Competitiveness, Strategy,

and Productivity

Prepared By: Gurpreet Singh

Competitiveness

How effectively an organization meets the wants and needs of
customers relative to others that offer similar goods or services.

Prepared By: Gurpreet Singh

Businesses Compete Using Marketing

Identifying consumer wants and needs

Pricing

Advertising and promotion

Prepared By: Gurpreet Singh

Businesses Compete Using Operations

Product and service design

Cost

Location

Quality

Quick response

Flexibility

Inventory management

Supply chain management

Service and service quality

Managers and workers

Prepared By: Gurpreet Singh

Why Some Organizations Fail

Too much emphasis on short-term financial performance

Failing to take advantage of strengths and opportunities

Neglecting operations strategy

Failing to recognize competitive threats

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
Prepared By: Gurpreet Singh
Mission/Strategy/Tactics

Mission Strategy Tactics

How does mission, strategies and tactics relate to

decision making and distinctive competencies?

Prepared By: Gurpreet Singh

 Strategy

Mission

The reason for existence for an organization

Mission Statement

States the purpose of an organization

Goals

Provide detail and scope of mission

Strategies

Plans for achieving organizational goals

Tactics

The methods and actions taken to accomplish strategies
Prepared By: Gurpreet Singh
Planning and Decision Making
Mission

Goals

Organizational Strategies

Functional Goals
Finance Marketing Operations
Strategies Strategies Strategies

Tactics Tactics Tactics

Operating Operating Operating

procedures procedures procedures
Prepared By: Gurpreet Singh
 Strategy Example

Jeet is a high school student. He 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.

Prepared By: Gurpreet Singh

Examples of Strategies

Low cost

Scale-based strategies

Specialization

Flexible operations

High quality

Service

Prepared By: Gurpreet Singh

 Strategy and Tactics

Distinctive Competencies

The special attributes or abilities that give an organization a competitive

edge.

Strategy Factors

Price

Quality

Time

Flexibility

Service

Location

Prepared By: Gurpreet Singh

Examples of Operations Strategies
Price Low Cost U.S. first-class postage
Wal-Mart

Quality High-performance design Sony TV

or high quality Consistent Lexus, Cadillac
quality Pepsi, Kodak, Motorola

Time Rapid delivery Express Mail, FedEx,

On-time delivery One-hour photo, UPS

Flexibility Variety Burger King

Volume Supermarkets

Service Superior customer Disneyland

service HP, IBM, Dell

Location Convenience Banks, ATMs

Prepared By: Gurpreet Singh

Global Strategy

Strategic decisions must be made with respect to
globalization

What works in one country may not work in another

Strategies must be changed to account for these
differences

Other issues

Political, social, cultural, and economic differences

Prepared By: Gurpreet Singh

Strategy Formulation

Distinctive competencies

Environmental scanning

SWOT

Order qualifiers

Order winners

Prepared By: Gurpreet Singh

Strategy Formulation…

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.

Prepared By: Gurpreet Singh

 Key External Factors

Economic conditions

Political conditions

Legal environment

Technology

Competition

Markets

Prepared By: Gurpreet Singh

Key Internal Factors

Human Resources

Facilities and equipment

Financial resources

Customers

Products and services

Technology

Suppliers

Prepared By: Gurpreet Singh

Operations Strategy

The approach, consistent with organization strategy, that
is used to guide the operations function.

Narrower in scope.

Dealing primarily with the operations aspect of the
organization.

It relates to products, processes, methods, operating
resources, quality, costs, lead times and scheduling.

Prepared By: Gurpreet Singh

 Strategic OM Decisions
Decision Area
Product and service design
Capacity
Process selection and layout
Affects
Costs, quality liability and environmental
Cost structure, flexibility
Costs, flexibility, skill level, capacity

Work design Quality of work life, employee safety, productivity

Location Costs, visibility

Quality Ability to meet or exceed customer expectations
Inventory Costs, shortages
Maintenance Costs, equipment reliability, productivity
Scheduling Flexibility, efficiency
Supply chains Costs, quality, agility, shortages, vendor relations

Projects Costs, new products, services, or operating systems

Prepared By: Gurpreet Singh
Quality and Time Strategies

Quality-based strategies:

Focuses on maintaining or
improving the quality of an
organization’s products or
services

Quality at the source.

Time-based strategies:

Focuses on reduction of time
needed to accomplish tasks (e.g.
develop new products or services
and market them, deliver a
product or service).

Prepared By: Gurpreet Singh

Time-based Strategies

Organizations have achieved time reduction in some of
the following:

Planning Time

Product/Service Design Time

Processing Time

Changeover Time

Delivery Time

Response Time for Complaints

Prepared By: Gurpreet Singh

Time-based Strategies…
JAN FEB MAR APR MAY JUN

Planning

Designing

Processing

Changeover
On time!

Delivery

Prepared By: Gurpreet Singh

Productivity

A measure of the effective use of resources, usually expressed
as the ratio of output to input.

It is an index that measure O/P (goods and services) relative to
I/P (labor, materials, energy and other resources) used to
produce them.

Productivity ratios are used for:

Planning workforce requirements

Scheduling equipment

Financial analysis

Prepared By: Gurpreet Singh

Productivity…

Partial measures/productivity

Output/(single input)

Multi-factor measures/productivity

Output/(multiple inputs)

Total measure/productivity

Output/(total inputs) Outputs
Productivity =
Inputs

Prepared By: Gurpreet Singh

 Productivity Growth
Productivity Growth =
Current Period Productivity – Previous Period Productivity x 100
Previous Period Productivity

For Example: If productivity increased from 80 to 84, the

growth would be:

84 – 80 x 100 = 5%
80
Prepared By: Gurpreet Singh
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

Prepared By: Gurpreet Singh

Examples of Partial Productivity Measures
Labor Units of output per labor hour
Units of output per shift
Productivity Value-added per labor hour

Machine Units of output per machine hour

Productivity

Capital Units of output per dollar/Rs input

Dollar/Rs value of output per dollar/Rs input
Productivity

Energy Units of output per kilowatt-hour

Dollar/Rs value of output per kilowatt-hour
Productivity
Prepared By: Gurpreet Singh
Process Yield

Process yield is the ratio of output of good product to the
quantity of raw material i.e. input.

Defective product is not included in the output.

Service example:

Ratio of cars rented to cars available to rent

Prepared By: Gurpreet Singh

Factors Affecting Productivity
Capital Quality

Technology Management

Prepared By: Gurpreet Singh

Other Factors Affecting Productivity

Standardization
Safety

Quality
Shortage of IT workers

Use of Internet
Layoffs

Computer viruses
Labor turnover

Searching for lost or
Design of the workspace
misplaced items
Incentive plans that

Scrap rates reward productivity

New workers
Prepared By: Gurpreet Singh
 Other Factors Affecting Productivity…

Standardization: Of processes & procedures to reduce variability.

Quality: Differences may distort productivity measurement.

Use of Internet: Lower cost = Wide range of transactions.

Computer viruses:

Searching for lost or misplaced items: Wastes time.

Scrap rates: Inefficient use of resources.

New workers: Tend to have lower productivity.

Safety: Accident can take toll on productivity.

Prepared By: Gurpreet Singh

 Other Factors Affecting Productivity…

Shortage of IT workers: Hampers the ability of Cos to update computing
resources, take advantage of new opportunities etc.

Layoffs:

Labor turnover: Replacements needs time to get up to speed.

Design of the workspace: E.g. Having tools & other work items within easy
reach can have positive impact on productivity.

Incentive plans that reward productivity:

Other factors:

Equipment breakdown, Shortages of Parts/Materials,
Education/Training/Health of Workers etc.
Prepared By: Gurpreet Singh
Outsourcing

Higher productivity in another company is a key reason
organizations outsource work.

Improving productivity may reduce the need for
outsourcing.

Prepared By: Gurpreet Singh

 Improving Productivity

Develop productivity measures for all operations.

Determine critical (bottleneck) operations.

Develop methods for productivity improvements such as
getting ideas from workers, studying how other firms have
increased productivity.

Establish reasonable goals for improvement.

Get management support.

Measure and publicize improvements.

Consider incentives to reward workers for contributions.
Prepared By: Gurpreet Singh
Productivity & Efficiency

Efficiency is a narrower concept that pertains to getting
the most out of a fixed set of resources.

Productivity is a broader concept that pertains to effective
use of overall resources.

E.g. An efficiency perspective on mowing a lawn given a

lawn mower would focus on the best way to use the hand
mower, a productivity perspective would include the
possibility of using a power mower.

Prepared By: Gurpreet Singh

Productivity Examples…
1. Four workers installed 720 square yards of carpeting in eight
hours.

Productivity = Yards of carpet installed

Labor hours worked

= 720 square yards

4 workers x 8 hours/worker

= 22.5 yards/hour
Prepared By: Gurpreet Singh
Productivity Examples…
2. A machine produced 68 usable pieces in two hours.

Productivity = Usable pieces

Production time

= 68 pieces
2 hours

= 34 pieces/hour
Prepared By: Gurpreet Singh
Productivity Examples…
3. 7040 Units Produced
Cost of labor of $1,000
Cost of materials: $520
Cost of overhead: $2000

What is the multifactor productivity?

Prepared By: Gurpreet Singh

Productivity Examples…
MFP = Output
Labor + Materials + Overhead

MFP = (7040 units)

$1000 + $520 + $2000

MFP = 2.0 units per dollar of input

Prepared By: Gurpreet Singh