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Chapter 2 Competitiveness Strategy and Productivity

Chapter 2 Competitiveness Strategy and Productivity. Competitiveness. Effectiveness in meeting customer needs vs. the rest Commonly confused terminology: Effectiveness vs. efficiency (Distinctive) competencies Price Time Quality Flexibility, ability to respond to changes

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Chapter 2 Competitiveness Strategy and Productivity

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  1. Chapter 2 Competitiveness Strategy and Productivity

  2. Competitiveness • Effectiveness in meeting customer needs vs. the rest • Commonly confused terminology: Effectiveness vs. efficiency (Distinctive) competencies • Price • Time • Quality • Flexibility, ability to respond to changes • Differentiation, special product features • Service

  3. Strategy • Mission • The reason for existence of an organization • Mission Statement • A clear statement of purpose • Strategy • A plan for achieving organizational goals • Tactics • The actions taken to accomplish strategies • Operational decisions • Day to day decisions to support tactics

  4. Example for Strategy 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

  5. Strategy Formulation • Order qualifier = Acceptable product features • A car with 40 miles per gallon • Order winner = Better-than-the-rest product features • A car with 60 miles per gallon: Toyota Prius dual powered car • Environmental Scanning • The consideration of internal and external events and trends that present threats or opportunities for a company. • Reading Financial times, Benchmarking, Stealing Employees • Figure out distinctive competencies • Price, quality, service • Emphasize one or more of the distinctive competencies with the strategy

  6. Strategies • Quality-based strategies • Focuses on quality in all phases of an organization • Quality at the source • Sony TV • Toyota cars: Nummi plant rented from general motors. • Time-based strategies • Focuses on reduction of time needed to accomplish tasks • Technology start ups compete on turning ideas into products

  7. Strategies • Product development strategy relates to Set of products/services and technologies for future operations • e.g. Be the technology leader • IBM workstations • e.g. Offer many products • Dell computers • Marketing and sales strategy relates to positioning, pricing and promotion of products/services • e.g. Never offer more than 40% discount • e.g. EDLP = every day low price • At Wal-Mart • e.g. Demand smoothing via coupons • BestBuy • Supply chain management strategy relates to procurement, transportation, storage and delivery • e.g. Never use more than 1 supplier for every input • e.g. Never expedite orders just because they are late

  8. Big Retailer Strategies • Wal-Mart: Efficiency • Target: More quality and service • Carrefour: International, ambiance • K-Mart: Confused. • Squeezed between Target and Wal-Mart • Reliance on coupon sales • Do coupons stabilize or destabilize a Supply chain? • K-Mart and Sears merged in November 2004 • K-Mart gets cash • Sears gets presence outside malls

  9. Productivity • Partial measures : output / single input • Output/energy , output/machine hour, output/labor • Multi – factor measures : output / multi input • Multi – factor : output/(energy + machine cost), output/(labor + capital) • Total measure : output / all inputs • In general, Productivity = output / input

  10. Example for productivity • 10,000 items are produced • Price $10/item • 500 labor hours to accomplish the job • Labor rate : $9/hr • Cost of raw material is $5,000 • Cost of overhead is $25,000 • What is the labor productivity?

  11. Example for productivity cont. • Output : 10,000 x $10/item = $100,000 • Input : 500 hours x $9 /hr = $4500 • Labor productivity=100,000 / 4500 = 22.22 • MFP (multi factor productivity) = output / labor + materials • 100,000 / {4,500 + 25,000 + 5,000} • MFP = 2.90 • What are the units of these productivity numbers?

  12. Factors Affecting Productivity Positively • High Technology • Dual powered engine helps Toyota Prius • Effective Management • High Quality (products) • Less scrap • Extensive Training • University of Texas at Dallas • Low employee tenure/layoffs • High Standardization • Efficient Workplace Design-Ergonomics • Effective Goals and Incentives

  13. Improving Productivity • Develop productivity measures • First measure, then manipulate • Develop methods for productivity improvements • Venues for ideas to prosper • Establish reasonable goals • High challenges vs. trivialities • Publicize improvements • Incentives, positive feedback, awards • Get management support • Productivity is more general than efficiency • Set the rules of the game to win it • Determine the critical operations = bottleneck

  14. Operation Operation Bottleneck Operation Operation Operation Bottleneck Operations Low capacity

  15. Summary • Competencies • Mission/Strategy/Tactics • Productivity

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