Competitiveness, Strategy, and Productivity

1. Competitiveness, Strategy, and Productivity Y.-H. Chen, Ph.D. International College Ming-Chuan University

2. Business Goals • Better quality • Higher productivity • Lower cost • The ability to quickly respond to customer needs How to achieve these goals?

3. Competitiveness, Strategy, and Productivity • Competitiveness: How effective an organization is in the marketplace compared with other organizations that offer similar products or services. • Strategy: The plans that determine the direction an organization takes in pursuing its goals. • Productivity: The effective use of resources.

4. Competitiveness How to achieve competitiveness? • Identifying consumer wants and / or needs • Pricing and quality • Advertising and promotion

5. Operations and Competitiveness How do operations affect competitiveness? • Product and service design • Cost • Location • Quality • Quick response • Flexibility • Inventory management • Supply chain management • Service • Managers and workers

6. Why some organizations fail? • Too much emphasis on short-term financial performance • Failing to take advantage of strengths and opportunities • Failing to recognize competitive threats • Neglecting operations strategy • Too much emphasis in product and service design and not enough on improvement • Neglecting investments in capital and human resources • Failing to establish good internal communications • Failing to consider customer wants and needs

7. Competitiveness Summary • What customers want? • What is the best way to satisfy those wants?

8. Strategies • Plans for achieving organizational goals. • Can be long term, intermediate term, or short term. • Must be designed to support the organization’s missions and its goals.

9. Mission, Strategy, and Tactic • Mission: The reason for existence for an organization. The basis for organizational goals. • Mission Statement: A clear statement of purpose. (Table 2.1, p.39) • Strategy: A plan (roadmap) for achieving organizational goals. • Tactics: The methods or actions taken to accomplish strategies.

10. Mission Goals Organizational strategy Functional strategies Finance Marketing Operations Tactics Tactics Tactics Operations operations Finance operations Marketing operations Mission, Strategy, and Tactics in Production / Operations Management

11. Mission, Strategy, and Tactic Example 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: Live a good life Goal/Mission: Successful career, good income Strategy: Obtain a college education Tactics: Select a college and a major Operations: Register, buy books, take courses, study, graduate, get job

12. Strategy Formulation • Take into account the realities of operations' strength and weakness. • Capitalizing on strength and dealing with weakness. (This is generally ignored in a business.) • SWOT approach (strength, weakness, opportunity, and threat) critically examines factors that could have either positive or negative effects.

13. SWOT Analysis

14. Price Flexibility Quality Differentiation Time Strategy Examples • Distinctive competencies • Environmental scanning • Technological change • Order qualifiers and order winners • Quality and time • Outsourcing • Globalization

15. Distinctive Competencies The special attributes or abilities that give an organization a competitive edge. • Price • Quality • Time • Flexibility • Service • Location

16. Price Low Cost U.S. first-class postage Motel-6, Red Roof Inns Quality High-performance design or high quality Consistent quality Sony TV Lexus, Cadillac Pepsi, Kodak, Motorola Time Express Mail, Fedex, One-hour photo, UPS Rapid deliveryOn-time delivery Flexibility Variety Volume Burger King Supermarkets Service Superior customer service Disneyland Nordstroms Location Convenience Banks, ATMs Distinct Competitiveness Examples

17. External factors Economic conditions Political conditions Legal environment Technology Competition Markets Internal factors Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers Environmental Scanning Strategy

18. Technological Change Strategy Technological changes occur in • Products • High-definition TV, improved computer chips, improved cellular telephone systems, and improved design of earthquake structures. • Services • Fast order processing and fast delivery. • Processes • Robotics, automation, computer-assisted processing, point-of-sale scanners, and flexible manufacturing systems.

19. Order Qualifiers and Order Winners Strategies • Order qualifiers • Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase • Order winners • Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition

20. Quality and Time Strategies • Quality-based strategies focus on satisfying customers by integrating quality into all phases of the organization. • Time-based strategies focus on reducing the time required to accomplish various activities. • The rationale is that, by reducing time, cost is generally less, productivity is higher, quality tends to be higher, product innovation appears on the market sooner, and customer service is improved. • A company that can bring out new products three times faster than its competitors enjoys a huge advantage.

21. Outsourcing Strategy • Reduce overhead • Gain flexibility • Take advantage of suppliers’ expertise

22. Globalization • Increased market share • Risks • May work only locally • Political or social upheaval • Coordination and management

23. Productivity • Effective use of resources. • An index that measures output relative to the input.

24. Productivity Reality Check? Productivity gains involves getting employees to work harder. False. The fact is that many productivity gains in the past have come from technological improvements. Productivity is the same as efficiency. Efficiency is a narrow concept that pertains to getting the most out of a given set of resources; productivity is a broader concept that pertains to effective use of overall resources. Example: An efficiency perspective on mowing a lawn given a hand mower would focus on the best way to use the hand mower; a productivity perspective would include the possibility of using a power mower.

25. Capital Quality Technology Management Productivity • Productivity is directly related to • Competitiveness • Standard of living • Inflation • Productivity measures can be used to track performance over time. • When improvements are needed.

26. Factors Affect Productivity • methods, capital, quality, technology, and management. • Examples: • Standardization, Internet, computer viruses, scrap rate, new worker, safety, short of IT skill, layoff, labor turnover, workplace design, training, equipment breakdown, material shortage.

27. Productivity Improvement • Establish reasonable goals • Develop productivity measures • Look at the system as a whole • Develop methods for achieving productivity improvement (e.g. quality circle) • Management support • Measure and publish results

28. Productivity Measures • Partial measures • output/(single input) • Multi-factor measures • output/(multiple inputs) • Total measure • output/(total inputs)

29. Partial Output Output Output Outputmeasures Labor Machine Capital Energy Multifactor Output Output measures Labor + Machine Labor + Capital + Energy Total Goods or Services Produced measure All inputs used to produce them Productivity Measures

30. Productivity MeasureExample 10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr Cost of raw material: $5,000 Cost of purchased material: $25,000 What is the labor productivity?

31. Productivity MeasureExample, 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

32. Productivity MeasureExample, Multifactor Productivity MFP = Output Labor + Materials MFP = (10,000 units)*($10) (500)*($9) + ($5000) + ($25000) MFP = 2.90

33. Productivity MeasureExample #1 Determine the productivity for these cases : • Four workers installed 720 square yards of carpeting in eight hours. • A machine produced 68 usable pieces in two hours.

34. Productivity MeasureExample #1 Solution • Four workers installed 720 square yards of carpeting in eight hours. • A machine produced 68 usable pieces in two hours. 720 square yards 4 workers 720 square yards 4 workers x 8 hours/worker Productivity= or = 180 square yards/worker or 22.5 square yards/hour 68 pieces 2 hours Productivity= = 34 pieces/hour

35. Productivity MeasureExample #2 Determine the multifactor productivity for the combined input using the following data: Output: 1760 units Input: Labor $1000, Material $520, Overhead $2000.

36. Productivity MeasureExample #2 Solution Output: 1760 units Input: Labor $1000, Material $520, Overhead $2000. Multifactor Productivity Output Labor + Material + Overhead = 1760 units $1000 + $520 + $2000 = = 0.50 units/dollar

37. Productivity Measure Summary • Calculation of multifactor productivity requires a common unit of measurement. • It is best to treat productivities as approximate indicators rather than precise measurements.