COMPETITIVENESS,

STRATEGY AND
PRODUCTIVITY
CHAPTER CONTENT

 Competitiveness
 Reasons for the Failure of Some Business Organizations
 Strategy
 Productivity

2
1
COMPETITIVENESS
3
“ How effectively an organization meets
the wants and needs of customers
relative to others that offer similar
goods or services

4
INFLUENCE OF MARKETING ON
COMPETITIVENESS

1. Identifying 2. Price and quality 3. Advertising and

consumer wants promotion
and/or needs

Achieving a perfect Informing potential

Understanding the
match between customers about
trade-off decision
consumer wants and features of products
consumers make
needs and the or services, and
between price and
organization’s goods attracting buyers
quality
and/or services
5
INFLUENCE OF OPERATIONS ON
COMPETITIVENESS

1. Product and 2. Cost 3. Location

service design
>Cost of output is a >Important in terms of
>Special key variable affecting cost and convenience for
characteristics or pricing decisions and customer
features of a product or profits >Location near inputs
service >Cost-reduction >Location near markets
>Innovation efforts are generally
ongoing in business
>Time-to-market
organizations
6
INFLUENCE OF OPERATIONS ON
COMPETITIVENESS

4. Quality 5. Quick response 6. Flexibility

>Materials, >Quickly bringing >The ability to respond to

workmanship, design, new or improved changes
and service products or services >Alterations: in design
>Customers are >Quickly delivering features of a product or
generally willing to existing products or service, or in volume
pay more for high services demanded by customers, or
quality products or >Quickly handling in the mix of products or
services customer complaints services offered
7
INFLUENCE OF OPERATIONS ON
COMPETITIVENESS

7. Inventory management 8. Supply chain management

>Effectively matching supplies >Coordinating internal and

of goods with demand external operations (buyers and
suppliers) to achieve timely and
cost-effective delivery of goods
throughout the system

8
INFLUENCE OF OPERATIONS ON
COMPETITIVENESS

9. Service 10. Managers and workers

>Might involve after-sale >If managers and workers are

activities competent and motivated, they
>Or it might involve extra can provide a distinct
attention while work is in competitive edge by their skills
progress and the ideas they create
>Service quality can be a key >One often overlooked skill:
differentiator; and it is one that is answering the telephone
often sustainable
9
 2
REASONS FOR THE FAILURE
OF BUSINESS ORGANIZATIONS

10
REASONS FOR THE FAILURE OF
BUSINESS ORGANIZATIONS

1. Neglecting operations strategy.

2. Failing to take advantage of strengths and opportunities, and/or failing to recognize
competitive threats.
3. Putting too much emphasis on short-term financial performance at the expense of
research and development.
4. Placing too much emphasis on product and service design and not enough on process
design and improvement.
5. Neglecting investments in capital and human resources.
6. Failing to establish good internal communications and cooperation among different
functional areas.
7. Failing to consider customer wants and needs. 11
3
STRATEGY
12
PLANNIG AND DECISION MAKING
HIERARCHY IN ORGANIZATIONS

13
VISION STATEMENT &
MISSION STATEMENT

A vision is what a firm strives A mission is the reason for

to achieve or where a firm the existence of an
strives to be in the long run. organization.
A vision statement describes A mission statement, is a
the firm as it would appear in declaration that firms use to
a future successful state.  describe their purpose and
It answers to the question major organizational
“What do we want to commitments.
become?” It answers to the question
“What is our business?’’ 14
“
A just world without poverty (Oxfam)

A world in which every child attains the right

to survival, protection, development, and
participation (Save the Children)

Examples of Vision Statements

15
“
A computer on every desk and in every home
(Microsoft; at its founding)

Our vision is to be earth's most customer

centric company; to build a place where people
can come to find and discover anything they
might want to buy online (Amazon)

Examples of Vision Statements

16
“
Growing the movement of leaders who work to
ensure that kids growing up in poverty get an
excellent education (Teach for America).

To help people and businesses throughout the

world to realize their full potential. (Microsoft)

17
“
We take pride in making a perfect pizza and providing
courteous and helpful service on time all the time.
Every customer says, "I'll be back!"
We are the employer of choice offering team members
opportunities for growth, advancement, and rewarding
careers in a fun, safe working environment.
We are accountable for profitability in everything we
do, providing our shareholders with value growth.
(Pizza Hut)

Examples of Mission Statements

18
GOALS

A mission statement serves as the basis for

organizational goals, which provide more detail
and describe the scope of the mission.

Goals serve as a foundation for the

development of organizational strategies.

19
STRATEGIES AND TACTICS

Strategies are action plans for achieving long term goals and
objectives of an organization.

Three Basic Business Strategies: Low cost, responsiveness (ability

to respond to changing demands), Differentiation (can relate to
product of service features, quality, reputation, customer service)

Tactics are the methods and actions taken to accomplish strategies

20
KEY STEPS IN STRATEGY FORMULATION

1. Establish 2. Assess 3. Identify 4. Select one

direct link to SWOT and order winners or two
mission and identify core and order strategies to
vision statement competencies qualifiers focus on

21
STRENGTHS, WEAKNESSES,
OPPORTUNITIES AND THREATS

 Strengths and weaknesses have an internal focus and

are typically evaluated by operations people.

 Threats and opportunities have an external focus and

are typically evaluated by marketing people

22
    
STRENGTHS (S) WEAKNESSES (W)
   
   
Internal
Internal attributes and resources that Internal limitations that
support a successful outcome interfere with a successful outcome
 
 
   
OPPORTUNITIES (O) THREATS (T)
   
   
External
External factors that a firm can use to Current and emerging external
its advantage factors that may hamper a firm’s
  performance
 
 
 Positive
SWOT DIAGRAM  Negative 23
KEY EXTERNAL FACTORS

ECONOMIC POLITICAL LEGAL

CONDITIONS CONDITIONS ENVIRONMENT
general health and direction of favorable or unfavorable attitudes
the economy, inflation and toward business, political
Government regulations, trade
deflation, interest rates, tax laws, stability or instability, and wars
restrictions, minimum wage
and tariffs regulations, labor laws, and patents

TECHNOLOGY COMPETITION MARKETS

The rate at which changes are the number and strength of size, location, brand loyalties,
occuring in products, in services competitors, the basis of ease of entry, potential for
and in processes competition (price, quality, growth, long-term stability, and
special features), and the ease of demographics.
market entry.

24
KEY INTERNAL FACTORS

HUMAN FACILITIES AND FINANCIAL

RESOURCES EQUIPMENT RESURCES
the skills and abilities of Capacities, location, age, and
managers and workers, special cost to maintain or replace
Cash flow, access to additional
talents (creativity, designing,
funding, existing debt burden, and
problem solving), loyalty to the
cost of capital
organization, expertise,
dedication, and experience. PRODUCTS AND SUPPLIERS
CUSTOMERS SERVICES
loyalty, existing relationships, existing products and services, supplier relationships,
and understanding of wants and and the potential for new dependability of suppliers,
needs of customers products and services quality, flexibility, and service

25
CORE COMPETENCIES

Core competencies are those special attributes or abilities

possessed by an organization that give it a competitive edge.

The most effective organizations use an approach that

develops core competencies based on customer needs as well
as on what the competition is doing.

To be effective, strategies and core competencies need to be

aligned.
26
ORDER WINNERS AND ORDER QUALIFIERS

Order qualifiers are Order winners are those

those characteristics that characteristics of an
potential customers organization’s goods or
perceive as minimum services that cause them
standards of to be perceived as better
acceptability for a than the competition
product to be considered
for purchase.
27
ORDER WINNERS AND ORDER QUALIFIERS

Order qualifiers may not be sufficient to get a potential customer

to purchase from the organization.

An organization needs to
>determine the set of order qualifier characteristics and the set of
order winner characteristics
>decide on the relative importance of each characteristic so that
appropriate attention can be given to the various characteristics

28
SELECTING STRATEGIES TO FOCUS ON

The organization may decide to have a single, dominant strategy (e.g.,

be the price leader) or to have multiple strategies.

A single strategy would allow the organization to concentrate on one

particular strength or market condition.

Multiple strategies may be needed to address a particular set of

conditions.
29
SELECTING STRATEGIES TO FOCUS ON

Here are some examples of different strategies an organization might choose from:
Low cost. Outsource operations to countries that have low labor costs.
Scale-based strategies. Use capital-intensive methods to achieve high output volume and
low unit costs.
Specialization. Focus on narrow product lines or limited service to achieve higher quality.
Newness. Focus on innovation to create new products or services.
Flexible operations. Focus on quick response and/or customization.
High quality. Focus on achieving higher quality than competitors.
Service. Focus on various aspects of service (e.g., helpful, courteous, reliable, etc.).
Sustainability. Focus on environmental-friendly and energy-efficient operations.
30
OPERATIONS STRATEGY

Operations strategy refers to the approach,

consistent with the organization strategy, that is
used to guide the operations function.

31
A COMPARISON OF AN ORGANIZATION’S MISSION, ITS
OVERALL STRATEGY, & ITS
OPERATIONS STRATEGY, TACTICS, AND OPERATIONS

32
STRATEGIC OPERATIONS MANAGEMENT
DECISION AREAS

33
OPERATIONS STRATEGIES

 Cost minimization
 Product differentiation
 Quality-based strategies
 Time-based strategies

34
QUALITY-BASED STRATEGY

A strategy that focuses on quality in all phases

of an organization.

Why Do Organizations Adopt quality-Based

Strategies?
 to overcome an image of poor quality
 to catch up with the competition
 to maintain an existing image of high quality
35
TIME-BASED STRATEGY

A strategy that focuses on reduction of time needed to

accomplish tasks

Why Do Organizations Adopt Time-Based

Strategies?
 to improve service to the customers
 to gain a competitive advantage over rivals who take
more time to accomplish the same tasks. 36
AREAS WHERE TIME REDUCTION CAN BE ACHIEVED

Planning time: The time needed to react to a competitive threat,

to develop strategies and select tactics, to approve proposed
changes to facilities, to adopt new technologies, and so on.

Product/service design time: The time needed to develop and

market new or redesigned products or services.

Processing time: The time needed to produce goods or provide

services. This can involve scheduling, repairing equipment,
methods used, inventories, quality, training, and the like.
37
AREAS WHERE TIME REDUCTION CAN BE ACHIEVED

Changeover time: The time needed to change from producing one type of
product or service to another. This may involve new equipment settings and
attachments, different methods, equipment, schedules, or materials.

Delivery time: The time needed to fill orders.

Response time for complaints: There might be customer complaints about

quality, timing of deliveries, and incorrect shipments. There might also be
complaints from employees about working conditions (e.g., safety, lighting,
heat or cold), equipment problems, or quality problems.
38
ORGANIZATION STRATEGY AND OPERATIONS
STRATEGY

Organization Operations Strategy Example

Strategy
Low Price Low cost Walton refrigerators
Responsiveness Short Processing Time CP/Bengal Meats food
stores
On-time Delivery Sundarban courier, Pathao
rides
Differentiation: High High-performance design Sony TV
Quality and/or high-quality
processing 39
ORGANIZATION STRATEGY AND OPERATIONS
STRATEGY

Organization Strategy Operations Example

Strategy
Differentiation: Newness Innovation Apple
Differentiation: Variety Flexibility Burger King (“Have it your way”),
Hospital emergency room
Volume McDonald’s (“Buses welcome”),
Toyota
Differentiation: Service Superior customer Amazon, Amber IT
service
Differentiation: Location Convenience DBBL ATMs 40
 IMPLICATIONS OF ORGANIZATION
STRATEGY FOR OPERATIONS MANAGEMENT

Organization Strategy Implications for Operations Management

Low price  Low variation in products/services and a high-volume,
steady flow of goods resulting in maximum use of
resources through the system
 Standardized work, material, and inventory
requirements
High quality  Higher initial cost for product and service design, and
process design
 More emphasis on assuring supplier quality
41
 IMPLICATIONS OF ORGANIZATION
STRATEGY FOR OPERATIONS MANAGEMENT

Organization Strategy Implications for Operations Management

Quick response  Flexibility
 Extra capacity
 Higher levels of some inventory items
Newness/innovation  Large investment in research and development for
new or improved products and services
 Adapt operations and supply processes to suit
new products or services.

42
 IMPLICATIONS OF ORGANIZATION
STRATEGY FOR OPERATIONS MANAGEMENT

Organization Strategy Implications for Operations Management

Product or service  high variation in resource and more emphasis on
variety product and service design
 higher worker skills
 cost estimation more difficult
 scheduling more complex
 quality assurance more involved
 inventory management more complex
 matching supply to demand more difficult

43
 IMPLICATIONS OF ORGANIZATION
STRATEGY FOR OPERATIONS MANAGEMENT

Organization Implications for Operations Management

Strategy
Sustainability  Affects location planning
 Affects product and service design
 Affects process design
 Affects outsourcing decisions
 Affects returns policies
 Affects waste management

44
4
PRODUCTIVITY

45
PRODUCTIVITY

Productivity is an index that measures effective use of

resources, usually expressed as the ratio of output to
input.
▰  

PRODUCTIVITY=

46
COMPUTING PRODUCTIVITY

Productivity measures can be based on a single input

(partial productivity), on more than one input (multifactor
productivity), or on all inputs (total productivity).

The choice of productivity measures depends primarily on

the purpose of the measurement.

47
SOME EXAMPLES OF DIFFERENT TYPES OF
PRODUCTIVITY MEASURES

48
SOME EXAMPLES OF PARTIAL PRODUCTIVITY
MEASURES

49
PRODUCTIVITY GROWTH

PRODUCTIVITY GROWTH=
▰  
×100%

50
LET’S DO SOME
MATHS!
FACTORS AFFECTING PRODUCTIVITY

COMMON FACTORS:

 Methods
 Capital
 Quality
 Technology (Can increase or decrease productivity)
 Management

52
 FACTORS AFFECTING PRODUCTIVITY

OTHER FACTORS:

 Standardizing  Safety,
 Quality differences  Layoffs,
 Use of the Internet  Labor turnover,
 Computer viruses  Design of the workspace, Incentive
 Searching for lost or misplaced plans that reward productivity
items increases
 Scrap rates
 New workers
 A shortage of technology-savvy 53
workers
IMPROVING PRODUCTIVITY

STEP 1: Develop productivity measures for all operations

Step 2: Look at the system as a whole in deciding which operations are most critical

Step 3: Develop methods for achieving productivity improvements

Step 4: Establish reasonable goals for improvement

Step 5: Make it clear that management supports and encourages productivity

improvement

Step 6: Measure improvements and publicize them 54

THANKS!
Any questions?

55