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Chapter 2 Competitiveness

Strategy and Productivity

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Competitiveness

Effectiveness in meeting customer needs vs. the rest– Commonly confused terminology: Effectiveness vs. efficiency

(Distinctive) competencies Price Time Quality Flexibility, ability to respond to changes

Differentiation, special product features

Service

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Strategy

Mission– The reason for existence of an organization

Mission Statement– A clear statement of purpose

Strategy– A plan for achieving organizational goals

Tactics– The actions taken to accomplish strategies

Operational decisions– Day to day decisions to support tactics

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Example for Strategy

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 job

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Strategy Formulation Order qualifier = Acceptable product features

– A car with 40 miles per gallon Order winner = Better-than-the-rest product features

– A car with 60 miles per gallon: Toyota Prius dual powered car

Environmental Scanning– The consideration of internal and external events and trends that present

threats or opportunities for a company.» Reading Financial times, Benchmarking, Stealing Employees

– Figure out distinctive competencies» Price, quality, service

Emphasize one or more of the distinctive competencies with the strategy

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Strategies Quality-based strategies

– Focuses on quality in all phases of an organization

– Quality at the source

» Sony TV

» Toyota cars: Nummi plant rented from general motors.

Time-based strategies– Focuses on reduction of time needed to accomplish tasks

» Technology start ups compete on turning ideas into products

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Strategies Product development strategy relates to Set of products/services and

technologies for future operations– e.g. Be the technology leader

» IBM workstations– e.g. Offer many products

» Dell computers Marketing and sales strategy relates to positioning, pricing and promotion of

products/services– e.g. Never offer more than 40% discount– e.g. EDLP = every day low price

» At Wal-Mart– e.g. Demand smoothing via coupons

» BestBuy Supply chain management strategy relates to procurement, transportation,

storage and delivery– e.g. Never use more than 1 supplier for every input– e.g. Never expedite orders just because they are late

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Big Retailer Strategies

Wal-Mart: Efficiency Target: More quality and service Carrefour: International, ambiance

K-Mart: Confused. – Squeezed between Target and Wal-Mart

– Reliance on coupon sales

– Do coupons stabilize or destabilize a Supply chain?

K-Mart and Sears merged in November 2004 » K-Mart gets cash» Sears gets presence outside malls

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Productivity

Partial measures : output / single input– Output/energy , output/machine hour, output/labor

Multi – factor measures : output / multi input– Multi – factor : output/(energy + machine cost),

output/(labor + capital)

Total measure : output / all inputs

In general, Productivity = output / input

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Example for productivity

10,000 items are produced Price $10/item

500 labor hours to accomplish the job Labor rate : $9/hr

Cost of raw material is $5,000 Cost of overhead is $25,000

What is the labor productivity?

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Example for productivity cont. Output : 10,000 x $10/item = $100,000 Input : 500 hours x $9 /hr = $4500 Labor productivity=100,000 / 4500 = 22.22

MFP (multi factor productivity) = output / labor + materials 100,000 / {4,500 + 25,000 + 5,000} MFP = 2.90

What are the units of these productivity numbers?

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Factors Affecting Productivity Positively

High Technology– Dual powered engine helps Toyota Prius

Effective Management High Quality (products)

– Less scrap Extensive Training

– University of Texas at Dallas Low employee tenure/layoffs High Standardization Efficient Workplace Design-Ergonomics Effective Goals and Incentives

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Improving Productivity

Develop productivity measures– First measure, then manipulate

Develop methods for productivity improvements– Venues for ideas to prosper

Establish reasonable goals– High challenges vs. trivialities

Publicize improvements– Incentives, positive feedback, awards

Get management support Productivity is more general than efficiency

– Set the rules of the game to win it

Determine the critical operations = bottleneck

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Bottleneck Operations

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Low capacity

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Summary

Competencies Mission/Strategy/Tactics Productivity