Competitiveness, Strategy, and Productivity

1. 2 Competitiveness, Strategy, and Productivity

2. Learning Objectives • List and briefly discuss the primary ways that business organizations compete. • List five reasons for the poor competitiveness of some companies. • Define the term strategy and explain why strategy is important for competitiveness. • Contrast strategy and tactics.

3. Learning Objectives • Discuss and compare organization strategy and operations strategy, and explain why it is important to link the two. • Describe and give examples of time-based strategies. • Define the term productivity and explain why it is important to organizations and to countries. • List some of the reasons for poor productivity and some ways of improving it.

4. NEW PRACTICUM SCHEDULE • SEMESTER SIX (6) • EMPLOYER SUGGESTION • JOB OPPORTUNITIES • STUDENTS WERE OFFERED BUT CANNOT ENTER THE JOB MARKET • SUGGEST PRIVATE ORGANIZATION • COMMENCE IMMEDIATELY • CANCEL IF ARRANGEMENT HAS BEEN

5. RULES FOR STUDENT • WEAR ONLY DECENT CLOTHES • NO T-SHIRT • NO SHORT • NO JEANS • WEAR ONLY SHOES. • NO SANDAL/ SLIPPER • SWITCH OFF HP • ATTENDANCE IS COMPULSORY

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

7. Businesses Compete Using Marketing • Identifying consumer wants and needs • Pricing • Advertising and promotion

8. Businesses Compete Using Operations • Product and service design • Cost • Location • Quality • Quick response

9. Businesses Compete Using Operations • Flexibility • Inventory management • Supply chain management • Service and service quality • Managers and workers

10. 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

11. 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

12. Mission/Strategy/Tactics Mission Strategy Tactics How do mission, strategies and tactics relate to decision making and distinctive competencies?

13. Strategy • Mission • Explains the 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

14. Planning and Decision Making Mission Organizational Goals OrganizationalStrategies Functional Goals Finance Strategies MarketingStrategies OperationsStrategies Tactics Tactics Tactics OperatingProcedures OperatingProcedures OperatingProcedures Figure 2.1

15. Strategy Example Example 1 Jun Hee 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

16. Examples of Strategies • Low cost • Scale-based strategies • Specialization • Flexible operations • High quality • Service

17. 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

18. Examples of Operations Strategies Table 2.2 Price Low Cost National first-class postage, Carrefour, Jetstar Quality High-performance design and/or high quality Consistent quality Sony TV, Lexus, Disneyland Coca-Cola, PepsiCo, Kodak,McDonald’s restaurants, UPS Pizza Hut, FedEx Time Rapid deliveryOn-time delivery Flexibility Variety Volume Burger King McDonald’s Service Superior customer service Disneyland, Hewlett-Packard, IBM Location Convenience Supermarkets, dry cleaners

19. 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

20. Strategy Formulation • Distinctive competencies • Environmental scanning • SWOT • Order qualifiers • Order winners

21. 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

22. Operations Strategy • Operations strategy: The approach consistent with organization strategy, that is used to guide the operations function.

23. Strategic OM Decisions Table 2.4

24. 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

25. Time-Based Strategies JAN FEB MAR APR MAY JUN Planning Designing Processing Changeover On time! Delivery

26. 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

27. Canned vegetables Metal sheets Making cans Water Cutting Energy Cooking Packing Labeling Food Processor Table 1.2 Outputs Inputs Processing Labor Cleaning 1-27

28. Productivity Output Productiv ity = Input • Partial measures • output/(single input) • Multi-factor measures • output/(multiple inputs) • Total measure • output/(total inputs)

29. Productivity Determine the productivity of the following; Four workers installed 720 square yards of carpeting in 8 hours. A machine produced 68 usable pieces in 2 hours. A company that processes fruits and vegetables is able to produce 400 cases of canned peaches in half hour with 4 workers. What is labour productivity Output Productiv ity = Input 2-29

30. Current Period Productivity – Previous Period Productivity Previous Period Productivity Productivity Growth Productivity Growth = If Productivity increased from 80 to 84, find the growth rate.

31. Measures of Productivity Table 2.5 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

32. 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 Dollar value 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 Examples of Partial Productivity Measures Table 2.6

33. Example Determine the multifactor productivity using the following data: 7040 Units Produced Cost of labor: $1,000 Cost of materials: $520 Cost of overhead: $2000 What is the multifactor productivity? Ans. 2.0 units per dollar of input

34. Example : Solution MFP = Output Labor + Materials + Overhead MFP = (7040 units) $1000 + $520 + $2000 MFP = 2.0 units per dollar of input

35. Question 1. A wrapping paper company produced 2,000 rolls of paper one day. Standard price in RM1/roll. Labour cost was RM160, material cost was RM50, and overhead was RM320. Determine the multifactor productivity 2. Suppose that a company produced 300 standard bookcases last week using 8 workers and it produced 240 standard bookcases this week using 6 workers. In which period was the productivity higher? 2-35

36. Process Yield • Process yield is the ratio of output of good product to input • Defective product is not included in the output • Service example: • Ratio of cars rented to cars available to rent

37. Factors Affecting Productivity Capital Quality Technology Management

38. Improving Productivity • Develop productivity measures • Determine critical (bottleneck) operations • Develop methods for productivity improvements • Establish reasonable goals • Get management support • Measure and publicize improvements • Do not confuse productivity with efficiency