 A measure of efficiency.  The amount of output produced compared to the amount of input required in production.

 Organisations that improve productivity will become more competitive.  Competitive Advantage occurs when an organisation is able to produce goods or services better than its competitors.  Competitive Advantage may be obtained by providing a product or service faster, better or cheaper than rival organisations.  Organisations essentially compete in two ways:  Cost – lower prices  Differentiation – value in terms of service (flexibility, speed, quality) or added feature compared to competitors.

 Competing on cost means offering a good or service at a cheaper cost, this means that LSOs need to reduce their operating costs.  This can be achieved by:  Achieve economies of scale  Bulk buy inputs  Eliminate waste  Produce standardised products  Produce high volume output  Use automated production systems

 Competing on quality means that LSOs aim to produce the best product or service available to the marketplace. For example, Apple Ipad.  Organisations that compete on quality:  View quality as a competitive weapon  Publicly communicate an organisation-wide commitment to quality.  Immediately respond to customer needs.  Reduce defect rates in the production process.  Strictly comply with design specifications.  ‘Tailor’ products to customers.  Use technology to produce large numbers of customised products to varying specifications.  Market themselves as a quality business.

 Some LSOs compete on the ability to deliver their goods and services to customers more quickly than others.  Organisations that compete on speed of delivery:  Promote a sense of urgency within the organisation.  Reduce the problems associated with bureaucracy.  Quickly identify and act on trends.  Respond quickly to changes in demand.  Often have flatter management structures.  Maintain a corporate culture expecting ongoing and radical change.