Course Notes IDS 355 Competetiveness, Strategy, and Productivity

2: Competetiveness, Strategy, and Productivity

Text: Operations Management by W. J. Stevenson

Charles E. Oyibo

Competitiveness refers to how effective an organization meets the needs of customers relative to others that offer similar goods and services. Businesses compete with each other in a variety of ways including:

• Price
• Quality
• Product or service differentiation
• Flexibility, the ability to respond to change
• Time: (a) How quickly a product or service is delivered to the customer, (b) how quickly new products and services are developed and brought to market, and (c) the rate at which improvements in products and processes are made.
• Service: including after-sale activities that are perceived by customers as value-added, such as delivery, setup, warranty work, technical support, etc.
• Managers and workers

Strategy

• Strategies are plans for achieving goals.
• Mission refers to the reason for existence of an organization
  • A Mission Statement is a statement of purpose that serves as a guide for stategy and decision making, and answers the question, "what business are we in?"
• Tactics are the methods and actions taken to accomplish strategies.

Mission Goals Operational Strategy Functional Strategies Tactics Operating Procedures

Steps in Strategy Formulation

1. Consider organization's distinctive competencies
2. Scan the environment, the considering of events and trends that present threats or opportunities for a company; using SWOT analysis to consider such factors as:

• competitors' activities
• changing consumer needs
• legal, econoic, political, and environmental issues
• the potential for new markets
• et cetera

3. Consider both order qualifiers and order winners

Examples of Organizational Strategies

• Low labor cost strategy: Exploiting inexpensive labor pool (Ethical?)
• Scale-based strategy: Using capital-intensive methods to achieve higher labor productivity and lower unit costs
• Focused factories strategy: Using smaller factories to focus on narrow product lines in order to take advantage of specialization and to achieve higher quality
• Flexible factories strategy: Reducing the time needed to incorporate new product and process designs; using flexible equipment that allowed volume and design changes, as well as product variety while continuing to stress quality

Quality and Time Strateries

• Quality-based strategies include strategies that focus on quality in all phases of an organization.
• Time-based strategies focus on reduction of time needed to accomplish tasks.

Productivity

Productivity is a measure of the effective use of resources, usually expressed as the ratio of output (goods and services) to input (labor, machines, capital, materials, energy, and other resources).

Productivity = Output / Input

Productivity Growth = [(current period productivity) - (previous period productivity)] / (previous period productivity).

Productivity can be based on a single input (partial productivity), more than one input (multifactor productivity), or on all inputs (total productivity).

Productivity measures are useful on a number of levels:

• Within an individual department or organization, they can be used to track performance over time
• As aggregate measure, they can be used to judge the performance of an entire industry or the productivity of a country as a whole.

Improving Productivity

1. Develop productivity measures for all operations; measurement is the first steo in managing and controlling operations
2. Look at the system as a whole. Taking a global perspective will help you identify bottleneck operations, for instance.
3. Develop methods for achieving productivity improvements, such as soliticiting ideas from workers, studying how other firms have increased productivity, and reaxaminig the way work is done.
4. Establish reasonable goals for improvement
5. Let employees know that managers support and encourage productivity improvements. Consider incentive to reward workers for their contributions.
6. Measure improvements and publicize them.
7. Don't confuse productivity with efficiency. Efficiency is a narrower concept that pertains to getting the most out of a fixed set of resources ("what is the best way to use this lawn mower?"); productivity is a broader concept that pertains to effective use of overall resources ("could we invest in a power mower?").

 

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Page Last Updated: Thursday September 30, 2004 9:01 PM