Competitiveness, Operations

strategy and Productivity

1/11/2018

Operations Management

Session 2 – Leaning outcome

• Understand the importance of Competitiveness, Strategy, and Productivity in todays global business environment.

• Explain the relationships of Competitiveness, Strategy, and Productivity in todays business

• Explain the Key factors to be considered when developing winning operations strategy in an organization.

Session 2 - Coverage

1. Overall Business Strategy to Operations Strategy

2. Operations Decisions

3. Competitive Dimensions

4. Order Qualifiers and Winners

5. Productivity as a Measure of Competitiveness

The three separate but related topics that are vitally important to business organizations.

Competitiveness - The effectiveness of an organization in the

marketplace relative to other organizations

that offer similar products or services

Strategy - The plans that determine how an organization

pursues its goals.

Productivity - the effective use of resources

What is Competitiveness?

Competitiveness - How effectively an organization meets

the wants and needs of customers

relative to others that offer similar

goods or services.

1. Identifying consumer wants and/or needs in an

organization’s decision-making process in

providing goods and/or services.

2. Understand the trade-off decision consumers

make between price and quality (The key factors in

consumer buying decisions)

3. Effective advertising and promotion for their

products or services to attract and retain

customers.

How do organizations compete?

What is strategy?

Organizational strategy is providing direction for, and

alignment of, the goals and strategies of the functional

units.

Define the position of the organization relative to its

environment

Move the organization closer to its long-term goals.

• Low cost.

• Responsiveness.

• Differentiation from competitors.

There are three basic business strategies

Mission

and Vision

Corporate

Strategy

Operations

Strategy

Marketing

Strategy

Financial

Strategy

Strategic Planning

The mission statement answers the question “What business are we in?”

Hierarchical organizational decision making process

Operations Strategy

•Involves decisions that relate to design of a process and infrastructure needed to support the process.

‘… the decisions which shape the long-term

capabilities of the company’s operations and

their contribution to overall strategy through

the on-going reconciliation of market

requirements and operations resources …’

The Operations function can provide a competitive

advantage through its performance at the five competitive

objectives

Cost

Dependability

Flexibility

Quality

Speed

Different competitive factors imply different performance objectives

Competitive factorsIf the customers value these ...

Performance objectivesThen, the operations will need

to excel at these ...

Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and services Flexibility (products and services)

Wide range of products and services Flexibility (mix)

Ability to change the timing or quantity of products and services

Flexibility (volume and/or delivery)

Competitive PrioritiesCorporate strategy• Goals

• Core competencies

• Environmental responses

• New products/services

• Global strategies

Market analysis• Segmentation

• Needs assessment

New Product for New Market

Existing product for New Market

New product for existing market

Existing product existing market

New ExistingProduct

New

ExistingMa

rke

t

SWOT&

Porter’s 5 Forces

Strategy and Decisions

Operations strategy

• Process decisions

• Quality decisions

• Capacity, location, and layout decisions

• Operating decisions

Market analysis

Competitive priorities

Corporate strategy

Services Manufacturing

• Standardized services

• Assemble-to-order

• Customized services

• Make-to-stock

• Assemble-to-order

• Make-to-order

Capabilities

Strategic Operations Management Decisions

Examples of operations strategies

Examples of operations strategies

Two important factors the organizations must take into account in formulating a successful strategy:

1. Order qualifiers

2. Order winners.

Order Qualifiers

•Defined• Order qualifiers are the basic criteria that permit

the firms products to be considered as candidates for purchase by customers

•A brand name car can be an “order qualifier”

Order Winners

•Defined• Order winners are the criteria that differentiates the

products and services of one firm from another

• Repair services can be “order winners”

• Examples: Warranty, Roadside Assistance,Leases, etc

Productivity

•Defined

Productivity is a common measure on how wellresources are being used. In the broadest sense, itcan be defined as the following ratio:

OutputsInputs

Total Measure Productivity

Total Measure Productivity = OutputsInputs

or

= Goods and services produced

All resources used

Partial Measure Productivity

• Partial measures of productivity =

Output or Output or Output or OutputLabor Capital Materials Energy

Multifactor Measure Productivity

• Multifactor measures of productivity =

Output .Labor + Capital + Energy

or

Output .Labor + Capital + Materials

Example 1

2014 2015

Output: Sales value of production 82000 95000

Input: LabourRaw materials and suppliesCapitalOther

22000800070003500

350001500012000

5000

Calculate,

1. Total productivity

2. Partial Measurement

3. Multifactor ratios

Example 2

Operations Management

A garment manufacturing company has provided the following

data.

2016 - (Rs 000)

Material 50000

Labour 65000

Energy 25000

Other expenses 10000

By -Products 15000

Sales value of the main production 185000

Calculate,

1. Total productivity ratio

2. Material, Labour and Energy partial productivity ratios

3. Multifactor productivity ratios

Factors that affect Productivity

• Methods

• Capital

• Quality

• Technology

• Management

Improving Productivity• Develop productivity measures

• Look at the system as a whole

• Develop methods for productivity improvements

• Establish reasonable goals

• Measure improvements

1. Overall Business Strategy to Operations Strategy

2. Operations Decisions

3. Competitive Dimensions

4. Order Qualifiers and Winners

5. Productivity as a Measure of Competitiveness

Session Title :Competitiveness, Operations strategy and Productivity

Essential Reading

Chapter 2

Operations Management 12th Edition by William J. Stevenson Published by McGraw-Hill Education (2015)

1.Define the competitiveness of an organization.

2.List several ways that business organizations

compete in the market

3.Name several reasons why business

organizations fail.

Review Questions

Review Questions

• Identify various operations management

activities carried out in an organization.

• Discuss the how these activities are affected by

the operations strategy of the organization. (Use

an organization like ‘Cargill’ in your answer.)