1. Competitiveness, Strategy, and Productivity
Chapter 2

2. Learning Objectives You should be able to:
List the three primary ways that business organizations compete
Explain five reasons for the poor competitiveness of some companies
Define the term strategy and explain why strategy is important
Know methods for strategy formulation (SWOT, order qualifiers/order winners)
Discuss and compare organization strategy and operations strategy, and explain why it is important to link the two
Definition of time/quality-based strategies
Define the term productivity (know how to calculate) and explain why it is important to organizations and countries
Provide some reasons for poor productivity and some ways of improving it
Instructor Slides

3. Three separate, but related concepts that are vitally important to business organizations
Competitiveness
Strategy
Productivity
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4. Competitiveness Competitiveness:
How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services
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5. Why Some Organizations Fail
Failing to consider customer wants and needs
Neglecting operations strategy
Failing to take advantage of strengths and opportunities
Failing to recognize competitive threats
Too much emphasis on short-term financial performance at the expense of R&D
Too much emphasis in product and service design and not enough on process design and improvement
Neglecting investments in capital and human resources
Failing to establish good internal communications and cooperation
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6. Marketing’s Influence on Competitiveness
Identifying consumer wants and needs
Identifying how these customer needs can best be satisfied
Pricing
Advertising and promotion
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7. Operations’ Influence on Competitiveness
Product and service design
Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service
Managers and workers
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8. Planning and Decision Making
Mission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

10. Wal-Mart Delivery Service Says to Amazon: 'Bring It' wsj
Wal-Mart Delivery Service Says to Amazon: 'Bring It' wsj.com 10/19/2012
In its latest bid to take on … Amazon.com this holiday season, Wal-Mart is promising same-day delivery in some cities for orders placed online. Called Wal-Mart To Go, the service costs $10 regardless of the size of the order.
The products will be shipped from the company's stores, not from a warehouse or distribution center. … Wal-Mart is betting that its network of thousands of stores, combined with an improved online presence … can help it compete head to head with Amazon, which has increasingly stressed fast, free or low-cost deliveries.
Wal-Mart also has been trying to compete with Amazon's prices inside its stores. In some, it has quietly begun matching the online retailer's prices when customers ask, a practice historically done only against local brick-and-mortar competitors.
Nearly half of Wal-Mart's online sales now come from purchases customers make online and pick up at a store, … "We have a unique advantage because we have the national footprint of stores combined with our online site that enable programs like site to store, pay with cash or pick up today," .

11. Planning and Decision Making
Mission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

12. Mission Mission The reason for an organization’s existence
Mission statement
States the purpose of the organization
The mission statement should answer the question of “What business are we in?”
The mission statement serves as the basis for organizational goals
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13. Examples of Mission Statements
Microsoft: To help people and businesses through the world to realize their full potential
Nike: To bring inspiration and innovation to every athlete in the world.
Verizon: To help people and businesses communicate with each other.
Walt Disney: To be one of world’s leading producers and providers of entertainment and information.
Instructor Slides

14. Planning and Decision Making
“We save people money so they can live better”
Mission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

15. Goals Goals Provide detail and the scope of the mission
Goals can be viewed as organizational destinations
Goals serve as the basis for organizational strategies
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16. Planning and Decision Making
“We save people money so they can live better”
Mission
consumer low prices
customer service
convenience
efficient, productive and sustainable solutions
Goals
Organizational Strategies
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

17. Organizational Strategies
Strategy
A plan for achieving organizational goals
Serves as a roadmap for reaching the organizational destinations
Organizations have
Organizational strategies
Overall strategies that relate to the entire organization
Support the achievement of organizational goals and mission
Functional level strategies
Strategies that relate to each of the functional areas and that support achievement of the organizational strategy
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18. Planning and Decision Making
“We save people money so they can live better”
1. Become a truly global company;
2. Understand the business challenges that retailers will face and solve them;
3. Play an even bigger leadership role on social issues that matter to our customers;
4. Keep our culture strong everywhere.
6/4/2010
Mission
consumer low prices
customer service
convenience
efficient, productive and sustainable solutions
Goals
Organizational Strategies
Developing our people;
Driving the productivity loop;
Winning in Global eCommerce;
Reinvigorating our customer–focused culture.
Leading on social and environmental issues.
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

19. Examples of Strategies
Low cost
e.g., by Outsource operations to countries with low labor cost
Scale-based strategies
Use capital-intensive methods to achieve high output volume and low unit cost
Specialization
Focus on narrow product lines or limited services to achieve higher quality
Newness
Focus on innovation to create new products or services
Flexible operations
Focus on quick response and/or customization
Service
Focus on various aspects of service (e.g., helpful, reliable, etc)
Sustainability
Focus on environmentally friendly and energy efficient operations
Quality-based strategies
focus on quality in all phases of an organization in order to achieve higher quality than competitors
Time-based strategies
Strategies that focus on the reduction of time needed to accomplish tasks
Agile operations
A strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and prosper in an environment of change

20. Strategy Formulation
Effective strategy formulation requires taking into account:
Core competencies
Environmental scanning
SWOT
Order qualifiers
Order winners
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21. 1. Core Competencies Core Competencies
The special attributes or abilities that give an
organization a competitive edge
To be effective core competencies and strategies need to be aligned
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22. 2. Environmental Scanning
Environmental Scanning is necessary to identify
Internal Factors
Strengths and Weaknesses
External Factors
Opportunities and Threats
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23. Key Internal Factors Human Resources Facilities and equipment
Skills of workforce, expertise, experience, loyalty to the organization
Facilities and equipment
Capacities, locations, age, maintenance costs
Financial resources
Cash flow, access to additional funding, debt, cost of capital
Customers
Loyalty, wants and needs
Products and services
Existing, potential for new ones
Technology
Existing, ability to integrate new and its impact on current and future operations
Suppliers
Relationships, dependency, quality, flexibility, service
Other
Labor relations, company image, distribution channels etc.
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24. Key External Factors Economic conditions Political conditions
Health and directions of the economy, inflation, deflation, interest rates, taxes, tariffs.
Political conditions
Attitude towards business, political stability, wars
Legal environment
Antitrust laws, regulations, trade restrictions, minimum wages laws, liability laws, labor laws, patents
Technology
Innovations rate, future process technology, design technology
Competition
Number and strength of competitors, basis of competitions (price, quality etc.)
Markets
Size, location, brand loyalty, ease of entry, growth potential, long term stability, demographics.
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25. SWOT Wal-Mart Strengths Weaknesses Opportunities Threats
Efficient logistics - latest technology and inventory management processes
Buying power
Scale of operations
Store network
Weaknesses
Declining prices and diminishing margins
Online presence
Public image (ethical issues)
Opportunities
Online business
Global market
Threats
Competition
Saturated US market
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26. Order Qualifiers & Order Winners
Characteristics that customers perceive as minimum standards of acceptability for a product or service to be considered as a potential for purchase
Order Winners
Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition
Price, delivery reliability, delivery speed and quality
can be order qualifiers or order winners and may change over time.
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27. Planning and Decision Making
“We save people money so they can live better”
1. Become a truly global company;
2. Understand the business challenges that retailers will face and solve them;
3. Play an even bigger leadership role on social issues that matter to our customers;
4. Keep our culture strong everywhere.
6/4/2010
Mission
consumer low prices
customer service
convenience
efficient, productive and sustainable solutions
Goals
Organizational Strategies
Developing our people;
Driving the productivity loop;
Winning in Global eCommerce;
Reinvigorating our customer–focused culture.
Leading on social and environmental issues.
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
reducing operating expenses
being as productive and efficient as possible
information systems, sourcing, business processes and shared service
investments to leverage additional opportunities in e–commerce
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

28. Operations Strategy Operations strategy
The approach, consistent with organization strategy, that is used to guide the operations function.
But… Organization Strategy should take into account the realities of operations strengths and weaknesses
Organizational Strategy
Operations Strategy
Examples of Companies or Services
Low Price
Low Cost
U.S. first-class postage
Wal-Mart
Responsiveness
Short processing times
On-time delivery
McDonald’s restaurants
FedEx
Differentiation:
High Quality
High performance design and/or high quality processing
Consistent Quality
Sony TV
Coca-Cola
Newness
Innovation
3M, Apple
Variety
Flexibility
Volume
Burger King (Have it your way”)
McDonald’s (“Buses Welcome”)
Service
Superior customer service
Disneyland
IBM
Location
Convenience
Supermarkets; Mall Stores
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29. Planning and Decision Making
Mission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

30. Tactics and Operations
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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31. Mission, Organizational strategy, Operations strategy
Management level
Time Horizon
Scope
Level of Detail
Relates to
The Overall organization
Mission
Top
Long
Broad
Low
Survival, profitability,
Strategy
Senior
Growth rate, market share
Operations
Strategic
Moderate to Long
Product design, choice of location, choice of technology, new facilities
Tactical
Middle
Moderate
Employment levels, output levels, equipment selection, facility layout
Operational
Short
Narrow
High
Scheduling personnel, adjusting output rates, inventory management, purchasing

32. Productivity Productivity Productivity measures are useful for
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 unit’s performance over time
Planning workforce requirements
Scheduling equipment
Financial analysis
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33. factories have been producing more with fewer workers.
“The Factory Floor Has a Ceiling on Job Creation ” wsj.com 1/12/2012
factories have been producing more with fewer workers.
Output for each hour of work, or productivity, is up an extraordinary 40% as factories have adopted new technologies and production processes.

34. Why does Productivity Matters?
High productivity is linked to higher standards of living -> Have more, work less.
Higher productivity relative to the competition leads to competitive advantage in the marketplace.
Manufacturing incorporates R&D -> competitive edge.
Manufacturing has beneficial side effect – service jobs.
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35. Productivity Productivity = Outputs Inputs Partial measures
output/(single input)
Multi-factor measures
output/(multiple inputs)
Total measure
output/(total inputs)

36. Measures of Productivity=
Outputs
Inputs
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

37. Partial Productivity Measures
Examples of
Partial Productivity Measures
Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
Energy Productivity
Units of output per dollar input
Dollar value of output per dollar input
Capital Productivity
Units of output per machine hour
Machine Productivity
Units of output per labor hour
Units of output per shift
Value-added per labor hour
Labor Productivity

38. Productivity Calculation Example
Units produced: 5,000 Standard price: $30/unit Labor input: 500 hours Cost of labor: $25/hour Cost of materials: $5,000 Cost of overhead: 2x labor cost
What is the
multifactor productivity?
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39. Solution
What is the implication of an unitless measure of productivity?
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40. Productivity Growth
Example: Labor productivity on the ABC assembly line was 25 units per hour in In 2010, labor productivity was 23 units per hour. What was the productivity growth from 2009 to 2010?
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41. Service Sector Productivity
Service sector productivity is difficult to measure and manage because
It involves intellectual activities
It has a high degree of variability
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42. Factors Affecting Productivity
Methods
Capital
Quality V
INCREASE: Calculators, Computers, Faxes, copiers, Internet search engines, Voice mail, cell phones,
Technology
Management
REDUCE: inflexibility, high costs, mismatched operations, non-work activities
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43. Improving Productivity
Develop productivity measures for all operations
Determine critical (bottleneck) operations
Develop methods for productivity improvements
Establish (reasonable) goals
Make it clear that management supports and encourages productivity improvement
Measure and publicize improvements
Don’t confuse productivity with efficiency
Efficiency =
getting the most out of a fixed set of resources
Productivity =
effective use of overall resources (e.g., upgrading equipment)
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44. In-class Case Analysis
Please read the case “Hazel” on page 38, and write down your answer to questions:
Page 38, 2(b) inventory?
Page 38, 3(c) trade-off of launching website
Page 69, 1
Write a mission statement for Hazel (one sentence)
Hand in after class (write down your full name)
Instructor Slides

45. Answers
1. Inventory: mowers, parts, fuel, lubricants, fertilizer, chemicals, tools, etc.
2. Trade-offs: Risk involved in starting a new type of business using new technology and making it successful, learning curve involved in the area of e-commerce, additional work load, hiring of more employees in the area of Web design, computer programmers, etc.
3. Competitive advantage: Her customers are her neighbors and friends. She has had personal relationships with many of her customers for years and they are going to want to help her as long as she does a good job.
4. …
Instructor Slides