chapter 2 competitiveness, strategy, and productivity mcgraw-hill/irwin copyright © 2012 by the...
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Chapter 2
Competitiveness, Strategy, and Productivity
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 2: Learning ObjectivesYou should be able to:
1. List the three primary ways that business organizations compete2. Explain five reasons for the poor competitiveness of some companies3. Define the term strategy and explain why strategy is important4. Discuss and compare organization strategy and operations strategy, and
explain why it is important to link the two5. Describe and give examples of time-based strategies6. Define the term productivity and explain why it is important to
organizations and countries7. Provide some reasons for poor productivity and some ways of improving
it
2-2Student Slides
Competitiveness
• Competitiveness:– How effectively an organization meets the wants
and needs of customers relative to others that offer similar goods or services
– Organizations compete through some combination of their marketing and operations functions
• What do customers want?• How can these customer needs best be satisfied?
Student Slides 2-3
Businesses Compete Using Operations
1. Product and service design2. Cost3. Location4. Quality5. Quick response6. Flexibility7. Inventory management8. Supply chain management9. Service10. Managers and workers
2-4Student Slides
Hierarchical Planning
Mission
Goals
Organizational Strategies
Tactics
Functional Strategies
2-5Student Slides
Mission, Goals, and Strategy
• Mission– The reason for an organization’s existence
• Goals– Provide detail and the scope of the mission
• Goals can be viewed as organizational destinations• Strategy
– A plan for achieving organizational goals• Serves as a roadmap for reaching the organizational destinations
Student Slides2-6
Core CompetenciesCore Competencies
The special attributes or abilities that give anorganization a competitive edge
To be effective core competencies and strategies need to be aligned
Student Slides 2-7
Strategy FormulationEffective strategy formulation requires taking
into account:Core competenciesEnvironmental scanning
SWOTSuccessful strategy formulation also requires
taking into account:Order qualifiersOrder winners
2-8Student Slides
Operations Strategy• Operations strategy
– The approach, consistent with organization strategy, that is used to guide the operations function.
Student Slides
Decision Area What the Decisions Affect
Product and service design Costs, quality, liability, and environmental issues
Capacity Cost, structure, flexibility
Process selection and layout
Costs, flexibility, skill level needed, 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
2-9
Strategic OM Decision Areas
Student Slides
Decision Area What the Decisions Affect
Product and service design Costs, quality, liability, and environmental issues
Capacity Cost, structure, flexibility
Process selection and layout
Costs, flexibility, skill level needed, 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
2-10
Time- and Quality-Based StrategiesTime-based strategies
Strategies that focus on the reduction of time needed to accomplish tasksIt is believed that by reducing time, costs are lower, quality is
higher, productivity is higher, time-to-market is faster, and customer service is improved
Quality-based strategyStrategy that focuses on quality in all phases of an organization
Pursuit of such a strategy is rooted in a number of factors:– Trying to overcome a poor quality reputation– Desire to maintain a quality image– A desire to catch up with the competition– A part of a cost reduction strategy
Student Slides 2-11
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– Judging the performance of an entire industry or
country
Student Slides 2-12
Productivity Measures
Student Slides
Partial Measures Output
Single Input;
Ouput
Labor;
Output
Capital
Multifactor Measures Output
Multiple Inputs;
Ouput
Labor +Machine;
Output
Labor +Capital +Energy
Total Measure Goods or services produced
All inputs used to produce them
Input
Output=tyProductivi
2-13
Improving Productivity1. 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
Don’t confuse productivity with efficiency
Student Slides 2-15