Chapter 2

Competitiveness
Strategy and Productivity

Competitiveness

Effectiveness in meeting customer needs vs. the rest

Commonly confused terminology: Effectiveness vs. efficiency

(Distinctive) competencies
Price
Time
Quality
Flexibility, ability to respond to changes
Differentiation, special product features
Service
2

Strategy

Mission

Mission Statement

A plan for achieving organizational goals

Tactics

A clear statement of purpose

Strategy

The reason for existence of an organization

The actions taken to accomplish strategies

Operational decisions

Day to day decisions to support tactics

3

Example for Strategy

Rita is a high school student. She would like to have a career
in business, have a good job, and earn enough income to
live comfortably

Mission:
Goal:
Strategy:
Tactics:
Operations:

Live a good life

Successful career, good income
Obtain a college education
Select a college and a major
Register, buy books, take
courses, study, graduate, get job
4

Strategy Formulation

Order qualifier = Acceptable product features

A car with 40 miles per gallon

Order winner = Better-than-the-rest product features

A car with 60 miles per gallon: Toyota Prius dual powered car

Environmental Scanning

The consideration of internal and external events and trends that present
threats or opportunities for a company.

Figure out distinctive competencies

Reading Financial times, Benchmarking, Stealing Employees

Price, quality, service

Emphasize one or more of the distinctive competencies with

the strategy
5

Strategies

Quality-based strategies

Focuses on quality in all phases of an organization

Quality at the source
Sony TV
Toyota cars: Nummi plant rented from general motors.

Time-based strategies

Focuses on reduction of time needed to accomplish tasks

Technology start ups compete on turning ideas into products

Strategies

Product development strategy relates to Set of products/services and technologies

for future operations
e.g. Be the technology leader
IBM workstations

e.g. Offer many products

Dell computers

Marketing and sales strategy relates to positioning, pricing and promotion of

products/services
e.g. Never offer more than 40% discount
e.g. EDLP = every day low price
At Wal-Mart

e.g. Demand smoothing via coupons

BestBuy

Supply chain management strategy relates to procurement, transportation, storage

and delivery
e.g. Never use more than 1 supplier for every input
e.g. Never expedite orders just because they are late

Big Retailer Strategies

Wal-Mart: Efficiency
Target: More quality and service
Carrefour: International, ambiance

K-Mart: Confused.

Squeezed between Target and Wal-Mart

Reliance on coupon sales
Do coupons stabilize or destabilize a Supply chain?

K-Mart and Sears merged in November 2004

K-Mart gets cash
Sears gets presence outside malls
8

Productivity

Partial measures : output / single input

Output/energy , output/machine hour, output/labor

Multi factor measures : output / multi input

Multi factor : output/(energy + machine cost), output/
(labor + capital)

Total measure : output / all inputs

In general, Productivity = output / input

Example for productivity

10,000 items are produced

Price $10/item
500 labor hours to accomplish the job
Labor rate : $9/hr

Cost of raw material is $5,000

Cost of overhead is $25,000

What is the labor productivity?

10

Example for productivity cont.

Output : 10,000 x $10/item = $100,000

Input : 500 hours x $9 /hr = $4500
Labor productivity=100,000 / 4500 = 22.22

MFP (multi factor productivity)

= output / labor + materials
100,000 / {4,500 + 25,000 + 5,000}
MFP = 2.90

What are the units of these productivity numbers?

11

Factors Affecting Productivity Positively

High Technology
Dual powered engine helps Toyota Prius

Effective Management
High Quality (products)
Less scrap

In Statistical Process Control, an x-bar chart is best

Extensive Training
suited for this type of data:
University of Texas at Dallas

Low employee tenure/layoffs

High Standardization
Efficient Workplace Design-Ergonomics
Effective Goals and Incentives
12

Improving Productivity

Develop productivity measures

First measure, then manipulate

Develop methods for productivity improvements

Venues for ideas to prosper

Establish reasonable goals

High challenges vs. trivialities

Publicize improvements
Incentives, positive feedback, awards

Get management support

Productivity is more general than efficiency
Set the rules of the game to win it

Determine the critical operations = bottleneck

13

Bottleneck Operations
Operation
Operation
Operation
Operation
Operation
Operation

Bottleneck
Bottleneck
Operation
Operation
Low capacity

Operation
Operation
14

Summary

Competencies
Mission/Strategy/Tactics
Productivity

15