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Competitiveness,
Strategy,
and Productivity
 Learning Objectives
 List and briefly discuss the primary ways
that business organizations compete.
 List five reasons for the poor
competitiveness of some companies.
 Define the term strategy and explain why
strategy is important for competitiveness.
 Contrast strategy and tactics.

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 Learning Objectives
 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.
 List some of the reasons for poor productivity
and some ways of improving it.

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Competitiveness:

How effectively an organization meets the

wants and needs of customers relative to
others that offer similar goods or services

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 Businesses Compete Using
Marketing
 Identifying consumer wants and/or needs
 Price and quality
 Advertising and promotion

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 Businesses Compete Using
Operations
 Product and service design
 Special characteristics or features
 Innovation
 Time-to-market
 Cost
 Productivity
 Location
 Quality
 Quick response
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 Businesses Compete Using
Operations
 Flexibility
 Inventory management
 Supply chain management
 Service and service quality
 Managers and workers

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 Why Some Organizations Fail

 Too much emphasis on short-term

financial performance at the expense of
research and development
 Failing to take advantage of strengths
and opportunities
 Neglecting operations strategy
 Failing to recognize competitive threats

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Why Some Organizations Fail
 Too much emphasis in product and
service design and not enough on
process design and improvement
 Neglecting investments in capital and
human resources
 Failing to establish good internal
communications and cooperation
 Failing to consider customer wants and
needs

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 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
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 Mission/Strategy/Tactics

Mission Strategy Tactics

How does mission, strategies and tactics relate to

decision making and distinctive competencies?

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 Strategy Example

Nusrat is a 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
 Mission: Live a good life
 Goal: Successful career, good income
 Strategy: Obtain an university education
 Tactics: Select an university and a major
 Operations: Register, buy books, take
courses, study, graduate, get job

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Planning and Decision Making
Hierarchy

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 Examples of Strategies
 Low cost
 Scale-based strategies
 Specialization
 Newness
 Flexible operations
 High quality
 Service
 Sustainability

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 Strategy and Tactics
 Core Competencies
The special attributes or abilities that give an
organization a competitive edge.
 Strategy Factors
 Price
 Quality
 Time
 Flexibility
 Service
 Location

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 Examples of Operations Strategies
Low Cost Neighborhood tea stalls
Price ASUS laptops
Tata Nano

Quality High-performance design North End; Gloria Jean’s

or high quality Consistent Samsung Galaxy
quality BMW, Mercedes

Time Rapid delivery Fedex,

On-time delivery One-hour photo

Flexibility Variety Swapno, Agora

Volume

Service Superior customer Disneyland

service

Location Convenience ATMs, BKash

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 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, cultural, and economic
differences

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 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 organization’s goods or
services that cause it to be perceived as
better than the competition

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 External Factors
 Economic conditions
 Political conditions
 Legal environment
 Technology
 Competition
 Markets

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 Internal Factors
 Human resources
 Facilities and equipment
 Financial resources
 Customers
 Products and services
 Technology
 Suppliers

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 Operations Strategy
 Operations strategy – The approach,
consistent with organization strategy,
that is used to guide the operations
function.
 Relates to products, processes, methods,
operating resources, quality, costs, lead
times, and scheduling
 Organization strategy – provides the
overall direction for the organization

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 Strategic OM Decisions
Decision Area Affects
Product and service design Costs, quality, reliability 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

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 Quality and Time Strategies
 Quality-based strategies
 Focuses on maintaining or improving the quality
of an organization’s products or services
 Quality at the source
 Time-based strategies
 Focuses on reduction of time needed to
accomplish tasks
 E.g. Planning, Product/Service design,
Processing, Changeover, Delivery, Response to
complaints

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Implications of Strategy

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 Productivity
 Productivity
 A measure of the effective use of resources,
usually expressed as the ratio of output to
input
Outputs
Productivity =
Inputs
 Outputs such as goods and services, inputs
such as labor, materials, energy, and other
resources

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 Productivity
 Partial measures
 output/(single input)
 Multi-factor measures
 output/(multiple inputs)
 Total measure
 output/(total inputs)

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 Examples of Productivity
 Labor productivity

 Machine productivity e.g. the number of

pieces produced/machine hours
 Determine the productivity for these cases:
 Four workers installed 720 square yards of
carpeting in eight hours.
 A machine produced 70 pieces in two hours.
However, two pieces were unusable
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 Productivity Growth

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

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 Measures of Productivity

Partial Output Output Output Output

measures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them

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Examples of Partial Productivity
Measures

Labor Units of output per labor hour

Units of output per shift
Productivity Value-added per labor hour

Machine Units of output per machine hour

machine hour
Productivity
Capital Units of output per dollar input
Monetary value of output per dollar input
Productivity
Energy Units of output per kilowatt-hour
Monetary value of output per kilowatt-hour
Productivity
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 Example 3

7040 Units Produced

Cost of labor of Tk. 1,000

Cost of materials: Tk. 520

Cost of overhead: Tk. 2,000

What is the multifactor productivity?

Ans. 2.0 units per Taka of input
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 Example 3 Solution

MFP = Output
Labor + Materials + Overhead

MFP = (7040 units)

1000 + 520 + 2000

MFP = 2.0 units per Taka of input

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 Process Yield
 Process yield is the ratio of output of good
product to input of raw materials
 Defective product is not included in the
output
 Service example:
 Ratio of number of students admitted to the number of
students applied
 Ratio of cars rented to cars available for a given day in a
car rental agency
 Ratio of new subscriptions to the number of calls made or
the number of letters mailed for subscription services
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Factors Affecting Productivity

Capital Quality

Technology Management

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 Other Factors Affecting Productivity

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

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 Other Factors Affecting Productivity

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

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 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

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