Operations Management:
Chapter 2
Competitivene
ss, Strategy,
and Productivity
Competitiveness:
How effectively an organization meets
the wants and needs of customers
relative to others that offer similar goods
or services
Businesses Compete Using
Marketing
• Identifying consumer wants and
needs
• Pricing
• Advertising and promotion
• Product and service design
Businesses• Cost
Compete • Location
• Quality
Using • Quick response
Operations• Flexibility
• Inventory management
• Supply chain management
• Service
Too much emphasis on short-term financial
performance
Failing to take advantage of strengths and
Why Some opportunities
Organizations Failing to recognize competitive threats
Fail Neglecting operations
strategy
·Too much emphasis in product and service
design and not enough on improvement
·Neglecting investments in capital and
Why Some human resources
Organizations ·Failing to establish good internal
communications
Fail ·Failing to consider customer wants and
needs
Mission/Strategy/Tactics
Missio Strateg Tactics
n y
How does mission, strategies and
tactics relate to
decision making and distinctive
competencies?
• Strategies
Plans for achieving organizational goals
• Mission
The reason for the existence of an
organization
• Mission Statement
STRATEGIES Answers the question “What business
are we in?”
• Goals
Provide detail and scope of mission
• Tactics
The methods and actions taken to
accomplish strategies
Rita 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: Live a good life
• Goal: Successful career, good income
• Strategy: Obtain a college education
• Tactics: Select a college and a major
• Operations: Register, buy books, take
courses, study, graduate, get a job
• Low cost - is a pricing strategy
characterized by low prices of
goods and services using various
saving methods
EXAMPLES OF • Scale-based strategies-capital
intensive method for high volume
STRATEGIES production.
• Specialization- a strategy developed by a
business to focus on the production of a very
limited range of products or services in order to
gain maximum productivity, expertise and
leadership in the targeted field.
• Flexible operations- help leaders
relieve that pressure, minimize risk,
and pursue new opportunities and
revenue streams.
EXAMPLES OF • High quality - a higher quality
product is provided and more
STRATEGIES expensive components are used
• Service - Good customer service
makes the purchasing process as
easy as possible for the consumer.
Distinctive Competencies
The special attributes or abilities that give
an
organization a competitive edge.
Distinctive
Competencies
• Price is the amount a customer must pay for the product
or service that has the lowest price.
• Quality refers to materials and workmanship as well as
design. Usually, it relates to a buyer’s perception of how
well the product or service will serve its intended
purpose.
• Product or service differentiation refers to any special
features (e.g., design, cost, quality, ease of use,
convenient location, warranty) that cause a product or
Distinctive
Competencies
• Flexibility is the ability to respond to changes.
• Time refers to a number of different aspects of an organization’s
operations. One is how quickly a product or service is delivered to a
customer.
• Service might involve after-sale activities that are perceived by
customers as value-added.
• Managers and workers are the people at the heart and soul of an
organization, and if they are competent and motivated, they can
Examples of Distinctive
Competencies
Operations Strategy
The approach, consistent with organization
strategy, that is used to guide the operations
function.
Strategy Formulation
- Distinctive
- Competencies
Environmental
- scanning
-
SWOT Order
- Order
qualifiers
winners
Order
- Characteristics that customers
qualifiers
perceives
as minimum standards of
Strategy acceptability
to be considered as a potential
Order
Formulation purchase
- Characteristics of an organization's
winners
goods
or services that cause it to be
perceived
as better than competition.
Key External
Factors
• Economic conditions
• Political conditions
• Legal environment
• Technology
• Competition
• Markets
Key Internal
• Factors
Human Resources
• Facilities and equipment
• Financial resources
• Customers
• Products and services
• Technology
•
Quality-based strategies
• Focuses on maintaining or
Quality and improving the quality of an
organization’s products or services
Time • Quality at the source
Time-based strategies
Strategies • Focuses on reduction of time needed
to accomplish tasks
TIME-BASED
STRATEGIES
Productivity
A measure of the effective
use of resources, usually
expressed as the ratio of output
to input
PRODUCTIVITY
Productivity ratios are used for:
• Planning workforce
requirements
• Scheduling equipment
• Financial analysis
• Partial measures
- output/(single
input)
PRODUCTIVITY • Multi-factor
measures
- output/(multiple
inputs)
• Total measure
- output/(total
Productivity Growth
Measures of
Productivity
Examples of Partial
Measures of Productivity
Example
7040 Units Produced
Sold for $1.10/unit What is the
multifactor?
Cost of labor of $1,000 productivity?
Cost of materials: $520
Cost of overhead:
Solution
Factors Affecting
Productivity
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
BOTTLENECK
OPERATION
Improving Productivity
· Develop productivity measures
· Determine critical (bottleneck) operations
· Develop methods for productivity improvements
· Establish reasonable goals
· Get management support
· Measure and publicize improvements
· Don’t confuse productivity with efficiency
Thank You!
