Chapter 2

Competitiveness,
Strategy, and
Productivity
Competitiveness:

How effectively an organization meets the

needs of customers relative to others that
offer similar goods or services
 Competitiveness

Fl
Price ex
ib i
lity
Quality
Di Service
ffe
re
nti
ati Time
on
 Mission/Strategy/Tactics

Mission Strategy Tactics

How does mission, strategies and tactics relate to

decision making and distinctive competencies?
 Strategy

• Mission
– The reason for existence for an organization
• Mission Statement
– A clear statement of purpose
• Strategy
– A plan for achieving organizational goals
• Tactics
– The actions taken to accomplish strategies
 Strategy Example
Example 1
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
Planning and Decision Making
Figure 2-1
Mission

Goals

Organizational strategy

Functional strategies
Finance Marketing Operations

Tactics Tactics Tactics

Finance Marketing Operations

operations operations operations
 Strategy Formulation

• Distinctive Competencies
– The special attributes or abilities that give
an organization a competitive edge.
• Environmental Scanning
– The considering of events and trends that
present threats or opportunities for a
company.
Examples of Distinctive Competencies
Price Low Cost U.S. first-class postage
Motel-6, Red Roof Inns

Quality High-performance design Sony TV

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

Time Rapid delivery Express Mail

On-time delivery One-hour photo
Flexibility Variety Burger King
Volume Supermarkets
Service Superior customer Disneyland
service Nordstroms
Location Convenience Banks, ATMs
 Key External Factors
• Economic conditions
• Political conditions
• Legal environment
• Technology
• Competition
• Markets
 Key Internal Factors
• Human Resources
• Facilities and equipment
• Financial resources
• Customers
• Products and services
• Technology
• Suppliers
 New 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
 Time-based Strategies
JAN FEB MAR APR MAY JUN

Planning

Designing

Processing

Changeover On time!

Delivery
 Productivity

• Partial measures
– output/(single input)
• Multi-factor measures
– output/(multiple inputs)
• Total measure
– output/(total inputs)
Outputs
Productivity =
Inputs
 Productivity Growth

Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
 Measures of Productivity
Table 2-4

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
 Examples of Partial Productivity Measures
Table 2-5

Labor Units of output per labor hour

Units of output per shift
Productivity Value-added per labor hour
Dollar value of output per labor hour
Machine Units of output per machine hour
Productivity Dollar value of output per machine hour

Capital Units of output per dollar input

Productivity Dollar value of output per dollar input

Energy Units of output per kilowatt-hour

Productivity Dollar value of output per kilowatt-hour
 Example 1: Determine the productivity of these cases: a) Four
workers installed 720 yards of carpeting in 8 hours. b) A machine
produced 68 usable piece in two hours.

• Solution:
• a) Productivity = (Yards of Carpet
installed)/(Labor hours worked) =
(720yr )/(4 workers x 8 hrs per
2

worker)=22.5 yards/hr
• b) Productivity = (usable
pieces)/(Production time) = (68 pieces)/(2
hrs)=34 pieces/hr
 Example
10,000 Units Produced

Sold for $10/unit

500 labor hours

What is the
labor productivity?
Labor rate: $9/hr

Cost of raw material: $5,000

Cost of purchased material: $25,000

 Example--Labor Productivity

•10,000 units/500hrs = 20 units/hour

or we can arrive at a unitless figure

•(10,000 unit* $10/unit)/(500hrs* $9/hr) =

22.22

Can you think of any advantages or

disadvantages of each approach?
Example--Multifactor Productivity

MFP = Output
Labor + Materials

MFP = (10,000 units)*($10)

(500)*($9) + ($5000) + ($25000)

MFP = 2.90
Figure 2-2

Annual Productivity Growth

6
4
Annual %
Change

2
0
-2 77 79 81 83 85 87 89 91 93 95 97 99
Year
Factors Affecting Productivity

Capital Quality

Technology Management
Factors Affecting Productivity
• Standardization
• Use of Internet
• Computer viruses
• Searching for lost or misplaced items
• Scrap rates
• New workers
• Cuts in health benefits
Factors Affecting Productivity
• Safety
• Shortage of IT workers
• Layoffs
• Labor turnover
• Design of the workspace
• Incentive plans that reward 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
• Don’t confuse productivity with efficiency
 Bottleneck Operation
Figure 2-3

Operation

Operation
Bottleneck
Operation
Operation

Operation