Competitiveness,

Strategy,
and Productivity

Learning Objectives

Define the term strategy and explain why

strategy is important for competitiveness.
Contrast strategy and tactics.
Discuss and compare organization
strategy and operations strategy, and
explain why it is important to link the two.
Define the term productivity and explain
why it is important to organizations and to
countries.

Competitiveness

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

Competitiveness Strategies
Differentiation better or at
least different
Cost - cheaper
Quick response more
responsive

Businesses Compete Using

Marketing
Identifying consumer wants and needs
Pricing
Advertising and promotion

Businesses Compete Using

Operations
Product and service design
Cost
Location
Quality
Quick response

Businesses Compete Using

Operations (cont.)

Flexibility
Inventory management
Supply chain management
Service and service quality
Managers and workers

Why Some Organizations Fail

Too much emphasis on short-term
financial performance
Failing to take advantage of strengths
and opportunities
Neglecting operations strategy
Failing to recognize competitive threats
SWOT = Strengths, Weaknesses,
Opportunities and Threats

Why Some Organizations Fail

Too much emphasis in product and
service design and not enough on
improvement
Neglecting investments in capital and
human resources
Failing to establish good internal
communications
Failing to consider customer wants and
needs

Mission/Strategy/Tactics
Mission

Strategy

Tactics

How does mission, strategies and tactics

relate to decision making and
distinctive competencies?

Strategy
Mission

The 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

Planning and Decision Making

Mission
Goals
Organizational Strategies
Functional Goals
Finance
Strategies

Tactics
Operating
procedures

Marketing
Strategies

Tactics
Operating
procedures

Operations
Strategies

Tactics
Operating
procedures

Strategy Example
Ratana is a high school student. She would like to
have a career in business, have a good job, and
earn enough income to live comfortably

Mission:
Goal:
Strategy:
Tactics:
Operations:

Live a good life

Successful career, good income
Obtain a college education
Select a college and a major
Register, buy books, take
courses, study, graduate, get job

Examples of Strategies
Low cost - outsourcing
Scale-based strategies - capital intensive
method for high volume production
Specialization - focus on narrow product line
for higher quality
Flexible operations - customization
High quality focus on higher quality than
competitors
Services focus on various aspect of
services

Strategy and Tactics

Strategy Factors

Price low cost

Quality consistent quality, high quality
Time rapid delivery, on-time delivery
Flexibility variety, volume
Service customer services
Location - convenience

Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.

Strategy Formulation

Distinctive competencies
Environmental scanning
SWOT
Order qualifiers
Order winners

Strategy Formulation
Order qualifiers
Characteristics that customers perceive as
minimum standards of acceptability to be
considered as a potential purchase

Order winners
Characteristics of an organizations goods or
services that cause it to be perceived as
better than the competition

Key External Factors

Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets

Key Internal Factors

Human Resources
Facilities and equipment
Financial resources
Customers (loyalty, understanding)
Products and services
Technology
Suppliers

Strategic OM Decisions
Decision 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

Quality and Time Strategies

Quality-based
strategies

Focuses on maintaining or
improving the quality of an
organizations products or
services
Quality at the source

Time-based strategies

Focuses on reduction of
time needed to accomplish
tasks

Time-based Strategies
JAN

FEB

MAR

APR

MAY

JUN

Planning
Designing
Processing
Changeover
Delivery

On time!

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, legal, cultural and economic
differences

Four International Operations

Strategies
International

High
Cost Reduction Considerations

Strategy

Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson

Low
Low

High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)

Four International Operations

Strategies

Cost Reduction Considerations

High

International Strategy
Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson

Low
Low

High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)

Four International Operations

Global
Strategies
Strategy

High
Cost Reduction Considerations

Standardized
product
Economies of scale
Cross-cultural
learning
International Strategy

Examples
Texas Instruments
Examples Caterpillar
U.S. Steel
Harley Davidson
Otis Elevator
Import/export or
license existing
product

Low
Low

High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)

Four International Operations

Strategies
High
Cost Reduction Considerations

Global Strategy
Standardized product
Economies of scale
Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator

International Strategy
Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson

Low
Low

High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)

Four International
Operations
Multidomestic
Strategies
Strategy

High

Use existing
Standardized product
domestic
model
Economies of
scale
Cross-cultural learning
globally
Examples
Texas
Instruments
Franchise, joint
Caterpillar
Otis Elevator
ventures,
subsidiaries

Cost Reduction Considerations

Global Strategy

International Strategy

Examples
Heinz
Examples
U.S. SteelMcDonalds
Harley Davidson
The Body Shop
Hard Rock Cafe
Import/export or
license existing
product

Low
Low

Local Responsiveness Considerations

(Quick Response and/or Differentiation)

High

Four International Operations

Strategies
High
Cost Reduction Considerations

Global Strategy
Standardized product
Economies of scale
Cross-cultural learning
Examples
Texas Instruments
Caterpillar
Otis Elevator

International Strategy
Import/export or
license existing
product

Multidomestic Strategy
Use existing
domestic model globally
Franchise, joint ventures,
subsidiaries

Examples
U.S. Steel
Harley Davidson

Examples
Heinz
The Body Shop
McDonalds Hard Rock Cafe

Low
Low

High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)

Four International Operations

Transnational
Strategies
Strategy

High
Global Strategy

Cost Reduction Considerations

Move material,
people, ideas
Examples
across national
Texas Instruments
Caterpillar
boundaries
Otis Elevator
Economies of scale
Cross-cultural
International
Strategy
Multidomestic Strategy
Use existing
Import/export
learning
or
domestic model globally
license existing
Standardized product
Economies of scale
Cross-cultural learning

product

Examples
Coca-Cola
Nestl

Examples
U.S. Steel
Harley Davidson

Low

Franchise, joint ventures,

subsidiaries
Examples
Heinz
The Body Shop
McDonalds Hard Rock Cafe

Low

High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)

Four International Operations

Strategies
Cost Reduction Considerations

High
Global Strategy

Transnational Strategy

Standardized product
Economies of scale
Cross-cultural learning

Move material, people, ideas

across national boundaries
Economies of scale
Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator

International Strategy

Examples
Coca-Cola
Nestl

Import/export or
license existing
product

Multidomestic Strategy
Use existing
domestic model globally
Franchise, joint ventures,
subsidiaries

Examples
U.S. Steel
Harley Davidson

Examples
Heinz
The Body Shop
McDonalds Hard Rock Cafe

Low
Low

High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)

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

Productivity ratios are used for

Planning workforce requirements
Scheduling equipment
Financial analysis

Productivity
Partial measures

output/(single input)

Multi-factor measures

output/(multiple inputs)

Total measure

output/(total inputs)

Outputs
Productivity =
Inputs

Productivity Growth

Productivity Growth =
Current Period Productivity Previous Period Productivity
Previous Period Productivity

Input

Output - Input

Labor
Output

Machine
Raw materials
Electricity / water / etc.
Capital
Inventory
Others

Products

Processes

Or
Services

Measures of Productivity

Partial
measures
Multifactor
measures
Total
measure

Output
Labor

Output
Output
Machine Capital

Output
Labor + Machine

Output
Energy

Output
Labor + Capital + Energy

Goods or Services Produced

All inputs used to produce them

Examples of Partial Productivity

Measures

Labor
Productivity

Units of output per labor hour

Units of output per shift
Value-added per labor hour

Machine
Productivity

Units of output per machine hour

machine hour

Capital
Productivity

Units of output per capital input

Money value of output per money input

Energy
Productivity

Units of output per kilowatt-hour

money value of output per kilowatt-hour

Example 3
7040 Units Produced
Cost of labor of $1,000
Cost of materials: $520
Cost of overhead: $2000
What is the multifactor productivity?

Example 3 Solution
MFP =

Output
Labor + Materials + Overhead

MFP =

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

MFP =

2.0 units per dollar of input

Process Yield
Process yield is the ratio of output of good
product to input
Defective product is not included in the
output
Service example:
Ratio of cars rented to cars available to rent

Factors Affecting Productivity

Capital

Quality

Technology

Management

Other Factors Affecting Productivity

Standardization
Quality
Use of Internet
Computer viruses
Searching for lost or misplaced items
Scrap rates
New workers

Other Factors Affecting Productivity

Safety
Shortage of IT workers
Layoffs
Labor turnover
Design of the workspace
Incentive plans that reward productivity
Outsourcing

Outsourcing
Higher productivity in another company is a
key reason organizations outsource work
Improving productivity may reduce the need
for outsourcing

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