


Quality-Based Strategies
• Quality-based strategy
– Strategy that focuses on quality in all phases of
an organization
• Pursuit of such a strategy is rooted in a number of
factors:
– Trying to overcome a poor quality reputation
– Desire to maintain a quality image
– A desire to catch up with the competition
– A part of a cost reduction strategy
Time-Based Strategies
• Time-based strategies
– Strategies that focus on the reduction of time
needed to accomplish tasks
• It is believed that by reducing time, costs are lower,
quality is higher, productivity is higher, time-to-market
is faster. and customer service is improved
Time-Based Strategies
• Areas where organizations have achieved
time reductions:
– Planning time
– Product/service design time
– Processing time
– Changeover time
– Delivery time
– Response time for complaints
Agile Operations
• Agile operations
– A strategic approach for competitive advantage
that emphasizes the use of flexibility to adapt
and prosper in an environment of change
• Involves the blending of several core competencies:
– Cost
– Quality
– Reliability
– Flexibility
The Balanced Scorecard Approach
• A top-down management system that organizations can use to clarify
their vision and strategy and transform them into action
• A strategic management performance metric used to identify and
improve various internal business functions and their resulting external
outcomes
• Used to measure and provide feedback to organizations
– Develop objectives
– Develop metrics and targets for each objective
– Develop initiatives to achieve objectives
– Identify links among the various perspectives
• Finance
• Customer
• Internal business processes
• Learning and growth
– Monitor results
The Balanced Scorecard
Productivity
• Productivity
– A measure of the effective use of resources,
usually expressed as the ratio of output to input
• Productivity measures are useful for
– Tracking an operating unit's performance over
time
– Judging the performance of an entire industry or
country
Why Productivity Matters
• High productivity is linked to higher standards of
living
– As an economy replaces manufacturing jobs with lower
productivity service jobs, it is more difficult to maintain
high standards of living
• Higher productivity relative to the competition leads
to competitive advantage in the marketplace
– Pricing and profit effects
• For an industry, high relative productivity makes it
less likely it will be supplemented by foreign industry
Productivity Measures
• Productivity = Output/Input
• Partial Measures: Output/Single-Input
– Output/ Labour
– Output/Capital
• Multifactor Measures: Output/ Multiple-Inputs
– Output/ Labour+Machine
– Output/ Labour+Capital+Energy
• Total Measure = Goods or services produced/
All inputs used to produce them
Productivity Calculation
• Example:
– Units produced: 5000
– Standard price: $30/unit
– Labor input: 500 hours
– Cost of labor:$25/hour
– Cost of materials: $5000
– Cost of overhead: 2x labor cost
• What is the multifactor productivity?
Solution
• Multifactor Productivity = Output/
Labor + Material + Overhead
= (5000 units x $30/ unit)/(500 hours x $25/
hours+ $5000 + (2(500 hours x $25/hour))
= $150000/$42500
= 35294
• What is the implication of an untdess
measure of productivity
Productivity Growth
• Productivity Growth =
Current productivity-Previous productivity x100%
Previous Productivity
• Example:
– Labor productivity on the ABC assembly line was 25 units
per hour in 2014. In 2015, labor productivity was 23 units
per hour.
– What was the productivity growth from 2014 to 2015?
• Solution:
– Productivity Growth =
(23-25)x 100%/ 25= -8%
Service Sector Productivity
• Service sector productivity is difficult to measure and
manage because
– It involves intellectual activities
– It has a high degree of variability
• A useful measure related to productivity is process yield
– Where products are involved
• ratio of output of good product to the quantity of raw material input.
– Where services are involved, process yield measurement is
often dependent on the particular process:
• ratio of cars rented to cars available for a given day
• ratio of student acceptances to the total number of students approved
for admission
Factors Affecting Productivity
Methods

Capital Quality

Technology Management
Improving Productivity
1. Develop productivity measures for all
operations
2. Determine critical (bottleneck) operations
3. Develop methods for productivity improvement
4. Establish reasonable goals
5. Make it clear that management supports and
encourages productivity improvement
6. Measure and publicize improvements
Don't confuse productivity with
efficiency
• Efficiency is a narrower concept that pertains to
getting the most out of a fixed set of resources
• Productivity is a broader concept that pertains to
effective use of overall resources
• Example:
– Efficiency perspective on moving a lawn given a hand
mower would focus on the best way to use the hand
mower
– Productivity perspective would include the possibility
of using a power mover
Summary
• Competitiveness
• Strategy
• Productivity

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