01/14/16
Compe,,veness
Strategy
and
Produc,vity
Compe,,veness
Compe,,veness:
How eec,vely an organiza,on meets the wants
and needs of customers rela,ve to others that
oer similar goods or services
Organiza,ons compete through some
combina,on of their marke,ng and opera,ons
func,ons
What do customers want?
How can these customer needs best be sa,sed?
By Prof. Jerome Alvarez
Why Some Organiza,ons Fail
Businesses Compete Using
Opera,ons
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Product and service design
Cost
Loca,on
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service
Managers and workers
Emphasis on short-term nancial performance
Neglec,ng strengths and opportuni,es
Neglec,ng opera,ons strategy
Failing to recognize compe,,ve threats
Neglec,ng process improvement
Neglec,ng investments in capital and human resources
Lack of good internal communica,ons
Neglec,ng customer wants and needs
Mission/Strategy/Tac,cs
Strategy
Action plan to
achieve mission
Functional areas
have strategies
Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
Mission
Strategy
Tac+cs
Mission: The reason for existence for an organiza,on
Mission Statement: States the purpose of an organiza,on
Goals:
Provide detail and scope of mission
Strategy: Plans for achieving organiza,onal goals
Tac,cs:
The methods and ac,ons taken to accomplish strategies
01/14/16
Strategic Process
Organizations
Mission
Functional
Area Missions
Marketing
Strategy Analysis
Planning and Decision Making
Mission
Goals
Organiza,onal Strategies
Opera+ons Strategy:
The approach, consistent
with the organiza,on
strategy, that is used to
guide the opera,ons
func,on
Finance
Strategies
Marke,ng
Strategies
o
o
Opera,ons
Strategies
o
o
Tac,cs
Tac,cs
Opera,ng
procedures
Opera,ng
procedures
Tac,cs
A strong compe--ve advantage is
dicult to copy, o7en because of a
rms culture, habits, or sunk costs.
Dis,nc,ve Competencies
The special a+ributes or
Low-cost strategy firms:
abili1es that give an
Honda Motor Co.
organiza1on a
Marriott's Fairfield Inns
Wal-Mart; Sam's Club
compe11ve edge.
Can reshape industry
Strategy Factors
Southwest Airlines
o
Func,onal Goals
Finance/
Accounting
Operations
Price
Quality
Time
Flexibility
Service
Loca,on
McDonalds
Warning:
Do not lower quality.
Wal-Mart vs. Target
Businesses with quality goods
usually have large market shares
Apple 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.
Opera,ng
procedures
10
Strategy Formula,on
Dis,nc,ve competencies
Environmental scanning
SWOT
Order qualiers:
Characteris,cs that customers perceive as minimum standards of
acceptability to be considered as a poten,al purchase
Order winners:
Characteris,cs of an organiza,ons goods or services that cause it to
be perceived as becer than the compe,,on
Deciding Factors in Strategy Decisions
Internal Factors
Human Resources
Facili,es and equipment
Financial resources
Customers
Products and services
Technology
Suppliers
External Factors
Economic condi,ons
Poli,cal condi,ons
Legal environment
Technology
Compe,,on
Markets
01/14/16
Four Interna,onal Opera,ons
Strategies (Heizer/Render)
Reasons to Globalize
Tangible
Reasons
Intangible
Reasons
1.
2.
3.
4.
5.
6.
Reduce costs (labor, taxes, tariffs, etc.)
Improve supply chain
Provide better goods and services
Understand markets
Learn to improve operations
Attract and retain global talent
Cost Reduc,on Considera,ons
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
International Strategy
Examples
Coca-Cola
Nestl
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
McDonalds Hard Rock Cafe
Low
Low
High
Local Responsiveness Considera,ons
(Quick Response and/or Dieren,a,on)
Match Product & Parent Intl.
Braun Household
Appliances
Firestone Tires
Godiva Chocolate
Haagen-Dazs Ice Cream
Jaguar Autos
MGM Movies
Lamborghini Autos
Alpo Peioods
1. Volkswagen
2. Bridgestone
3. Campbell Soup
4. Ford Motor Company
5. Gillette
6. Nestl
7. Pillsbury
8. Sony
Match Product & Parent - Local
Krispy Kreme
Mang Inasal
Kidzania
Yellow Cab
Sky Cable
Volkswagen
Pancake House
McDonalds
Resorts World
City of Dreams
SCTEX
St. Marcs Caf/ Paul
Restaurant
Family Mart
1. Maxs
2. Ayala
3. Jollibee
4. SM
5. Metropacific
6. ABS-CBN/Lopez Group
7. AGI/ Megaworld
8. Bench
Match Product & Parent
Braun Household
Appliances
Firestone Tires
Godiva Chocolate
Haagen-Dazs Ice Cream
Jaguar Autos
MGM Movies
Lamborghini Autos
Alpo Peioods
1. Volkswagen
2. Bridgestone
3. Campbell Soup
4. Ford Motor Company
5. Gillette
6. Nestl
7. Pillsbury
8. Sony
Match Product & Country
Braun Household
Appliances
Firestone Tires
Godiva Chocolate
Haagen-Daz Ice Cream
Jaguar Autos
MGM Movies
Lamborghini Autos
Alpo Pet Foods
1. Great Britain
2. Germany
3. Japan
4. United States
5. Italy
01/14/16
Match Product & Country
Braun Household
Appliances
Firestone Tires
Godiva Chocolate
Haagen-Daz Ice Cream
Jaguar Autos
MGM Movies
Lamborghini Autos
Alpo Pet Foods
Strategies for Compe,,ve Advantage
(Generic Strategies)
Dieren,a,on becer, or at least
dierent
Cost leadership cheaper
Focus/Response Focus cost/Focus
dieren,a,on/ Rapid response
1. Great Britain
2. Germany
3. Japan
4. United States
5. Italy
Strategies for Compe,,ve Advantage
(Generic Strategies)
DIFFERENTIATION
COST
FOCUS RESPONSE
Flexibility is matching
market changes in
design innova,on and
volumes.
Reliability is mee,ng
schedules.
Timeliness is
quickness
in design, produc,on,
and delivery.
Uniqueness can go
beyond both the
physical
characteris,cs and
service acributes to
encompass everything
that impacts
customers percep,on
of value
Provide the maximum
value (lowest cost) as
perceived by
customer. Does not
imply low quality.
Examples:
Examples:
Examples:
Apple products
Cebu Pacific
Fedex
Starbucks Coffee
Pure Gold
Pizza Huts 5 minute
guarantee
Time- and Quality-Based Strategies
Time-based strategies
Strategies that focus on the reduc,on of ,me needed to accomplish
tasks
Quality-based strategy
Strategy that focuses on quality in all phases of an organiza,on
Goods and Services and
the 10 OM Decisions
OMs Contribu,on to Strategy
Operations
Decisions
Product
Quality
Process
Examples
Specific
Strategy Used
Competitive
Advantage
FLEXIBILITY:
Sonys constant innovation
of new products....Design
HPs ability to lead
the printer marketVolume
Southwest Airlines No-frills service....LOW COST
Location
Layout
Human
resource
Supply chain
Inventory
Scheduling
DELIVERY:
Pizza Huts 5-minute guarantee
at lunchtime.....Speed
Federal Expresss absolutely,
positively on time...Dependability
QUALITY:
Motorolas HDTV converters.........Conformance
Motorolas pagers...Performance
Caterpillars after-sale service
on heavy equipment....AFTER-SALE SERVICE
Fidelity Securitys broad
line of mutual funds.BROAD PRODUCT LINE
Differentiation
(Better)
Response
(Faster)
Cost
leadership
(Cheaper)
Operations
Decisions
Goods and
service
design
Goods
Services
Product is usually Product is not
tangible
tangible
Quality
Many objective
standards
Many subjective
standards
Process
and
capacity
design
Customers not
involved
Customer may be
directly involved
Capacity must
match demand
Maintenance
Heizer/ Render
01/14/16
Goods and Services and
the 10 OM Decisions
Operations
Decisions
Location
selection
Goods
Near raw
materials and
labor
Services
Near customers
Layout
design
Production
efficiency
Enhances product
and production
Human
resources
and job
design
Technical skills,
Interact with
consistent labor
customers, labor
standards, output standards vary
based wages
Goods and Services and
the 10 OM Decisions
Operations
Decisions
Supply
chain
Goods
Relationship
critical to final
product
Services
Important, but
may not be
critical
Inventory
Raw materials,
work-in-process,
and finished
goods may be
held
Cannot be stored
Scheduling
Level schedules
possible
Meet immediate
customer demand
Goods and Services and
the 10 OM Decisions
Company Strategy/Issues
Operations
Decisions
Goods
Services
Maintenance Often preventive Often repair and
and takes place
takes place at
at production site customers site
Product Life Cycle
Introduction
Growth
Maturity
Decline
Best period to
increase market share
R&D engineering is
cri,cal
Prac,cal to change
price or quality image
Strengthen niche
Poor ,me to change
image, price, or quality
Compe,,ve costs
become cri,cal
Defend market
posi,on
Cost control cri,cal
Fast food/ Fine
Dining
restaurants
Sales
Tablets/
Phablets
Wireless
Products
Landline, LCDs,
Fluorescent lamps
CDs, DVDs
OM Strategy/Issues
Product Life Cycle
Introduction
Growth
Product design and
development
cri,cal
Frequent product
and process design
changes
Short produc,on
runs
High produc,on
costs
Forecas,ng cri,cal
Product and process
reliability
Compe,,ve product
improvements and
op,ons
Limited models
Acen,on to quality
Increase capacity
Maturity
Standardiza,on
Less rapid product
changes more
minor changes
Op,mum capacity
Increasing stability
of process
Shio toward product Long produc,on
focus
runs
Enhance distribu,on Product
improvement and
cost cupng
Decline
Licle product
dieren,a,on
Cost
minimiza,on
Overcapacity in
the industry
Produc,vity
Prune line to
eliminate items
not returning
good margin
Reduce capacity
01/14/16
Produc,vity
Produc,vity
Productivity =
Units produced
Input used
Measure of process improvement
Represents output relative to input
Only through productivity increases
can our standard of living improve
Productivity: A measure of the eec,ve use of resources, usually expressed
as the ra,o of output to 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.
Important Note!
Production is a measure of output only
and not a measure of efficiency
The objec,ve is to improve produc,vity!
Examples of Partial Productivity Measures
Produc,vity
Par,al measures:
output/(single input)
Mul,-factor measures: output/(mul,ple inputs)
Total measure:
output/(total inputs)
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
Capital
Technology
Quality
Management
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
Other Factors Aec,ng Produc,vity
Factors Aec,ng Produc,vity
Methods
Labor
Productivity
Standardiza,on
Quality / Scrap rates / Rework
Use of Internet / Computer viruses
Searching for lost or misplaced items
Layos / New workers / Labor turnover
Safety
Shortage of IT workers
Design of the workspace
Incen,ve plans that reward quality and produc,vity
01/14/16
Improving Produc,vity at
Starbucks
A team of 10 analysts
con,nually look for ways to
shave ,me. Some
improvements:
Produc,vity Calcula,ons
Labor Produc,vity
Produc,vity =
Stop requiring signatures
on credit card purchases
under $25
Saved 8 seconds
per transaction
Change the size of the ice
scoop
Saved 14 seconds
per drink
New espresso machines
Saved 12 seconds
per shot
1,000
= = 4 units/labor-hour
250
One resource input single-factor produc,vity
Single-Factor Produc,vity Example
Collins Title Company has a sta of 4, each
working 8 hours per day (for a payroll cost of
$640/day) and overhead expenses of $400 per
day. Collins processes and closes on 8 ,tles
each day. The company recently purchased a
computer ,tle-search system that will allow the
processing of 14 ,tles per day. Although the
sta, their work hours, and pay will be the same,
the overhead expenses are now $800 per day.
Collins Title Produc,vity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
Old labor
produc,vity
Collins Title Produc,vity
Old System:
Units produced
Labor-hours used
8 titles/day
Overhead = $400/day
8 ,tles/day
32 labor-hrs
Collins Title Produc,vity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Old labor
produc,vity
8 ,tles/day
32 labor-hrs
= .25 ,tles/labor-hr
Old labor
produc,vity
New labor
produc,vity
Overhead = $800/day
=
8 ,tles/day
32 labor-hrs
= .25 ,tles/labor-hr
14 ,tles/day
32 labor-hrs
01/14/16
Collins Title Produc,vity
Old System:
Collins Title Produc,vity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Overhead = $800/day
Old labor
produc,vity
New labor
produc,vity
Change in Produc,vity
8 ,tles/day
= .25 ,tles/labor-hr
32 labor-hrs
14 ,tles/day
Old mul,factor
produc,vity
Overhead = $800/day
=
8 ,tles/day
$640 + 400
= .4375 ,tles/labor-hr
32 labor-hrs
=
14 titles/day
.4375-.25
= .75 or 75%
.25
Collins Title Produc,vity
Old System:
Collins Title Produc,vity
Old System:
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
Overhead = $800/day
=
8 ,tles/day
= .0077 ,tles/dollar
$640 + 400
Collins Title Produc,vity
14 titles/day
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Overhead = $800/day
Old mul,factor
produc,vity
New mul,factor
produc,vity
=
=
8 ,tles/day
$640 + 400
= .0077 ,tles/dollar
14 ,tles/day
$640 + 800
= .0097 ,tles/dollar
.0097 - .0077
.0077
Overhead = $800/day
Old mul,factor
produc,vity
New mul,factor
produc,vity
8 ,tles/day
$640 + 400
= .0077 ,tles/dollar
14 ,tles/day
$640 + 800
Mul,-Factor Produc,vity
Old System:
Change in Produc,vity
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Old mul,factor
produc,vity
Staff of 4 works 8 hrs/day
Payroll cost = $640/day
Produc,vity =
Output
Labor + Material + Energy +
Capital + Miscellaneous
Also known as total factor productivity
Output and inputs are often expressed in
dollars
Multiple resource inputs multi-factor productivity
= .2597 or 26%
01/14/16
Paper Co. Produc,vity
Paper Co. Produc,vity
A wrapping paper company produced 2,000 rolls
of paper one day. Standard price is $1/roll.
Labor cost was $160, material cost was $50, and
overhead was $320. Determine the
produc,vity.
A wrapping paper company produced 2,000 rolls
of paper one day. Standard price is $1/roll.
Labor cost was $160, material cost was $50, and
overhead was $320. Determine the
produc,vity.
Produc,vity =
Quan,ty produced @ standard price
Labor cost + Material cost + Overhead
Produc,vity =
2,000 rolls x $1/roll
$160 + $50 + $320
= 3.77 rolls output per dollar unit
Exercise 1
Joyce and Joy make apple crates for resale to local
growers. They and their three employees: Abigael,
Caryl, and Angel invest 50 hours per day making
150 crates.
What is their produc,vity?
They have discussed reassigning work so the ow
through the shop is smoother. If they are correct and
can do the necessary training, they think they can
increase crate produc,on to 155 per day. What would
be their new produc,vity?
Is there an increase or decrease in produc,vity? By how
much?
Exercise 2 - Given the following data:
Units produced
Labor (hrs.)
Resin (pounds)
Capital invested ($)
Energy (BTU)
Last Year
Now
1,000
1,000
300
275
50
45
10,000
11,000
3,000
2,850
Exercise 2
1. Show the percentage change for each category.
2. Jiggs determines his cost as follows:
Labor at $ 10 per hour
Resin at $ 5 per pound
Capital at 1% of investment
Energy $ .50 per BTU
Compute for the mul,-factor basis with dollars
as the common denominator
