Transcript Introduction to

Chapter 2
Competitiveness
Strategy
Productivity
Saba Bahouth – UCO
1
Competitiveness:
How effectively an organization meets the
wants and needs of customers relative to
others that offer similar goods or services.
Saba Bahouth – UCO
2
Businesses Compete In…
Marketing
Operations
• Consumer wants & needs
• Pricing
• Advertising & promotion
•
•
•
•
•
•
•
•
•
Product and service design
Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Managers and workers
Saba Bahouth – UCO
3
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
Saba Bahouth – UCO
4
Saba Bahouth – UCO
5
Strategy
Saba Bahouth – UCO
6
Mission/Strategy/Tactics
Mission
Mission:
Tactics
The reason for existence for an organization
Mission Statement:
Goals:
Strategy
States the purpose of an organization
Provide detail and scope of mission
Strategy: Plans for achieving organizational goals
Tactics:
The methods and actions taken to accomplish strategies
Saba Bahouth – UCO
7
Planning and Decision Making
Mission
•
•
•
•
•
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 a job
Goals
Organizational Strategies
Functional Goals
Finance
Strategies
Tactics
Operating
procedures
Marketing
Strategies
Tactics
Operating
procedures
Saba Bahouth – UCO
Operations
Strategies
Tactics
Operating
procedures
8
Strategy Analysis
A strong competitive advantage is
difficult to copy, often because of a
firm’s culture, habits, or sunk costs.
Distinctive Competencies
The special attributes or
Low-cost strategy firms:
abilities that give an
Honda Motor Co.
organization a
Marriott's Fairfield Inns
Wal-Mart; Sam's Club
competitive edge.
Can reshape industry
Strategy Factors
o
o
o
o
o
o
Price
Quality
Time
Flexibility
Service
Location
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 premium prices
Rolex and Mont Blanc
Two types of time performance measures:
1. Speed of doing something (Fast delivery)
2. 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
OR time between two units at output.
• Lead time: time between release of an order and shipment.
• Purchasing lead time: time required to obtain purchased item.
Saba Bahouth – UCO
9
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
Saba Bahouth – UCO
10
Deciding Factors in Strategy Decisions
Internal Factors
External Factors
•
•
•
•
•
•
•
•
•
•
•
•
•
Human Resources
Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers
Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets
Saba Bahouth – UCO
11
Productivity
Saba Bahouth – UCO
12
Productivity
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 process generates a maximum amount of
outputs for a given amount of inputs.
Effectiveness is doing the right things efficiently.
Saba Bahouth – UCO
13
Saba Bahouth – UCO
14
Productivity
• Partial measures:
• Multi-factor measures:
• Total measure:
Partial
measures
Multifactor
measures
Total
measure
Output
Labor
output/(single input)
output/(multiple inputs)
output/(total inputs)
Output
Output
Machine Capital
Output
Labor + Machine
Output
Energy
Output
Labor + Capital + Energy
Goods or Services Produced
All inputs used to produce them
Saba Bahouth – UCO
15
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
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
Saba Bahouth – UCO
16
Productivity Growth
Percentage Increase in Productivity
Productivity Growth
Saba Bahouth – UCO
17
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
Saba Bahouth – UCO
18
Outsourcing
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
Versus
Litchfield, Michigan
Fortune, Sept 18, 2006
Saba Bahouth – UCO
19
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)
Saba Bahouth – UCO
20
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?
Saba Bahouth – UCO
21
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
Saba Bahouth – UCO
22
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
23