Competitiveness, Strategy & Productivity

Competitiveness

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

• Organizations compete through some combination of their marketing and operations functions

  • What do customers want?

  • How can these customer needs best be satisfied?

Predictors of Competetiveness

How Business Compete using Operations: 

1. Product and service design: special characteristics; delayed differentiation

2. Cost: economies of scale

3. Location: convenience

4. Quality: perceived higher quality

5. Quick Response: service

6. Flexibility (Shakeys): response to changes

7. Inventory Management (Mercury Drug)

8. Supply Chain Management (Seafood Restaurants)

9. Service

10. Managers and workers 

Why Organizations Fail?

• Neglecting operations strategy - this is a core part of organizations overall strategy

• Failing to take advantage of strengths and opportunities and/or failing to recognize competitive threats

• Too much emphasis on short term financial performance 

• Too much emphasis on product and service design and not on process design and improvement

Mission

- Reason for organization’s existence expressed through mission statement

• Mission Statement:  States the purpose of the organization. The mission statement should answer the question of 'What businesses are we in?'

Strategies

•  Plans for achieving organization's goals

  • Three basic strategies - low cost, responsiveness, differentiation from competitors

  • Organizational Strategies: relates to entire org

  • Functional level strategies: supports achievement of org strategy 

  • Basic strategies: low cost, responsiveness, differentiation from competitors

• Tactics - methods and actions taken to accomplish strategies 

  • “How to” part of the process

  • This is how your strategy will be implemented in real life

• Operation - actual “doing” part of the process

3 Generic Strategies

• Differentiation (Better)

  • Goal: Stand out with unique value

  • Tools: Quality, Design, Location

  • Add-ons: Innovations, Broader product line, After-sales service, Customer experience

• Cost Leadership (Cheaper)

  • Goal: Lowest possible cost production

  • Methods: Low overhead, Effective capacity use, Inventory management

  • Balance: Keep costs reasonable while satisfying consumer needs

• Response (Faster)

  • Goal: Speed & flexibility (e.g., FedEx)

  • Traits: Flexible, Reliable, Quick

  • Ability: Adjust to demand & customer preferences

Alternative Strategies (Triple Bottom Line)

• Sustainability

  • Focus: Improve lives + protect environment over time

• Supply Chain

  • Focus: Manage suppliers, production, distribution effectively

• Globalization

  • Focus: Operate across multiple countries, adapt to global markets

Goals

Provides detail and the scope of mission - towards organizational destination (future you want to realize)

Operation Strategy

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

• Quality Based - Strategy that focuses on quality in all phases of an organization.

• Time Based - Strategies that focus on the reduction of time needed to accomplish tasks.

Effective strategies requires taking into account

• Core competencies - special attributes or abilities that give organizations a competitive edge

• Environment scanning - identifies internal factors and external factors (SWOT)

Strategy Formulation

• Successful strategy formulation also requires taking into account:

  • Order qualifiers: Characteristics that customers perceive as minimum standards of acceptability for a product or service to be considered as a potential for purchase

  • Order winners: Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition

Balance Scorecard

A top-down management system that organizations can use to clarify their vision and strategy and transform them into action.

Developed by Robert Kaplan and David Norton, 1990s

• Develop objectives

• Develop metrics that target each objective

• Develop initiatives

• Identify links among finance, customer, internal processes, and learning and growth

• Monitor results

Productivity

• A measure of the effective use of resources, usually expressed as the ratio of output to input.

• Productivity is defined as a measure that compares the output (goods and services) to the input (labor, materials, energy, etc.) used in production.

Productivity = Output / Input

Forumlas for Measures

Partial Measures

• Focuses on a single output

= Output / Single Input

= Output / Labor

= Output / Capital

Multifactor Measures

• Considers multiple inputs 

= Output / Multiple Inputs of same unit

Total Measure

• Evaluates all inputs collectively

• Value Added = Outputs - inputs

= Goods or services produced / All inputs used to produce them

Productivity Growth

= (Current Prod - Previous Prod / Previous Productivity) x 100

• Can be used to track operating unit’s performance over time or to compare performance of an industry or country