2-1 Competitiveness, Strategy, and Productivity

CHAPTER

Productivity, Competitiveness
&
Strategy

2-2 Competitiveness, Strategy, and Productivity

1. Productivity

Productivity

A measure of the effective use of resources,

usually expressed as the ratio of output to input

Productivity ratios are used for

Planning workforce requirements
Scheduling equipment
Financial analysis

2-3 Competitiveness, Strategy, and Productivity

Productivity

Partial measures

Multi-factor measures

output/(single input)
output/(multiple inputs)

Total measure

output/(total inputs)

Outputs
Productivity =
Inputs

2-4 Competitiveness, Strategy, and Productivity

Measures of Productivity
Partial
measures
Multifactor
measures
Total
measure

Output
Labor

Output
Output
Machine Capital

Output
Labor + Machine

Output
Energy

Output
Labor + Capital + Energy

Goods or Services Produced

All inputs used to produce them

Examples of Partial Productivity

Measures

2-5 Competitiveness, Strategy, and Productivity

Labor
Productivity

Units of output per labor hour

Units of output per shift
Value-added per labor hour

Machine
Productivity

Units of output per machine hour

Capital
Productivity

Units of output per dollar input

Dollar value of output per dollar input

Energy
Productivity

Units of output per kilowatt-hour

Dollar value of output per kilowatt-hour

2-6 Competitiveness, Strategy, and Productivity

Example
7040 Units Produced
Sold for $1.10/unit
Cost of labor of $1,000
Cost of materials: $520
Cost of overhead: $2000

What is the
multifactor
productivity?
Ans. 2.20

2-7 Competitiveness, Strategy, and Productivity

Solution
MFP =

Output
Labor + Materials + Overhead

MFP =

(7040 units)*($1.10)
$1000 + $520 + $2000

MFP =

2.20

2-8 Competitiveness, Strategy, and Productivity

Productivity Growth

Productivity Growth =
Current Period Productivity Previous Period Productivity
Previous Period Productivity

2-9 Competitiveness, Strategy, and Productivity

Factors Affecting Productivity

Technology
Quality
Use of Internet
Computer viruses
New workers
Layoffs
Design of the workspace
Incentive plans that reward productivity

2-10 Competitiveness, Strategy, and Productivity

Bottleneck Operation
Machine
Machine #1
#1
Machine
Machine #2
#2

10/hr

10/hr

Machine
Machine #3
#3

Bottleneck
Bottleneck
Operation
Operation
10/hr

Machine
Machine #4
#4

10/hr

30/hr

2-11 Competitiveness, Strategy, and Productivity

Improving Productivity
Develop productivity measures
Determine critical (bottleneck) operations
Develop methods for productivity
improvements
Establish reasonable goals
Get management support
Measure and publicize improvements
Dont confuse productivity with efficiency

2-12 Competitiveness, Strategy, and Productivity

2. Competitiveness
How effectively an organization meets the
wants and needs of customers relative to
others that offer similar goods or services
Businesses compete by using;
Marketing
Operations

2-13 Competitiveness, Strategy, and Productivity

Businesses Compete Using Marketing

Identifying consumer wants and needs and in
result makes better products
Pricing
Make product available where customer needs it
Advertising and promotion

2-14 Competitiveness, Strategy, and Productivity

Businesses Compete Using Operations

Product and service design

Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service

2-15 Competitiveness, Strategy, and Productivity

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

Cont.

2-16 Competitiveness, Strategy, and Productivity

Why Some Organizations Fail

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

Value = Performance / Cost

2-17 Competitiveness, Strategy, and Productivity

3. Strategy

Mission/Vision
The

reason for existence for an organization

Mission Statement
Answers

Goals
Provide

detail and scope of mission

Strategies

the question What business are we in?

Plans for achieving organizational goals

Tactics
The

methods and actions taken to accomplish strategies

2-18 Competitiveness, Strategy, and Productivity

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:
Goal:
Strategy:
Tactics:
Operations:

Live a good life

Successful career, good income
Obtain a college education
Select a college and a major
Register, buy books, take
courses, study, graduate, get job

2-19 Competitiveness, Strategy, and Productivity

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

Products
Processes
Resources
Quality
Costs
Lead time
Scheduling

2-20 Competitiveness, Strategy, and Productivity

Strategy Formulation
Distinctive competencies
Environmental scanning
SWOT

Set your preference:

Order qualifiers
Order winners

2-21 Competitiveness, Strategy, and Productivity

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 organizations goods or

services that cause it to be perceived as better
than the competition

2-22 Competitiveness, Strategy, and Productivity

Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.
Price
Quality
Time
Flexibility
Service
Location

2-23 Competitiveness, Strategy, and Productivity

Examples of Distinctive Competencies

Price

Low Cost

Southwest Airline
Nobel Televisions

Quality

High-performance design Sony TV

or high quality Consistent BMW
quality
Pepsi, Kodak, Motorola

Time

Rapid delivery
On-time delivery

Domino Pizza, Fedex,

KFC

Flexibility

Variety
Volume

Subway
Supermarkets

Service

Superior customer
service

Walmart
Disneyland

Location

Convenience

Banks, ATMs

2-24 Competitiveness, Strategy, and Productivity

Key External Factors to Consider

Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets

2-25 Competitiveness, Strategy, and Productivity

Key Internal Factors

Human Resources
Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers

2-26 Competitiveness, Strategy, and Productivity

Popular Strategies

Cost Minimization Strategy

Quality Based Strategy

Time Based Strategy