Competitiveness, Strategy, and Productivity

Y.-H. Chen, Ph.D.International College

Ming-Chuan University

Business Goals

Better quality Higher productivity Lower cost The ability to quickly respond to

customer needsHow to achieve these goals?

Competitiveness, Strategy, and Productivity Competitiveness: How effective an

organization is in the marketplace compared with other organizations that offer similar products or services.

Strategy: The plans that determine the direction an organization takes in pursuing its goals.

Productivity: The effective use of resources.

Competitiveness

How to achieve competitiveness? Identifying consumer wants and /

or needs Pricing and quality Advertising and promotion

Operations and CompetitivenessHow do operations affect competitiveness? Product and service design Cost Location Quality Quick response Flexibility Inventory management Supply chain management Service Managers and workers

Why some organizations fail? Too much emphasis on short-term financial

performance Failing to take advantage of strengths and

opportunities Failing to recognize competitive threats Neglecting operations strategy Too much emphasis in product and service

design and not enough on improvement Neglecting investments in capital and human

resources Failing to establish good internal

communications Failing to consider customer wants and needs

Competitiveness Summary

What customers want? What is the best way to satisfy

those wants?

Strategies

Plans for achieving organizational goals.

Can be long term, intermediate term, or short term.

Must be designed to support the organization’s missions and its goals.

Mission, Strategy, and Tactic

Mission: The reason for existence for an organization. The basis for organizational goals. Mission Statement: A clear statement of

purpose. (Table 2.1, p.39) Strategy: A plan (roadmap) for achieving

organizational goals. Tactics: The methods or actions taken to

accomplish strategies.

Mission, Strategy, and Tactics in Production / Operations Management

Mission

Goals

Organizational strategy

Functional strategies

Finance Marketing Operations

Tactics Tactics Tactics

Finance operations

Marketingoperations

Operationsoperations

Mission, Strategy, and Tactic 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 lifeGoal/Mission: 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

Strategy Formulation

Take into account the realities of operations' strength and weakness.

Capitalizing on strength and dealing with weakness. (This is generally ignored in a business.)

SWOT approach (strength, weakness, opportunity, and threat) critically examines factors that could have either positive or negative effects.

SWOT Analysis

StrengthDomain knowledge.Breadth of solution.Business strategy.

OpportunityService to existing customers.Improve resource util. by integrating products.Strengths are our best weapons.

WeaknessLack of trans. knowledge.Frequent change of strategy.Lack of customer references.Overlapped products.

ThreatNetwork effect of company X.Lack of product compatibility to legacy products.Multiple business acquisition consumes resource.

Strategy Examples

Distinctive competencies Environmental scanning Technological change Order qualifiers and order winners Quality and time Outsourcing Globalization

Quality

Price

Time

Flexibility

Differentiation

Distinctive Competencies

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

Price Quality Time Flexibility Service Location

Distinct Competitiveness Examples

Banks, ATMsConvenienceLocationLocation

DisneylandNordstroms

Superior customer service

ServiceService

Burger KingSupermarkets

VarietyVolume

FlexibilityFlexibility

Express Mail, Fedex,One-hour photo, UPS

Rapid deliveryOn-time delivery

TimeTime

Sony TVLexus, CadillacPepsi, Kodak, Motorola

High-performance design or high quality Consistent quality

QualityQuality

U.S. first-class postageMotel-6, Red Roof Inns

Low CostPricePrice

Environmental Scanning Strategy External factors

Economic conditions

Political conditions Legal environment Technology Competition Markets

Internal factors Human Resources Facilities and

equipment Financial resources Customers Products and

services Technology Suppliers

Technological Change Strategy

Technological changes occur in Products

High-definition TV, improved computer chips, improved cellular telephone systems, and improved design of earthquake structures.

Services Fast order processing and fast delivery.

Processes Robotics, automation, computer-assisted

processing, point-of-sale scanners, and flexible manufacturing systems.

Order Qualifiers and Order Winners Strategies

Order qualifiers Characteristics that 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 the competition

Quality and Time Strategies Quality-based strategies focus on satisfying c

ustomers by integrating quality into all phases of the organization.

Time-based strategies focus on reducing the time required to accomplish various activities. The rationale is that, by reducing time, cost is gen

erally less, productivity is higher, quality tends to be higher, product innovation appears on the market sooner, and customer service is improved.

A company that can bring out new products three times faster than its competitors enjoys a huge advantage.

Outsourcing Strategy

Reduce overhead Gain flexibility Take advantage of suppliers’

expertise

Globalization

Increased market share Risks

May work only locally Political or social upheaval Coordination and management

Productivity Effective use of resources. An index that measures output

relative to the input.

Productivity = Outputs

Inputs

Productivity Reality Check?

Productivity gains involves getting employees to work harder.False. The fact is that many productivity gains in the past have come from technological improvements.

Productivity is the same as efficiency.

Efficiency is a narrow concept that pertains to getting the most out of a given set of resources; productivity is a broader concept that pertains to effective use of overall resources.Example: An efficiency perspective on mowing a lawn given a hand mower would focus on the best way to use the hand mower; a productivity perspective would include the possibility of using a power mower.

Productivity

Productivity is directly related to Competitiveness Standard of living Inflation

Productivity measures can be used to track performance over time. When improvements are needed.

Capital Quality

Technology Management

Factors Affect Productivity

methods, capital, quality, technology, and management.

Examples: Standardization, Internet, computer

viruses, scrap rate, new worker, safety, short of IT skill, layoff, labor turnover, workplace design, training, equipment breakdown, material shortage.

Productivity Improvement Establish reasonable goals Develop productivity measures Look at the system as a whole Develop methods for achieving

productivity improvement (e.g. quality circle)

Management support Measure and publish results

Productivity Measures

Partial measures output/(single input)

Multi-factor measures output/(multiple inputs)

Total measure output/(total inputs)

Productivity Measures

Partial Output Output Output Outputmeasures 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

Productivity MeasureExample

10,000 Units Produced

Sold for $10/unit

500 labor hours

Labor rate: $9/hr

Cost of raw material: $5,000

Cost of purchased material: $25,000

What is the labor productivity?

Productivity MeasureExample, Labor Productivity

10,000 units/500hrs = 20 units/hour

(10,000 unit* $10/unit)/(500hrs* $9/hr) = 22.22

or we can arrive at a unitless figure

Productivity MeasureExample, Multifactor Productivity

MFP = OutputLabor + Materials

MFP = (10,000 units)*($10)(500)*($9) + ($5000) + ($25000)

MFP = 2.90

Productivity MeasureExample #1

Determine the productivity for these cases :

a. Four workers installed 720 square yards of carpeting in eight hours.

b. A machine produced 68 usable pieces in two hours.

a. Four workers installed 720 square yards of carpeting in eight hours.

b. A machine produced 68 usable pieces in two hours.

Productivity MeasureExample #1 Solution

Productivity=720 square yards

4 workers

720 square yards

4 workers x 8 hours/worker

Productivity=

or

= 180 square yards/worker or 22.5 square yards/hour

68 pieces

2 hours

= 34 pieces/hour

Productivity MeasureExample #2

Determine the multifactor productivity for the combined input using the following data:

Output: 1760 unitsInput: Labor $1000, Material $520,

Overhead $2000.

Output

Labor + Material + Overhead

Productivity MeasureExample #2 Solution

Output: 1760 unitsInput: Labor $1000, Material $520, Overhead

$2000.

Multifactor Productivity

=

=1760 units

$1000 + $520 + $2000= 0.50 units/dollar

Productivity Measure Summary

Calculation of multifactor productivity requires a common unit of measurement.

It is best to treat productivities as approximate indicators rather than precise measurements.