Chapter 2

Competitiveness, Strategy, and Productivity

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

Chapter 2: Learning Objectives

You should be able to:
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 Discuss and compare organization strategy and operations strategy, and explain why it is important to link the two

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Chapter 2: Learning Objectives (contd.)

You should be able to:
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

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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
What do customers want? How can these customer needs best be satisfied?

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Hierarchical Planning
Mission Goals Organizational Strategies Functional Strategies Tactics
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Mission, Goals, and Strategy

Mission
The reason for an organizations existence

Goals
Provide detail and the scope of the mission Goals can be viewed as organizational destinations

Strategy
A plan for achieving organizational goals Serves as a roadmap for reaching the organizational destinations

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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

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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

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Operations Strategy
Operations strategy
The approach, consistent with organization strategy, that is used to guide the operations function.
Decision Area Product and service design Capacity Process selection and layout Work design Location Quality Inventory Maintenance Scheduling Supply chains Projects What the Decisions Affect Costs, quality, liability, and environmental issues Cost, structure, flexibility Costs, flexibility, skill level needed, capacity Quality of work life, employee safety, productivity Costs, visibility Ability to meet or exceed customer expectations Costs, shortages Costs, equipment reliability, productivity Flexibility, efficiency Costs, quality, agility, shortages, vendor relations Costs, new products, services, or operating systems
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Time- and Quality-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

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 part of a cost reduction strategy

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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

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The Balanced Scorecard Approach

A top-down management system that organizations can use to clarify their vision and strategy and transform them into action
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

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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 units performance over time Judging the performance of an entire industry or country

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Productivity Measures
Productivity= Output Input Output ; Single Input Ouput ; Labor Output Capital Ouput ; Labor +Machine Output Labor +Capital +Energy

Partial Measures

Multifactor Measures

Output ; Multiple Inputs

Goods or services produced Total Measure All inputs used to produce them

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Improving Productivity
1. Develop productivity measures for all operations 2. Determine critical (bottleneck) operations 3. Develop methods for productivity improvements 4. Establish reasonable goals 5. Make it clear that management supports and encourages productivity improvement 6. Measure and publicize improvements Dont confuse productivity with efficiency

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