Competitiveness, Strategy, And Productivity

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

ex ib i

Price

Quality Di

ffe

re

lity

Service nti

ati

on

Time

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: •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

Planning and Decision Making Figure 2-1

Mission Goals Organizational strategy Functional strategies Finance

Tactics Finance operations

Marketing Operations

Tactics

Tactics

Marketing 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 On-time delivery

Express Mail One-hour photo

Flexibility

Variety Volume

Burger King Supermarkets

Service

Superior customer service

Disneyland 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 Delivery

On time!

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 measures

Output Labor

Multifactor measures

Output Labor + Machine

Total measure

Output Output Machine Capital

Output Energy

Output Labor + Capital + Energy

Goods or Services Produced All inputs used to produce them

Examples of Partial Productivity Measures Table 2-5 Labor Productivity

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

Machine Productivity

Units of output per machine hour Dollar value 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

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 worker)=22.5 yards/hr • b) Productivity = (usable pieces)/(Production time) = (68 pieces)/(2 hrs)=34 pieces/hr 2

Example 10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr

What is the labor productivity?

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

Annual % Change

6 4 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 Operation Operation

Bottleneck Operation