Transcript Competitiveness, Strategy, and Productivity Chapter 2 Learning Objectives  You should be able to: 1.

Competitiveness, Strategy,
and Productivity
Chapter 2
Learning Objectives
 You should be able to:
1. List the three primary ways that business organizations
compete
2. Explain five reasons for the poor competitiveness of some
companies
3. Define the term strategy and explain why strategy is
important
4. Know methods for strategy formulation (SWOT, order
qualifiers/order winners)
5. Discuss and compare organization strategy and operations
strategy, and explain why it is important to link the two
6. Definition of time/quality-based strategies
7. Define the term productivity (know how to calculate) and
explain why it is important to organizations and countries
8. Provide some reasons for poor productivity and some ways of
improving it
Instructor Slides
2
• Three separate, but related concepts that
are vitally important to business
organizations
– Competitiveness
– Strategy
– Productivity
2-3
Competitiveness
• Competitiveness:
– How effectively an organization meets the
wants and needs of customers relative to
others that offer similar goods or services
2-4
Why Some Organizations Fail
•
•
•
•
•
•
•
•
Failing to consider customer wants and needs
Neglecting operations strategy
Failing to take advantage of strengths and
opportunities
Failing to recognize competitive threats
Too much emphasis on short-term financial
performance at the expense of R&D
Too much emphasis in product and service design
and not enough on process design and
improvement
Neglecting investments in capital and human
resources
Failing to establish good internal communications
and cooperation
2-5
Marketing’s Influence on
Competitiveness
• Identifying consumer wants and needs
• Identifying how these customer needs
can best be satisfied
• Pricing
• Advertising and promotion
2-6
Operations’ Influence on
Competitiveness
•
•
•
•
•
•
•
•
•
•
Product and service design
Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service
Managers and workers
2-7
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
2-8
http://www.youtube.com/watch?v=4e4Eft2G_i0
9
Wal-Mart Delivery Service Says to Amazon: 'Bring It'
wsj.com 10/19/2012
• In its latest bid to take on … Amazon.com this holiday season, WalMart is promising same-day delivery in some cities for orders placed
online. Called Wal-Mart To Go, the service costs $10 regardless of the
size of the order.
• The products will be shipped from the company's stores, not from a
warehouse or distribution center. … Wal-Mart is betting that its
network of thousands of stores, combined with an improved online
presence … can help it compete head to head with Amazon, which has
increasingly stressed fast, free or low-cost deliveries.
• Wal-Mart also has been trying to compete with Amazon's prices inside
its stores. In some, it has quietly begun matching the online retailer's
prices when customers ask, a practice historically done only against
local brick-and-mortar competitors.
• Nearly half of Wal-Mart's online sales now come from purchases
customers make online and pick up at a store, … "We have a unique
advantage because we have the national footprint of stores combined
with our online site that enable programs like site to store, pay with
10
cash or pick up today," .
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
2-11
Mission
• Mission
– The reason for an organization’s existence
• Mission statement
– States the purpose of the organization
– The mission statement should answer the question of
“What business are we in?”
– The mission statement serves as the basis for
organizational goals
2-12
Examples of Mission Statements
• Microsoft: To help people and businesses through
the world to realize their full potential
• Nike: To bring inspiration and innovation to every
athlete in the world.
• Verizon: To help people and businesses
communicate with each other.
• Walt Disney: To be one of world’s leading
producers and providers of entertainment and
information.
Instructor Slides
13
Planning and Decision Making
Mission
“We save people money
so they can live better”
Goals
Organizational Strategies
Functional Goals
Finance
Strategies
Tactics
Operating
procedures
Marketing
Strategies
Tactics
Operating
procedures
Operations
Strategies
Tactics
Operating
procedures
2-14
Goals
• Goals
– Provide detail and the scope of the mission
• Goals can be viewed as organizational destinations
– Goals serve as the basis for organizational
strategies
2-15
Planning and Decision Making
“We save people money
so they can live better”
Mission
•
•
•
•
Goals
Organizational Strategies
consumer low prices
customer service
convenience
efficient, productive and
sustainable solutions
Functional Goals
Finance
Strategies
Tactics
Operating
procedures
Marketing
Strategies
Tactics
Operating
procedures
Operations
Strategies
Tactics
Operating
procedures
2-16
Organizational Strategies
• Strategy
– A plan for achieving organizational goals
• Serves as a roadmap for reaching the organizational
destinations
– Organizations have
• Organizational strategies
– Overall strategies that relate to the entire organization
– Support the achievement of organizational goals and
mission
• Functional level strategies
– Strategies that relate to each of the functional areas
and that support achievement of the organizational
strategy
2-17
Planning and Decision Making
1. Become a truly global company;
2. Understand the business challenges that
retailers will face and solve them;
3. Play an even bigger leadership role on
social issues that matter to our customers;
4. Keep our culture strong everywhere.
6/4/2010
“We save people money
so they can live better”
Mission
•
•
•
•
Goals
Organizational Strategies
1. Developing our people;
2. Driving the productivity loop;
3. Winning in Global eCommerce;
4. Reinvigorating our customer–focused
Finance
culture.
Strategies
5. Leading on social and environmental
issues.
Tactics
Operating
procedures
consumer low prices
customer service
convenience
efficient, productive and
sustainable solutions
Functional Goals
Marketing
Strategies
Tactics
Operating
procedures
Operations
Strategies
Tactics
Operating
procedures
2-18
Examples of Strategies
• Low cost
– e.g., by Outsource operations to countries with low labor cost
• Scale-based strategies
– Use capital-intensive methods to achieve high output volume and low unit
cost
• Specialization
– Focus on narrow product lines or limited services to achieve higher quality
• Newness
– Focus on innovation to create new products or services
• Flexible operations
– Focus on quick response and/or customization
• Service
–
Focus on various aspects of service (e.g., helpful, reliable, etc)
• Sustainability
–
Focus on environmentally friendly and energy efficient operations
• Quality-based strategies
– focus on quality in all phases of an organization in order to achieve
higher quality than competitors
• Time-based strategies
–
Strategies that focus on the reduction of time needed to accomplish tasks
• Agile operations
– A strategic approach for competitive advantage that emphasizes the use2-19
of
flexibility to adapt and prosper in an environment of change
Strategy Formulation
 Effective strategy formulation requires
taking into account:
1. Core competencies
2. Environmental scanning
•
SWOT
3. Order qualifiers
4. Order winners
2-20
1. Core Competencies
 Core Competencies
The special attributes or abilities that give an
organization a competitive edge

To be effective core competencies and strategies need
to be aligned
2-21
2. Environmental Scanning
• Environmental Scanning is necessary to
identify
– Internal Factors
• Strengths and Weaknesses
– External Factors
• Opportunities and Threats
2-22
Key Internal Factors
1. Human Resources
–
Skills of workforce, expertise, experience, loyalty to the organization
–
Capacities, locations, age, maintenance costs
–
Cash flow, access to additional funding, debt, cost of capital
–
Loyalty, wants and needs
–
Existing, potential for new ones
–
Existing, ability to integrate new and its impact on current and
future operations
2. Facilities and equipment
3. Financial resources
4. Customers
5. Products and services
6. Technology
7. Suppliers
–
Relationships, dependency, quality, flexibility, service
–
Labor relations, company image, distribution channels etc.
8. Other
2-23
Key External Factors
1. Economic conditions
–
Health and directions of the economy, inflation, deflation,
interest rates, taxes, tariffs.
2. Political conditions
–
Attitude towards business, political stability, wars
–
Antitrust laws, regulations, trade restrictions, minimum
wages laws, liability laws, labor laws, patents
3. Legal environment
4. Technology
–
Innovations rate, future process technology, design
technology
5. Competition
–
Number and strength of competitors, basis of
competitions (price, quality etc.)
6. Markets
–
Size, location, brand loyalty, ease of entry, growth
potential, long term stability, demographics.
2-24
SWOT
• Wal-Mart
• Strengths
•
•
•
•
Efficient logistics - latest technology and inventory management
processes
Buying power
Scale of operations
Store network
• Weaknesses
•
•
•
Declining prices and diminishing margins
Online presence
Public image (ethical issues)
• Opportunities
•
•
Online business
Global market
• Threats
•
•
Competition
Saturated US market
2-25
Order Qualifiers & Order Winners
3. Order Qualifiers
– Characteristics that customers perceive as minimum
standards of acceptability for a product or service to be
considered as a potential for purchase
4. Order Winners
– Characteristics of an organization’s goods or services that
cause it to be perceived as better than the competition
• Price, delivery reliability, delivery speed and
quality
– can be order qualifiers or order winners and may change
over time.
2-26
Planning and Decision Making
1. Become a truly global company;
2. Understand the business challenges that
retailers will face and solve them;
3. Play an even bigger leadership role on
social issues that matter to our customers;
4. Keep our culture strong everywhere.
6/4/2010
“We save people money
so they can live better”
Mission
•
•
•
•
Goals
Organizational Strategies
1. Developing our people;
2. Driving the productivity loop;
3. Winning in Global eCommerce;
4. Reinvigorating our customer–focused
Finance
culture.
Strategies
5. Leading on social and environmental
issues.
consumer low prices
customer service
convenience
efficient, productive and
sustainable solutions
Functional Goals
Marketing
Strategies
Operations
Strategies
• reducing operating expenses
Tactics• being as productiveTactics
and efficient as
possible
• information systems, sourcing, business
Operating
Operating
processes and shared service
procedures
procedures
• investments to leverage
additional
opportunities in e–commerce
Tactics
Operating
procedures
2-27
Operations Strategy
• Operations strategy
– The approach, consistent with organization strategy, that is used to
guide the operations function.
– But… Organization Strategy should take into account the realities of
operations strengths and weaknesses
Organizational
Strategy
Operations Strategy
Examples of Companies or Services
Low Price
Low Cost
U.S. first-class postage
Wal-Mart
Short processing times
McDonald’s restaurants
On-time delivery
FedEx
High performance design
and/or high quality processing
Sony TV
Consistent Quality
Coca-Cola
Differentiation:
Newness
Innovation
3M, Apple
Differentiation:
Variety
Flexibility
Burger King (Have it your way”)
Volume
McDonald’s (“Buses Welcome”)
Differentiation:
Service
Superior customer service
Disneyland
Differentiation:
Location
Convenience
Responsiveness
Differentiation:
High Quality
IBM
Supermarkets; Mall Stores
2-28
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
2-29
Tactics and Operations
• Tactics
– The methods and actions taken to accomplish
strategies
– The “how to” part of the process
• Operations
– The actual “doing” part of the process
2-30
Mission, Organizational strategy,
Operations strategy
The Overall
organization
Operations
Management
level
Time
Horizon
Scope
Level
of
Detail
Relates to
Mission
Top
Long
Broad
Low
Survival,
profitability,
Strategy
Senior
Long
Broad
Low
Growth rate, market
share
Strategic
Senior
Moderate
to Long
Broad
Low
Product design, choice
of location, choice of
technology, new
facilities
Tactical
Middle
Moderate
Moderate
Moder
ate
Employment levels,
output levels,
equipment selection,
facility layout
Operational
Low
Short
Narrow
High
Scheduling personnel,
adjusting output rates,
inventory management,
purchasing
31
Productivity
• Productivity
– A measure of the effective use of resources,
usually expressed as the ratio of output to
input
• Productivity measures are useful for
– Tracking an operating unit’s performance over
time
• Planning workforce requirements
• Scheduling equipment
• Financial analysis
2-32
“The Factory Floor Has a Ceiling on Job
Creation ” wsj.com 1/12/2012
•
factories have been
producing more
with fewer
workers.
•
Output for each
hour of work, or
productivity, is up
an extraordinary
40% as factories
have adopted new
technologies and
production
processes.
33
Why does Productivity Matters?
• High productivity is linked to higher
standards of living -> Have more, work less.
• Higher productivity relative to the
competition leads to competitive advantage
in the marketplace.
• Manufacturing incorporates R&D ->
competitive edge.
• Manufacturing has beneficial side effect –
service jobs.
2-34
Productivity
Outputs
Productivity =
Inputs
• Partial measures
–
output/(single input)
• Multi-factor measures
–
output/(multiple inputs)
• Total measure
–
output/(total inputs)
2-35
Measures of Productivity
Outputs
Productivity =
Inputs
2-36
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
2-37
Productivity Calculation Example
Units produced:
5,000
Standard price:
$30/unit
Labor input:
500 hours
Cost of labor: $25/hour
Cost of materials: $5,000
Cost of overhead: 2x labor cost
What is the
multifactor
productivity?
2-38
Solution
Multifacto r Productivi ty =
Output
Labor + Material + Overhead
=
5,000units $30/unit
(500hours $25/hour)+ $5,000+ (2(500hours $25/hour))
=
$150,000
$42,500
= 3.5294
What is the implication of an unitless measure of productivity?
2-39
Productivity Growth
Productivity Growth =
Current productivity - Previous productivity
100%
Previous productivity
Example: Labor productivity on the ABC assembly line was 25 units per hour in
2009. In 2010, labor productivity was 23 units per hour. What was the
productivity growth from 2009 to 2010?
Productivity Growth=
23- 25
100%  8%
25

2-40
Service Sector Productivity
 Service sector productivity is difficult to
measure and manage because
 It involves intellectual activities
 It has a high degree of variability
2-41
Factors Affecting Productivity
Methods
Capital
INCREASE:
Calculators,
Computers,
Faxes, copiers,
Internet search
engines, Voice
mail, cell phones,
email
Technology
Quality
REDUCE:
inflexibility, high
costs, mismatched
operations, nonwork activities
Management
2-42
Improving Productivity
1. Develop productivity measures for all operations
2. Determine critical (bottleneck) operations
3. Develop methods for productivity improvements
4. Establish (reasonable) goals
5. Make it clear that management supports and encourages
productivity improvement
6. Measure and publicize improvements
7. Don’t confuse productivity with efficiency
–
Efficiency =
getting the most out of a fixed set of resources
–
Productivity =
effective use of overall resources (e.g., upgrading equipment)
2-43
In-class Case Analysis
• Please read the case “Hazel” on page 38, and
write down your answer to questions:
1. Page 38, 2(b) inventory?
2. Page 38, 3(c) trade-off of launching website
3. Page 69, 1
4. Write a mission statement for Hazel (one
sentence)
• Hand in after class (write down your full name)
Instructor Slides
44
Answers
• 1. Inventory: mowers, parts, fuel, lubricants,
fertilizer, chemicals, tools, etc.
• 2. Trade-offs: Risk involved in starting a new type
of business using new technology and making it
successful, learning curve involved in the area of
e-commerce, additional work load, hiring of more
employees in the area of Web design, computer
programmers, etc.
• 3. Competitive advantage: Her customers are her
neighbors and friends. She has had personal
relationships with many of her customers for
years and they are going to want to help her as
long as she does a good job.
• 4. Slides
…
Instructor
45