Chapter 2:

Competitiveness,
Strategy, and
Productivity
2.1: Introduction
In this chapter, you will learn about the different ways
companies compete and why some firms do a very good
job of competing.
2.2: Competitiveness
Competitiveness through marketing:
1. Identifying consumer wants and/ or needs
2. Price and quality
3. Advertising and promotion

Competitiveness through operations:

1. Product and service design
2. Cost
3. Location
2.2: Competitiveness
4. Quality
5. Quick response
6. Flexibility
7. Inventory management
8. Supply chain management
9. Service
10. Managers and workers
2.2: Competitiveness
Why some organizations fail? Among the reasons are the
following:
1. Neglecting operations strategy.
2. Failing to take advantage of strengths and
opportunities.
3. Putting too much emphasis on short-term financial
performance at the expense of research and
development.
2.2: Competitiveness
4. Placing too much emphasis on product and service
design and not enough on process and improvement.
5. Neglecting investments in capital and human
resources.
6. Failing to establish good internal communications
and cooperation among different functional areas.
7. Failing to consider customer wants and needs.
2.2: Competitiveness
The key to successfully competing is to determine what
customers want and then directing efforts towards
meeting (or even exceeding) customer expectations.
2.3 Missions and Strategies
Mission - the reason for the existence of
an organization.
Mission Statement - states the purpose of an organization.
Goals - provide detail and scope of the mission.
Strategies - plans for achieving organizational goals.
Tactics - the methods and actions taken to accomplish
strategies.
Here are some examples of different
strategies an organization might
choose from.

1. Low cost 5. Flexible operations

2. Scale-based strategies 6. High quality
3. Specialization 7. Service
4. Newness 8. Sustainability
Strategy Formulation
SWOT Analysis
(strengths, weaknesses,
opportunities and threats)
Order qualifiers
Order Winners
Environmental Scanning
Supply Chain Strategy
~ specifies how the supply chain should
function to achieve supply chain goals.

Sustainability Strategy
~ a set of actionable steps that a company takes to improve their
impact on the community and the environment.

Global Strategy
~ a plan to help a company grow from an international
business (which sells products or services in other
countries).
2.4 Operation Strategy
• narrower in scope, dealing
primarily with the operations
aspect of the organization.
Operations strategy relates to
product, processes, methods,
operating resources, quality,
costs, lead times, and
scheduling.
 OPERATIONS STRATEGY
Quality and Time Strategies
• Quality-Based Strategies - focus on maintaining or improving the quality of an
organization’s products or services. They may reflect an effort to overcome an
image of poor quality, a desire to catch up with the competition, a desire to
maintain an existing image of high quality, or some combination of these and
other factor.

• Time-Based Strategies - focus on reducing the time required to accomplish

various activities. Organizations seek to improve service to
the customer and to gain a competitive advantage over
rivals who take more time to accomplish the same tasks.
Organizations have achieved time reduction in some of the following:

• Planning Time - The time needed to react to a competitive threat, to

develop strategies and select tactics, to approve proposed changes to
facilities, to adopt new technologies, and so on.

• Product/Service Design Time - The time needed to develop and

market new or redesigned products or services.
• Processing Time - The time needed to produce goods
or provide services. This can involve scheduling,
repairing equipment, methods used, inventories,
quality, training, and the like.
Organizations have achieved time reduction in some of the following:

• Changeover Time - The time needed to change from producing one type
of product or service to another. This may involve new equipment settings
and attachments, different methods, equipment, schedules, or materials.

• Delivery Time - The time needed to fill orders.

• Response time for complaints - These might be customer complaints

about quality, timing of deliveries, and incorrect shipments. These might
also be complaints from employees about working
conditions (e.g., safety, lighting, heat or cold), equipment
problems, or quality problems. the same tasks.
 2.5 Implications of Organization
Strategy for Operations Management
Organization strategy has a major impact on operations
and supply chain management strategies.

Example: organizations that use a low-cost, high-

volume strategy limit the amount of variety
offered to customers.
 2.6 Transforming Strategy into Action:
The Balance Scorecard

The Balance Scorecard

- is a top down management sytem that organizations
that can use clarify their vision and strategy and
transform them into action.
Organizational
Implications for Operations Management
Strategy

Requires low variation in product and services and high-

volume, steady flow of good results in maximum use of
Low Price resources through the system.
Standardized work, material, and inventory are
requirements.

Entails higher initial cost for product and services

High Quality design, and process design, and more emphasis on
assuring supplier quality.

Requires flexibility, extra capacity,

Quick Response and higher
levels of some inventory items.
 Entails large investment in research and development
for new or improved products and services plus the
Newness/Innovation
need to adapt operations and supply processes to suit
new products or services.

Requires high variation in resource and more emphasis

on product and service design; high worker skill needed,
Product of service cost estimation more difficult; scheduling more complex;
variety quality assurance more involved ; inventory management
more complex; and matching supply to demand more
difficult.

Affects location planning, product and

service design ,process design,
Sustainability
outsourcing decision, returns
policies and waste management.
FIGURE 2.2
THE BALANCE SCORECARD Financial
Performance

Vision
Customer/Stakeholder and Efficiency of Internal
Satisfaction Strategy Business Process

Organizational
Knowledge
Innovation

Strategy Objectives
Strategy Iniatives Performance
Measures and Targets
TABLE 2.6
Focal Point Factors

Delievery Performance
Quality Performance
Suppliers Number of Suppliers
Suppliers Locations
Duplicate Activities

Bottlenecks
Internal Process Automation Potential
Turnover

Job Satisfaction
Employees Learning Oppurtunities
Delievery Performance

Quality Performance
Customers Satisfaction
Retention Rate
2.7 PRODUCTIVITY
is an index that measures output (goods and
services) relative to the input (labor, materials,
energy, and other resources) used to produce it. It
is usually expressed as the ratio of output to input:
 PRODUCTIVITY RATIO
can be computed for a single operation, a department, an
organization, or an entire country. In business organizations,
productivity ratios are used for planning workforce
requirements, scheduling equipment, financial analysis, and
other important tasks.
For NONPROFIT ORGANIZATION,
higher productivity means lower costs; for PROFIT ORGANIZATION,
productivity is an important factor in determining
how competitive a company is. For a nation, the rate
of productivity growth is of great importance.
PRODUCTIVITY GROWTH
the increase in productivity from one period to the next
relative to the productivity in the preceding period.

EXAMPLE 1. If productivity increased from 80 to 84, the growth rate would

be

Productivity growth = ((84-80)/80)x100

= 5%
COMPUTING PRODUCTIVITY
Productivity measures can be based on a single input (partial productivity),
on more than one input (multi- factor productivity), or on all inputs total
productivity).
The choice of productivity measure depends primarily on the
purpose of the measurement. If the purpose is
to track improvements in labor productivity, then labor
becomes the obvious input measure.
COMPUTING PRODUCTIVITY
Partial measures are often of greatest use in operations
management
The units of output used in productivity measures depend
on the type of job performed.
COMPUTING PRODUCTIVITY
MULTIFACTOR PRODUCTIVITY

Output: 7,040

Output

7,040 units

2 units per dollar input