PRODUCTIVITY

COMPET ITVENESS

A N D STRATEGY
LESSON 2
 LEARNING OBJECTIVES:
1. List and briefly discuss the primary ways that business organizations compete
2. List five reasons for the poor competitiveness of some companies
3. Define the strategy and explain why strategy is important for competitiveness.
4. Contrast strategy and tactics
5. Discuss and compare organization strategy and operations strategy, and
explain why it is important to link in two.
6. Describe and give examples of time-based strategies.
7. Define the term productivity and explain why it is important to organizations
and to countries.
8. List some of the reasons for poor productivity and some ways of improving it.
 Three topics:
Competitiveness - relates to the effectiveness of Competitiveness,
an organization in the market place relatively to Strategy, and
other organizations that offer similar products or
Productivity - are
services.
three separate but
Strategy - relates to the plans that determine related topics that
how an organization pursues its goals. are vitally
Productivity - relates to the effective use of
important to
resources and it has a direct impact on business
competitiveness. organizations.
COMPETITIVENESS
 COMPETITIVENESS:

⇨ C o m p a n i e s m u s t b e c o m p e t i t i v e to sell
their g o o d s a n d provide services in the market.

⇨ It is an important factor in determining whether a

company succeeds or fails

⇨ Marketing influences competitiveness in several ways

 COMPETITIVENESS:
OTHER IMPORTANT FACTORS
THREE M A I N FACTORS
⇝ Identifying consumer wants and
needs
⇝Pricing
⇝ Advertising and promotion
Product and service design
Cost
Location Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service and service quality
Managers and workers
 Why Some Organizations Fail?

Organizations fail or perform

poorly for a variety of reasons.
Being aware of such reasons
may help managers avoid making
similar mistake. Some of the
reasons are following:
2. Failing to take
1. Too much emphasis
on short-term financial
advantage of
performance at the strengths and
expense of research opportunities
and development.

5. Too much
3. Failing to
4. Neglecting emphasis in product
recognize and service design
competitive operations
and not enough
threats strategy on improvement
6. Neglecting investments in capital and human resources

7. Failing to establish good internal communications

8. Failing to consider customer wants and needs

 Why Some Organizations Succeed?

In the past success was often put

down to good luck, but as a
society we have largely moved
on from such ideas and
1. A Plan 2. Perseverance
researchers have studied
businesses in detail looking for
the common elements of
success:

3. Understanding 4. Shared belief

that success of and Team
failure is not spirit
5. Motivation
permanent
 6. Clear vision of what success is

7. Maximise resources available

8. Clear understanding of Time, Money and Resources

STRATE GY
 STRATEGY

⇨ PLANS FOR STRATEGY CAN BE

ACHIEVING ⤷ Long term
ORGANIZATIONAL
⤷ Short Term
GOALS
 MISSION AND GOALS:

MISSION MISSION GOALS

The reason for
STATEMENT
Provide detail and
existence of an scope of the
States the purpose
organization. mission.
of an organization.

STRATEGIES TACTICS
The methods and
Plans for achieving
actions taken to
organizational accomplish strategies
goals.
 EXAMPLE OF MISSION STATEMENT:

MICROSOFT
“TO HELP PEOPLE AND BUSINESSES THROUGHOUT THE WORLD TO REALIZE
THEIR FULL POTENTIAL”
NIKE
“TO BRING INSPIRATIONS AND INNOVATION TO EVERY ATHLETE IN THE
WORLD”
WALT DISNEY
“TO BE ONE OF THE WORLD’S LEADING PRODUCERS AND PROVIDERS OF
ENTERTAINMENT AND INFORMATION”
 MISSION GOALS

ORGANIZATIONAL STRATEGIES

FUNCTIONAL GOALS

FINANCE MARKETING OPERATIONS

STRATEGIES STRATEGIES STRATEGIES

TACTICS TACTICS TACTICS

OPERATING OPERATING OPERATING

PROCEDURES PROCEDURES

“PLANNING AND DECISION MAKING ARE HIERARCHICAL IN ORGANIZATIONS”

 STRATEGY EXAMPLE:

MISSION: LIVE A GOOD LIFE

GOAL: SUCCESSFUL CAREER,

Jane is a high school GOOD INCOME
student. She would like to OBTAIN A
STRATEGY: COLLEGE EDUCATION
have a career in business,
have a good job, and earn
TACTICS: THE METHOD HOW TO
enough income to live FINANCE COLLEGE
comfortably. OPERATIONS: REGISTER,BUY BOOKS,
TAKECOURSES,
STUDY, GRADUATE,
GET JOB
 ORGANIZATIONAL STRATEGIES
outsource operations to the third world countries that have low labor
LOW COST
costs.

SCALE BASED use the capital intensive methods to achieve high output volume and
STRATEGIES low unit cost.

focus on narrow product lines or limited services to achieve higher

SPECIALIZATION
quality.

FLEXIBLE
focus on quick response.
OPERATIONS

focus on achieving higher quality than competitors.

HIGH QUALITY

SERVICE focus on various aspects of service (e.g., helpful, courteous, reliable,

etc.).
 STRATEGY AND TACTICS

STRATEGIC FACTORS

1. PRICE 2. QUALITY 3. TIME

4. FLEXIBILITY 5. SERVICE 6. LOCATION

EXAMPLES OF STRATEGIC FACTORS
 GLOBAL STRATEGY

➤ Many company realized that strategic decisions must be made

with respect to globalization as it has increased

➤ 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

 KEYS EXTERNAL FACTORS OF GLOBAL STRATEGY

ECONOMIC The general health, direction of the economy, ination, deation,

CONDITIONS interest rates, tax laws and tariffs.

POLITICAL Favorable or Unfavorable attitudes towards business, political stability

CONDITIONS or instability and wars.
LEGAL Government regulations, trade, restriction, minimum wage law, labor
ENVIRONMENT law and patent.

TECHNOLOGY Product innovations and new design.

COMPETITION Price, Quality, Special Features and the ease of Market Entry.

Size, location, brand loyalties, potential for growth, long-term

MARKETS
stability, and demographics.
 KEYS INTERNAL FACTORS OF GLOBAL STRATEGY

HUMAN The skills abilities of managers and workers, special talent, loyalty,
RESOURCES dedication and experience.
FACILITIES AND
EQUIPMENT Capacities, location, age, cost and replace.
FINANCIAL
Funding, debt burden, cost of capital and cash ow.
RESOURCES

CUSTOMERS Loyalty and understanding of wants and needs.

PRODUCT AND
Quality, design and potential for new products and services.
SERVICES

TECHNOLOGY The ability to integrate new technologies

SUPPLIERS Quality, exibility, reliable and trustworthy in service.

 STRATEGY FORMULATION
❖ To formulate an effective strategy, senior managers must take into account the followings:

● Distinctive competencies

⤷ the special attributes or abilities that give an organization a competitive edge.

● Environmental scanning

⤷ the considering of events and trends that presents threats or opportunities for a
company

● SWOT- links between organizational and operations strategies.

⤷ this is an approach shows strengths and weaknesses have an internal focus and
evaluated by operation people. The threats and opportunities have external focus and
evaluated by marketing people.
 STRATEGY FORMULATION

❖ Order qualifiers
○ Characteristicsthat 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 its
competitors.
 OPERATIONS STRATEGY

OPERATIONS The approach, consistent with organization strategy, that is used to

STRATEGY
guide the operations function.

QUALITY- BASED
Focuses on maintaining or improving the quality of an organization’s
STRATEGIES
products or services.

TIME-BASED
Focuses on reduction of time needed to accomplish tasks.
STRATEGIES
TIME-BASED STRATEGIES
STRATEGIC OM DECISIONS
 EFFICIENCY
❖ Economic Efficiency
- It refers to the ratio of outputs and input. This means that economic
efciency is getting the most output from the least amount of inputs.

❖ Organizational Efficiency
- It is ratio of product or service outputs to land, capital or labor inputs.

❖ Efficiency (%) = (Output/Input) = 100%

- or realized output/expected output
Ex: A coffee shop makes 150 coffees per hour. How efcient is the operation
as labor input 200 coffees per hour?
- Efciency (%) = (Output/Input) = 100%
= (150/200)= 100%
= 75%
PRODUCTIVITY
 PRODUCTIVITY

❖ Productivity
- is an index that measures output (goods and services)
relative to the input (labor, materials, energy, and other
resources)
it used to produce ❖ Productivity ratios
. are used for:
Productivity = Unit Outputs -Planning workforce
Unit Inputs requirements
- Scheduling
Equipment
- Financial Analysis
 PRODUCTIVITY GROWTH
❖ Productivity growth
- is the increase in productivity from one period to the
next relative to the productive in the preceding period.
Thus,
 COMPUTING PRODUCTIVITY
❖ Productivity measures
- can be based on a single input (partial productivity),
on more than one input (multifactor productivity), or
on all inputs (total productivity).
 EXAMPLES:
Example: A machine produced 70
Four workers installed square pieces in two hours.
720 yards of carpeting in 8
hours. However, two pieces were
unusable.
Productivity = Yards of carpet installed
Labor hours worked
Productivity = Usable pieces
= 720 square yards
Production time
4 workers x 8 hours/worker
= 34 pieces/hour
= 22.5 yards/hour
EXAMPLES:

❖ Calculations of multifactor productivity measure

inputs and outputs using a common unit of
measurement, such as cost. For instance, the
measure might use cost of inputs and units of
the output:
 EXAMPLES:
A wrapping-paper company produced 2,000 rolls of paper one day.
Labor cost was $160, material cost was $50, and overhead was
$320. Determine the multifactor productivity.

MFP = Quantity produced

Labor cost + Material cost + Overhead

= 2,000 rolls = 3.77 rolls/dollar input

$160 + $50 + $320
 FACTORS AFFECTING PRODUCTIVITY

CAPITAL TECHNOLOGY QUALITY MANAGEMENT

OTHER FACTORS AFFECTING PRODUCTIVITY

❏ Standardization
❏ Quality
❏ Use of Internet
❏ Computer viruses
❏ Searching for lost or misplaced items
❏ Scrap rates
❏ New workers
❏ Safety
❏ Shortage of IT workers
❏ Layoffs
❏ Labor turnover
❏ Design of the workspace
❏ Incentives plans that reward
productivity
 KEY STEPS IN PRODUCTIVITY

Develop productivity measures

Determine critical (bottleneck) operations
Develop methods for productivity improvements
Establish reasonable goals
Get management support
Measure and publicize improvements
Don’t confuse productivity with efciency
Exercises
1. Billco Windows and Doors is preparing their monthly productivity report. Their monthly
costs are shown below. Calculate the following:
a) labour productivity (output / labour hours)
b) machine productivity (output / machine hours), and
c) the multifactor productivity (output /labour cost + material cost + energy cost) of dollars spent
on labour, materials, and energy.

Sample Problems

Units produced: 1800

Labour hours: 1975
Machine hours: 425
Materials cost: $81000
Energy cost: $21600
Exercises
2. A greeting card company manufactured 3500 cards in one day. Labour
cost was $1200, material cost was $90, and overhead was $450. What is the
multifactor productivity?

3. A company makes seasonal jams and jellies. Yesterday they produced 420
jars of jam with five workers who each worked an 8-hour day. What was the
labour productivity?