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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 tolink the two.

Describe and give examples of time-based strategies.

Define the term productivity and explain why it isimportant to organizations and to countries.

List some of the reasons for poor productivity andsome ways of improving it.

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Competitiveness:

How effectively an organization meets thewants and needs of customers relative toothers 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 financialperformance

Failing to take advantage of strengths andopportunities

Neglecting operations strategy

Failing to recognize competitive threats

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Why Some Organizations Fail

Too much emphasis in product and service designand 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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Strategy

MissionThe 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

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Mission

Goals

OrganizationalStrategies

Functional Goals

FinanceStrategies

MarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

Operatingprocedures

Operatingprocedures

Operatingprocedures

Figure 2.1

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Strategy ExampleRita is a high school student. She would like to have acareer in business, have a good job, and earn enoughincome to live comfortably

Mission: Live a good lifeGoal: Successful career, good income

Strategy: Obtain a college education

Tactics: Select a college and a major

Operations: Register, buy books, takecourses, study, graduate, get job

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Example 1

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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 CompetenciesThe 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

Banks, ATMsConvenienceLocation

Disneyland

Nordstroms

Superior customer

serviceService

Burger King

Supermarkets

Variety

VolumeFlexibility

Express Mail, Fedex,

One-hour photo, UPSRapid delivery

On-time deliveryTime

Sony TV

Lexus, Cadillac

Pepsi, Kodak, Motorola

High-performance design

or high quality Consistent

quality

Quality

U.S. first-class postageMotel-6, Red Roof Inns

Low CostPrice

Table 2.2

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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 asminimum standards of acceptability to beconsidered as a potential purchase

Order winners

Characteristics of an organizations goods orservices 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, consistentwith organization strategy, that is used to guide theoperations function.

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Strategic OM DecisionsDecision Area Affects

Product and service design Costs, quality liability and environmental

Capacity Cost structure, flexibility

Process selection and layout Costs, flexibility, skill level, capacity

Work design Quality of work life, employee safety, productivity

Location Costs, visibility

Quality Ability to meet or exceed customer expectations

Inventory Costs, shortages

Maintenance Costs, equipment reliability, productivity

Scheduling Flexibility, efficiency

Supply chains Costs, quality, agility, shortages, vendor relations

Projects Costs, new products, services, or operating systems

Table 2.4

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Quality and Time Strategies Quality-based strategies

Focuses on maintaining orimproving the quality of anorganizations products or

services Quality at the source

Time-based strategies

Focuses on reduction of timeneeded to accomplish tasks

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Time-based Strategies

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JAN FEB MAR APR MAY JUN

Planning

Processing

Changeover On time!

Designing

Delivery

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Productivity Productivity

A measure of the effective use of resources, usuallyexpressed 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)

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Productivity =OutputsInputs

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Productivity Growth

Current Period Productivity Previous Period ProductivityPrevious Period Productivity

Productivity Growth =

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Units of output per kilowatt-hour

Dollar value of output per kilowatt-hourEnergy

Productivity

Units of output per dollar input

Dollar value of output per dollar inputCapital

Productivity

Units of output per machine hour

machine hourMachine

Productivity

Units of output per labor hour

Units of output per shift

Value-added per labor hour

Labor

Productivity

Examples of Partial Productivity Measures

Table 2.5

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Example 3

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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

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MFP = OutputLabor + Materials + Overhead

MFP = (7040 units)$1000 + $520 + $2000

MFP = 2.0 units per dollar of input

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Process Yield Process yield is the ratio of output ofgoodproduct 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

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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 foroutsourcing

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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