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Chapter 2 Competitiveness Strategy Productivity. Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services. Businesses Compete In…. Marketing Consumer wants & needs Pricing Advertising & promotion.

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

Saba Bahouth – UCO

businesses compete in
Businesses Compete In…
  • Marketing
  • Consumer wants & needs
  • Pricing
  • Advertising & promotion


  • Product and service design
  • Cost
  • Location
  • Quality
  • Quick response
  • Flexibility
  • Inventory management
  • Supply chain management
  • Managers and workers

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why some organizations fail
Why Some Organizations Fail
  • Emphasis on short-term financial performance
  • Neglecting strengths and opportunities
  • Neglecting operations strategy
  • Failing to recognize competitive threats
  • Neglecting process improvement
  • Neglecting investments in capital and human resources
  • Lack of good internal communications
  • Neglecting customer wants and needs

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Saba Bahouth – UCO

mission strategy tactics





Mission:The reason for existence for an organization

Mission Statement:States the purpose of an organization

Goals:Provide detail and scope of mission

Strategy:Plans for achieving organizational goals

Tactics:The methods and actions taken to accomplish strategies

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planning and decision making
Planning and Decision Making
  • 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 a job




Functional Goals

Finance Strategies









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strategy analysis

A strong competitive advantage is difficult to copy, often because of a firm’s culture, habits, or sunk costs.

Strategy Analysis
  • Low-cost strategy firms:
  • Honda Motor Co.
    • Marriott's Fairfield Inns
    • Wal-Mart; Sam's Club
  • Can reshape industry
    • Southwest Airlines
    • McDonald’s
  • Warning:
  • Do not lower quality.
  • Wal-Mart vs. Target

Businesses with quality goods usually have large market shares

I-Pod and Samsung

Quality is positively related to a higher return on investment

Toyota and RR

Profitability: Short term decrease; Long term increase –

Quality is free (Philip Crosby)

High quality producers can usually charge premiumprices

Rolex and Mont Blanc

Distinctive Competencies

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

Strategy Factors

  • Price
  • Quality
  • Time
  • Flexibility
  • Service
  • Location
  • Two types of time performance measures:
    • Speed of doing something (Fast delivery)
    • Reliability of doing something (On-time delivery)
    • Processing time: the time it takes to process/perform a task.
    • Queue time: the time spent waiting.
    • Cycle time: time from beginning of work to finish
    • ORtime between two units at output.
    • Lead time: time between release of an order and shipment.
    • Purchasing lead time: time required to obtain purchased item.

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strategy formulation
Strategy Formulation
  • Distinctive competencies
  • Environmental scanning
  • SWOT
    • 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

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deciding factors in strategy decisions
Deciding Factors in Strategy Decisions
  • 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

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Saba Bahouth – UCO

    • Productivity: A measure of the effective use of resources, usually expressed as the ratio of output to input
    • Productivity = Output / Input
  • Efficiency
  • the degree to which a process generates outputs with the minimal consumption of inputs
  • or
  • the degree to which a processgenerates a maximum amount of outputs for a given amount of inputs.
  • Effectiveness is doing the right things efficiently.

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  • Partial measures: output/(single input)
  • Multi-factor measures: output/(multiple inputs)
  • Total measure: output/(total inputs)

Partial Output OutputOutputOutputmeasures 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

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Units of output per labor hour

Units of output per shift

Value-added per labor hour

Labor Productivity

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

Examples of Partial Productivity Measures

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Productivity Growth

Percentage Increase in Productivity

Productivity Growth

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other factors affecting productivity
Other Factors Affecting Productivity
  • Standardization
  • Quality / Scrap rates / Rework
  • Use of Internet / Computer viruses
  • Searching for lost or misplaced items
  • Layoffs / New workers / Labor turnover
  • Safety
  • Shortage of IT workers
  • Design of the workspace
  • Incentive plans that reward quality and productivity

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

Improving productivity may reduce the need for outsourcing.

Same Company

Same product: Mufflers

Shanghai, China


Litchfield, Michigan

Fortune, Sept 18, 2006

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simple exercise
Simple Exercise

4 employees produced 1600 cameras

Productivity = 1600/4 = 400 Cameras per employee

4 employees produced 1600 cameras in two days

4 employees produced 1600 cameras

3 worked 2 days, 1 worked 1.5 days, all 4 produced same number of cameras (ie. 400)

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simple exercise cont d
Simple Exercise (Cont’d)

4 employees produced 1600 cameras in two days

The company works 8 hours a day, 5 days a week, 52 weeks a year

Workers get paid $14 an hour, and salary overheads are 200%

Equipment yearly depreciation cost is $312,000

Material cost is $18 per camera

This company charges dealers $30 per camera

What is the Productivity?

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thoughts about productivity
Thoughts about Productivity

The 70s and the 80s were bad In the 70s and 80s:

Manufacturing Productivity Growth:~4% per year

Services Productivity Growth: ~0% per year

Combined Productivity Growth: ~1% per year

Now it is much better

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negative impact on productivity
Negative Impact on Productivity
  • Workers and employees attitude
  • Less saving… more spending/consuming
  • More government regulations
  • Legal/lawyers cost
  • Increased demand for services
  • Emphasis on short term performance

Saba Bahouth – UCO