Competitiveness, Strategy, and Productivity Chapter 2

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-2 How effectively an organization meets the needs of customers relative to others that offer similar goods or services Competitiveness

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-3 Competitiveness Price Quality Product/Service differentiation Flexibility Time Service Managers and workers

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-4 Strategy Mission –The reason for existence for an organization Mission Statement –A clear statement of purpose Strategy –A plan for achieving organizational goals –Long term Tactics –The actions taken to accomplish strategies –More specific and shorter term

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-5 How does mission, strategies and tactics relate to decision making and distinctive competencies? StrategyTacticsMission Mission/Strategy/Tactics

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-6 Strategy Example 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 Live a good life Goal Successful career, good income Strategy Obtain a college education Tactics Select a college and a major Operations Register, buy books, take courses, study, graduate, get job

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-7 Mission Goals Organizational strategy Functional strategies FinanceMarketingOperations Tactics Finance operations Marketing operations Operations operations Figure 2-3 Planning and Decision Making Hierarchy

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-8 Strategy Formulation Order Qualifiers –minimum standards to be in the market Order Winners –characteristic that causes the customer to pick your product/service over the competition Distinctive Competencies –special attributes or abilities that give an organization a competitive edge Environmental Scanning –considering events and trends that present threats or opportunities for a company

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-9 Key External Factors Economic conditions Political conditions Legal environment Technology Competition Markets

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-10 Key Internal Factors Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-11 Examples of Strategies Traditional Strategies –Cost minimization –Product differentiation New Strategies –Quality-based strategies Focuses on quality in all phases of an organization Quality at the source –Time-based strategies Focuses on reduction of time needed to accomplish tasks

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-12 Examples of Distinctive Competencies Banks, ATMsConvenience Location Disneyland Nordstroms Superior customer service Service Burger King Supermarkets Variety Volume Flexibility Express Mail One-hour photo Rapid delivery On-time delivery Time Sony TV Lexus, Cadillac Pepsi, Kodak, Motorola High-performance design or high quality, consistent quality Quality U.S. first-class postage Motel-6, Red Roof Inns Low Cost Price

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-13 Company Strategy to be Supported Operations Strategy Quality Product Process Location Layout Human resources Purchasing and JIT Inventory Scheduling Maintenance Marketing Strategy Service Distribution Promotion Price Channels of distribution Product positioning Finance Strategy Leverage Cost of capital Working capital Receivables Payables Financial Control Lines of Credit Implementing Strategy via Specific Functional Strategies

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-14 Operations Strategy Considerations Consistent with –Company strategy –Environmental demands –Competitive demands –Product life cycle Identifies and organizes the POM tasks Makes the necessary choices within the POM function Creates competitive advantage

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-15 Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-16 Measures of Productivity Partial Output Output Output Output measures Labor Machine Capital Energy Multifactor Output Output measures Labor + Machine Labor + Capital + Energy Total Goods or Services Produced measure All inputs used to produce them Table 2-4

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-17 Productivity Growth Current Period Productivity – Previous Period Productivity Previous Period Productivity

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-18 Why is productivity important at the national level? Why is productivity important at the firm level?

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-19 Example 10,000 units produced in a period Sold for $10/unit 500 labor hours required during the period Labor rate: $9/hr Cost of raw material for the units produced : $5,000 Cost of purchased material for the units produced: $25,000 What is the labor productivity?

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-20 Example--Labor Productivity 10,000 units/500hrs = 20 units/hour or we can arrive at a unitless figure (10,000 unit* $10/unit)/(500hrs* $9/hr) = Can you think of any advantages or disadvantages of each approach?

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-21 Example Multifactor Productivity MFP =Output Labor + Materials MFP =(10,000 units)*($10) (500)*($9) + ($5000) + ($25000) MFP =2.90

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-22 Figure 2-2

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-23 Factors Affecting Productivity ( 1 of 2) Standardization Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers Cuts in health benefits

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-24 Factors Affecting Productivity (2 of 2) Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-25 Improving 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 efficiency

Management 3620Chapter 2 Competitiveness, Strategy, and Productivity2-26 Operation Bottleneck Operation Bottleneck Operation Figure units/hour 30 units/hour Example Bottleneck Operation