Learning Objectives

List and briefly discuss the primary ways that business organizations compete. List five reasons for the poor competitiveness of some companies. Define the term strategy and explain why strategy is important for competitiveness. Contrast strategy and tactics.

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Learning Objectives
Discuss and compare organization strategy and

operations strategy, and explain why it is important to link the two. Describe and give examples of time-based strategies. Define the term productivity and explain why it is important to organizations and to countries. List some of the reasons for poor productivity and some ways of improving it.

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Competitiveness:
How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services

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Businesses Compete Using Marketing

Identifying consumer wants and needs
Pricing Advertising and promotion

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Businesses Compete Using Operations

Product and service design
Cost Location Quality Quick response

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Businesses Compete Using Operations

Flexibility Inventory management Supply chain management Service and service quality Managers and workers

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Why Some Organizations Fail

Too much emphasis on short-term financial

performance Failing to take advantage of strengths and opportunities Neglecting operations strategy Failing to recognize competitive threats

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Why Some Organizations Fail

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

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Mission/Strategy/Tactics
Mission Strategy Tactics

How does mission, strategies and tactics relate to decision making and distinctive competencies?

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Strategy
Mission
The reason

for existence for an organization

Mission Statement
States the purpose of

an organization

Goals
Provide detail and scope of

mission

Strategies
Plans for achieving organizational goals

Tactics
The

methods and actions taken to accomplish strategies

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Planning and Decision Making

Figure 2.1
Mission Goals

Organizational Strategies
Functional Goals Finance Strategies Marketing Strategies Operations Strategies

Tactics Operating procedures

Tactics Operating procedures

Tactics Operating procedures

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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

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Examples of Strategies
Low cost
Scale-based strategies Specialization Flexible operations High quality Service

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Strategy and Tactics

Distinctive Competencies

The special attributes or abilities that give an organization a competitive edge.

Strategy Factors

Price Quality Time Flexibility Service Location

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Examples of Operations Strategies

Table 2.2

Price Quality Time Flexibility Service Location

Low Cost

U.S. first-class postage Motel-6, Red Roof Inns

High-performance design Sony TV or high quality Consistent Lexus, Cadillac quality Pepsi, Kodak, Motorola Rapid delivery On-time delivery Variety Volume Superior customer service Convenience Express Mail, Fedex, One-hour photo, UPS Burger King Supermarkets Disneyland Nordstroms Banks, ATMs

Global Strategy
Strategic decisions must be made with respect to

globalization What works in one country may not work in another Strategies must be changed to account for these differences Other issues
Political, social, cultural, and economic differences

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Strategy Formulation
Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners

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Strategy Formulation
Order qualifiers
Characteristics that customers perceive as

minimum standards of acceptability to be considered as a potential purchase Order winners Characteristics of an organizations goods or services that cause it to be perceived as better than the competition

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Key External Factors

Economic conditions Political conditions Legal environment Technology Competition Markets

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Key Internal Factors

Human Resources
Facilities and equipment Financial resources

Customers
Products and services Technology

Suppliers

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Operations Strategy
Operations strategy The approach, consistent

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

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Table 2.4

Strategic OM Decisions
Affects
Costs, quality liability and environmental Cost structure, flexibility Costs, flexibility, skill level, capacity

Decision Area
Product and service design Capacity Process selection and layout

Work design
Location Quality Inventory Maintenance Scheduling Supply chains

Quality of work life, employee safety, productivity

Costs, visibility Ability to meet or exceed customer expectations Costs, shortages Costs, equipment reliability, productivity Flexibility, efficiency Costs, quality, agility, shortages, vendor relations

Projects

Costs, new products, services, or operating systems

Quality and Time Strategies

Quality-based strategies Focuses on maintaining or improving the quality of an organizations products or services Quality at the source Time-based strategies Focuses on reduction of time needed to accomplish tasks

Time-based Strategies
JAN
Planning Designing Processing Changeover Delivery On time!

FEB

MAR

APR

MAY

JUN

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Productivity
Productivity A measure of the effective use of resources, usually expressed as the ratio of output to input Productivity ratios are used for Planning workforce requirements Scheduling equipment Financial analysis

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

Outputs Productivity = Inputs

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Productivity Growth
Productivity Growth =
Current Period Productivity Previous Period Productivity Previous Period Productivity

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Measures of Productivity
Table 2.4

Partial measures
Multifactor measures Total measure

Output Labor

Output Output Machine Capital

Output Energy

Output Labor + Machine

Output Labor + Capital + Energy

Goods or Services Produced All inputs used to produce them

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Examples of Partial Productivity Measures

Table 2.5

Labor Productivity
Machine Productivity Capital Productivity

Units of output per labor hour Units of output per shift Value-added per labor hour
Units of output per machine hour machine hour 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

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Example 3
7040 Units Produced Cost of labor of $1,000 Cost of materials: $520

Cost of overhead: $2000

What is the multifactor productivity? Ans. 2.0 units per dollar of input
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Example 3 Solution
MFP = Output Labor + Materials + Overhead

MFP = MFP =

(7040 units) $1000 + $520 + $2000 2.0 units per dollar of input

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Process Yield
Process yield is the ratio of output of good product to

input Defective product is not included in the output

Service example: Ratio of cars rented to cars available to rent

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Factors Affecting Productivity

Capital Quality

Technology

Management

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Other Factors Affecting Productivity

Standardization
Quality Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers

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Other Factors Affecting Productivity

Safety
Shortage of IT workers Layoffs

Labor turnover
Design of the workspace Incentive plans that reward productivity

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Outsourcing
Higher productivity in another company is a key

reason organizations outsource work Improving productivity may reduce the need for outsourcing

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Improving Productivity
Develop productivity measures Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Get management support

Measure and publicize improvements

Dont confuse productivity with efficiency

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Questions?

Thank You