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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