CH 2

Chapter 2: Competitiveness, Strategy, and Productivity

Introduction to Competitiveness, Strategy, and Productivity

  • Competitiveness is defined as:

    • Competitiveness: The effectiveness of an organization in meeting the wants and needs of customers, known as the VOICE OF THE CUSTOMER, in comparison with others offering similar products or services.

    • Key aspects to foster competitiveness include:

    • Better quality

    • Higher productivity

    • Lower costs

    • Ability to respond quickly to customer needs, expectations, and requirements

  • The bar is continually being raised; hence, making continuous improvements is essential.

Marketing’s Influence on Competitiveness

  • Marketing plays a significant role in competitiveness. It includes:

    • Identifying consumer wants and/or needs (VOICE OF THE CUSTOMER)

    • Pricing strategies

    • Advertising and promotion efforts

Business Competition through Operations

  • Businesses compete using various operations strategies:

    1. Product and service design

    2. Cost management

    3. Location

    4. Quality assurance

    5. Speed of service

    6. Flexibility

    7. Inventory management

    8. Supply chain management

    9. Service quality

Reasons for Organizational Failure

  • Common reasons organizations fail include:

    • Neglect of operations strategy

    • Inability to capitalize on strengths and opportunities

    • Failure to recognize competitive threats

    • Lack of investment in capital and human resources

    • Poor internal communication and cooperation

    • Failure to address customer wants and needs, which differ from customer requirements

  • SWOT Analysis: A tool for evaluating strengths, weaknesses, opportunities, and threats, essential for strategic planning.

Mission in Strategy Hierarchy

  • Hierarchical Planning Components:

    • Mission: The fundamental purpose of an organization.

    • A mission statement outlines the organization's reason for existence.

    • It should answer, “What business are we in?”

Examples of Mission Statements

  • Selected portions of company mission statements include:

    • Microsoft: "To help people and businesses throughout the world to realize their full potential."

    • Verizon: "To help people and businesses communicate with each other."

    • Starbucks: "To inspire and nurture the human spirit — one cup and one neighborhood at a time."

    • US Department of Education: Focused on promoting student achievement and access to education.

    • SVSU College of Business: Aims to deliver high-quality business education and ensure equal opportunity.

Setting Goals

  • Goals: Specific statements that provide details and scope of the organization’s mission.

    • They serve as destinations for the organization and act as the foundation for operational strategies.

Crafting Strategies

  • Strategy: A formulated plan to achieve organizational goals, which acts as a roadmap.

    • There are two types of strategies:

    • Organizational strategies: Apply to the whole organization.

    • Functional level strategies: Apply to specific functional areas in support of the organizational strategy.

Tactics and Operations

  • Tactics: The methods employed to accomplish the strategies, representing the “how to” of strategy execution.

  • Operations: The actual execution and implementation of strategies in practice.

Examples of Strategies

  • Low Price strategy exemplified by Wal-Mart (low-cost retailing).

  • High Quality strategy as used by Lexus (high-performance design).

  • Quick Response strategy illustrated by McDonald’s emphasis on on-time delivery.

  • Variety/Flexibility strategies, e.g., Burger King’s “Have it your way” and McDonald's willingness to accommodate.

  • Superior Customer Service exemplified by Disneyland.

Understanding Core Competencies

  • Core Competencies: Unique attributes that provide competitive advantage.

    • It's critical for core competencies and strategies to be aligned to ensure organizational effectiveness.

Strategy Formulation

  • Effective strategy formulation requires:

    • Identifying core competencies

    • Conducting environmental scans (e.g., SWOT analysis)

Considerations in Strategy Formulation

  • Order qualifiers: Characteristics perceived as minimum standards for customers to consider a purchase.

  • Order winners: Traits that distinguish an organization’s products/services as superior to competitors.

Winning Customers

  • Qualifiers: Minimum competitive standards that must be met (e.g., cleanliness in a restaurant).

  • Winners: The competitive advantage used to make final purchasing decisions (e.g., low price vs. quality).

  • Losers: Failure to meet expectations leading to loss of customers (e.g., reliability failures).

Case Example: Speedy Pizza

  • Competitive Advantage: Guaranteeing pizza delivery within 20 minutes.

    • Requirements include:

    • Pre-formed dough

    • Efficient assembly area

    • Fast preparation and delivery capabilities

  • Strategic Objectives: Focus on high-temperature recipes, fast workers, and protective delivery capacity.

Operations Strategy Overview

  • Operations Strategy: The systematic approach aligned with organizational strategy, guiding operational functions.

  • Operations management encompasses the design, operation, and continuous improvement of systems delivering goods and services.

Decision Making in Operations

  • Critical decision areas affecting operations strategy include:

    • Product and service design impacts costs, quality, and liabilities.

    • Capacity management affects operational structure, flexibility, and costs.

    • Process selection and layout influence flexibility and required skill levels.

    • Work design impacts employee safety, productivity, and quality of work life.

    • Location impacts visibility and operational costs.

    • Quality assurance measures overall customer satisfaction.

    • Inventory management influences service delivery and costs.

Time-Based Strategies

  • Time-Based Strategies: Focus on reducing the time required to complete tasks, leading to improved productivity and customer service.

    • Examples of areas targeting time reductions include:

    • Planning time

    • Product/service design time

    • Processing time

    • Changeover time

    • Delivery time

    • Response time for complaints.

Linking Operations to Profitability

  • Operations can serve as a channel to achieve financial objectives, notably profitability via:

    • Productivity metrics which track the efficiency of outputs generated relative to inputs used.

Understanding Productivity

  • Productivity: Defined as the ratio of outputs generated by a business to the inputs used.

  • Productivity measures serve to:

    • Monitor performance over time.

    • Assess performance across industries or countries.

Types of Productivity Measures

  • Productivity Measures include:

    • Capital Output: Outputs generated per unit of capital.

    • Labor Output: Outputs generated per unit of labor.

    • Single Input Output: Outputs relative to singular inputs.

    • Partial Measures: Measures considering subsets of inputs (e.g., labor + machine).

    • Multifactor Measures: Measures integrating multiple inputs (e.g., labor + capital + energy).

    • Total Measure: Total output against all inputs used to generate it.

Improving Productivity Metrics

  • Strategies for improving productivity:

    • Increase outputs while decreasing inputs or both.

    • Increase net income while decreasing costs (or assets).

Example of Productivity Growth**

  • Example:

    • In 2022, the productivity in the cardiac unit was 25 patients per provider; in 2023 it was 23 patients per provider.

    • Productivity Growth Calculation:

      ext{Productivity Growth} = rac{ ext{Current productivity} - ext{Previous productivity}}{ ext{Previous productivity}} imes 100\
      ext{Productivity Growth} = rac{23 - 25}{25} imes 100 = -8\

  • Interpretation suggests a decline in productivity from 2022 to 2023.

Factors Affecting Productivity

  • Key factors that may influence productivity include:

    • Capital investment

    • Methodologies employed

    • Quality of resources

    • Technology utilization

    • Management effectiveness

Technology's Role in Productivity

  • Technological advancements impacting productivity include:

    • Drones, GPS devices, smartphones, 3D printing technologies, Radio-Frequency Identification (RFID), medical imaging technologies, and artificial intelligence.

Strategies for Improving Productivity

  • Steps for improving productivity in operations are:

    1. Develop productivity measures for all operational functions.

    2. Identify critical bottleneck operations.

    3. Establish methods for productivity improvements.

    4. Set realistic and attainable goals.

    5. Ensure management support for improvement efforts.

    6. Measure and communicate improvements effectively.

    • Important Note: It's essential to not confuse productivity with efficiency.