Transcript Document

Competitiveness,
Strategy,
and Productivity
Learning Objectives
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Define the term strategy and explain why
strategy is important for competitiveness.
Contrast strategy and tactics.
Discuss and compare organization
strategy and operations strategy, and
explain why it is important to link the two.
Define the term productivity and explain
why it is important to organizations and to
countries.
Competitiveness
How effectively an
organization meets the
wants and needs of
customers relative to
others that offer similar
goods or services
Competitiveness Strategies
 Differentiation – better or at
least different
 Cost - cheaper
 Quick response – more
responsive
Businesses Compete Using
Marketing
 Identifying consumer wants and needs
 Pricing
 Advertising and promotion
Businesses Compete Using
Operations
 Product and service design
 Cost
 Location
 Quality
 Quick response
Businesses Compete Using
Operations (cont.)
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Flexibility
Inventory management
Supply chain management
Service and service quality
Managers and workers
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
SWOT = Strengths, Weaknesses,
Opportunities and Threats
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
Mission/Strategy/Tactics
Mission
Strategy
Tactics
How does mission, strategies and tactics
relate to decision making and
distinctive competencies?
Strategy
 Mission
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The reason for existence for an organization
 Mission Statement
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States the purpose of an organization
 Goals
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Provide detail and scope of mission
Strategies
 Plans for achieving organizational goals
 Tactics
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The methods and actions taken to accomplish strategies
Planning and Decision Making
Mission
Goals
Organizational Strategies
Functional Goals
Finance
Strategies
Tactics
Operating
procedures
Marketing
Strategies
Tactics
Operating
procedures
Operations
Strategies
Tactics
Operating
procedures
Strategy Example
Ratana 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
Examples of Strategies
 Low cost - outsourcing
 Scale-based strategies - capital intensive
method for high volume production
 Specialization - focus on narrow product line
for higher quality
 Flexible operations - customization
 High quality – focus on higher quality than
competitors
 Services – focus on various aspect of
services
Strategy and Tactics
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Strategy Factors
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Price – low cost
Quality – consistent quality, high quality
Time – rapid delivery, on-time delivery
Flexibility – variety, volume
Service – customer services
Location - convenience
Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.
Strategy Formulation
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Distinctive competencies
Environmental scanning
SWOT
Order qualifiers
Order winners
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
Key External Factors
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Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets
Key Internal Factors
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Human Resources
Facilities and equipment
Financial resources
Customers (loyalty, understanding)
Products and services
Technology
Suppliers
Strategic OM Decisions
Decision Area
Affects
Product and service design
Costs, quality liability and environmental
Capacity
Cost structure, flexibility
Process selection and layout
Costs, flexibility, skill level, capacity
Work design
Quality of work life, employee safety, productivity
Location
Costs, visibility
Quality
Ability to meet or exceed customer expectations
Inventory
Costs, shortages
Maintenance
Costs, equipment reliability, productivity
Scheduling
Flexibility, efficiency
Supply chains
Costs, quality, agility, shortages, vendor relations
Projects
Costs, new products, services, or operating systems
Quality and Time Strategies
 Quality-based
strategies
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Focuses on maintaining or
improving the quality of an
organization’s products or
services
Quality at the source
 Time-based strategies
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Focuses on reduction of
time needed to accomplish
tasks
Time-based Strategies
JAN
FEB
MAR
APR
MAY
JUN
Planning
Designing
Processing
Changeover
Delivery
On time!
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, legal, cultural and economic
differences
Four International Operations
Strategies
International
High
Strategy
Cost Reduction Considerations
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Four International Operations
Strategies
Cost Reduction Considerations
High
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Four International Operations
Global
Strategies
Strategy
High
Cost Reduction Considerations
 Standardized
product
 Economies of scale
 Cross-cultural
learning
Examples
 Import/export or
license existing
Texas Instruments
product
Examples Caterpillar
U.S. Steel
Otis Elevator
Harley Davidson
International Strategy
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Four International Operations
Strategies
High
Global Strategy
Cost Reduction Considerations
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Four International Operations
Multidomestic
Strategies
Strategy
High
 Use existing
 Standardizeddomestic
product
model
 Economies of scale
 Cross-cultural learning
globally
Examples
Franchise, joint
Texas 
Instruments
Caterpillar
Otis Elevatorventures,
subsidiaries
Cost Reduction Considerations
Global Strategy
International Strategy
Examples
Heinz
Examples McDonald’s
U.S. Steel
Harley Davidson
The Body Shop
Hard Rock Cafe
 Import/export or
license existing
product
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Four International Operations
Strategies
High
Global Strategy
Cost Reduction Considerations
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
International Strategy
 Import/export or
license existing
product
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
U.S. Steel
Harley Davidson
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Four International Operations
Transnational
Strategies
Strategy
High
 Move material,
people, ideas
Examples
across national
Texas Instruments
Caterpillar boundaries
Otis Elevator
 Economies of scale
 Cross-cultural
International Strategy
Multidomestic Strategy
 Use existing
learning
 Import/export
or
domestic model globally
Global Strategy
Cost Reduction Considerations
 Standardized product
 Economies of scale
 Cross-cultural learning
license existing
product
Examples
Coca-Cola
Nestlé
Examples
U.S. Steel
Harley Davidson
Low
 Franchise, joint ventures,
subsidiaries
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
Four International Operations
Strategies
Cost Reduction Considerations
High
Global Strategy
Transnational Strategy
 Standardized product
 Economies of scale
 Cross-cultural learning
 Move material, people, ideas
across national boundaries
 Economies of scale
 Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator
Examples
Coca-Cola
Nestlé
International Strategy
 Import/export or
license existing
product
Multidomestic Strategy
 Use existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples
U.S. Steel
Harley Davidson
Examples
Heinz
The Body Shop
McDonald’s Hard Rock Cafe
Low
Low
High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
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
Productivity
 Partial measures
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output/(single input)
 Multi-factor measures
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output/(multiple inputs)
 Total measure
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output/(total inputs)
Outputs
Productivity =
Inputs
Productivity Growth
Productivity Growth =
Current Period Productivity – Previous Period Productivity
Previous Period Productivity
Input
Output - Input
Labor
Output
Machine
Raw materials
Products
Electricity / water / etc.
Processes
Or
Services
Capital
Inventory
Others
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
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
machine hour
Capital
Productivity
Units of output per capital input
Money value of output per money input
Energy
Productivity
Units of output per kilowatt-hour
money value of output per kilowatt-hour
Example 3
7040 Units Produced
Cost of labor of $1,000
Cost of materials: $520
Cost of overhead: $2000
What is the multifactor productivity?
Example 3 Solution
MFP =
Output
Labor + Materials + Overhead
MFP =
(7040 units)
$1000 + $520 + $2000
MFP =
2.0 units per dollar of input
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
Factors Affecting Productivity
Capital
Quality
Technology
Management
Other Factors Affecting Productivity
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Standardization
Quality
Use of Internet
Computer viruses
Searching for lost or misplaced items
Scrap rates
New workers
Other Factors Affecting Productivity
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Safety
Shortage of IT workers
Layoffs
Labor turnover
Design of the workspace
Incentive plans that reward productivity
Outsourcing
Outsourcing
 Higher productivity in another company is a
key reason organizations outsource work
 Improving productivity may reduce the need
for outsourcing
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