Competitiveness in Business

Competitiveness

• Companies compete to sell goods and services in the marketplace.
• Competitiveness determines if a company prospers or fails via price, delivery time, or differentiation.
• Marketing influences competitiveness by identifying consumer needs, pricing, and promotion.
• Identifying consumer wants is key for competitiveness, aiming for a match with offered goods/services.
• Consumers decide on purchases based on price and quality, requiring understanding of this trade-off. Advertising and promotion inform potential customers and attract buyers.

Operations Influence on Competitiveness

• Product/service design, affects costs, location, quality, response time, flexibility, inventory, supply chain, and after sales service.
• Product and service design aligns financial, operational, supply chain capabilities with consumer needs.
• Innovation and speed to market are key factors in buying decisions.
• Cost impacts pricing and profit, with ongoing reduction efforts crucial.
• Higher productivity gives companies a cost advantage, achieved through outsourcing.
• Location affects cost and customer convenience. Proximity to inputs lowers costs, while closeness to markets reduces delivery times. Retail benefits from convenient locations.
• Quality involves materials, workmanship, design, and service, influencing customer willingness to pay more.
• Quick response is a competitive edge through faster new product introduction, delivery, and complaint handling.
• Flexibility to adapt to design changes, demand volume, or the mix of offerings, creates a competitive advantage.
• Inventory management ensures efficient supply-demand matching.
• Supply chain management coordinates internal/external operations for timely, cost-effective delivery.
• Excellent service is value-added, such as delivery, warranty, courtesy, and attention to detail. High service quality improves profitability and growth.
• Competent, motivated managers/workers provide a competitive edge through skills and ideas.
• Positive telephone interactions can create a competitive advantage.

Why Organizations Fail

• Neglecting operations strategy endangers companies and operations.
• Failing to take advantage of strengths and opportunities is a common mistake which causes failures.
• Overemphasizing short-term financial performance hurts innovation and long term growth.
• Overemphasizing product/service design rather than process design/improvement is problematic.
• Neglecting investments in capital and human resources can limit a company's abilities.
• Poor internal communication and cooperation between functional areas hurts competitiveness..
• Ignoring customer needs will result in negative performance.
• Success requires determining and meeting/exceeding customer expectations through customer research.
• Operations must collaborate with marketing to understand customer priorities for strategic development.

Mission and Strategies

• An organization's mission statement defines its purpose and business focus.
• Organizational goals detail the mission, setting scope and stakeholder expectations, serving as the basis organizational strategies.
• Organizational strategy directs and aligns functional units, impacting success.
• The three basic business strategies are low costs, responsiveness, and differentiation.
• Strategies act as roadmaps to achieve goals, offering decision-making focus.
• Organizational strategies apply company-wide, while functional strategies support overall goals in specific departments.
• Tactics are specific methods to perform work.

Strategy Examples

• Rita wants a good business career with a good income.
  • Mission: Live a good life.
  • Goals: Have a 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.
• Distinctive competencies give a competitive edge like price, quality, time, flexbility, service, and location.

Strategy Formulation

• Requires considering core competencies and scanning the environment.
• Examine competitor actions and factors that could positively and negatively affect the company.
• SWOT approach evaluates strengths, weaknesses, opportunities, and threats.
• Strengths/weaknesses are internally-focused within operations
• Opportunities/threats are externally focused and require marketing input.
• Michael Porter's five forces consider new competition, substitutes, customer/supplier power, and competitive intensity.
• To succeed, businesses must account for order qualifiers and winners to win over customers. Order qualifiers denote minimum standards and order winners denote outstanding service.

Environmental Scanning

• Includes monitoring competition, consumer needs, legal/economic/political/environmental issues, and potential markets.
• Technological changes can create opportunities and threats.
• Changes occur in products, services, and processes, offering potential competitive advantage.
• Choices must be appropriate to create long term gains, to avoid problems later.
• External factors include:
  • Economic conditions (inflation, interest rates, taxes)
  • Political climate
  • Legal environment (laws)
  • Technology innovation rates.
  • Competition
  • Markets (size, location, long-term stability)
• Internal factors include:
  • Human resources (skills, expertise, loyalty)
  • Facilities and equipment (capacity, location, cost)
  • Financials (cash flow, debt)
  • Customers (loyalty, needs)
  • Products and Services
  • Technology
  • Suppliers
• Evaluate external/internal factors to formulate a success strategy.
• Key questions to address include:
  • Internet's role
  • Global presence
  • Use of outsourcing
  • Supply chain strategies
  • New product/service introduction
  • Desirable growth rate
  • Emphasis on lean production
  • Product differentiation
• An organization may leverage strategic options in the following key steps:
  • Link strategy to the organization's mission or vision statement.
  • Assess strengths, weaknesses, threats and opportunities, and identify core competencies.
  • Identify order winners and order qualifiers.
  • Select one or two strategies (e.g., low cost, speed, customer service) to focus on.

Strategic Considerations

• Supply chain strategy aligns with the business strategy, enhancing value and guiding supplier/customer relationships and sustainability.
• Sustainability strategy focuses on corporate sustainability through governance and goals for products, processes, and the supply chains.
• Global strategy addresses international strategic decisions, considering varying regional dynamics.
• Operations strategy aligns with overall organizational strategy, focusing on products, resource management, quality, and scheduling.
• Operations strategy must align with overall strategy through capitalizing on strengths/dealing with weaknesses.
• Functional units must unify to drive competitive growth with synergistic output.
• Operations strategy influences competitiveness.
  • A well-designed and executed strategy helps to ensure success.

Strategic Operation Management Strategies

• Product and service design affects costs, quality, liability, and environmental issues.
• Capacity affects cost structure and flexibility.
• Process selection and layout affects costs, flexibility, skill levels, and capacity.
• Work design affects the quality of work life, employee safety, and productivity.
• Location affects cost and visibility.
• Quality affects the ability to meet or exceed customer expectations.
• Inventory affects costs and shortages.
• Maintenance affects costs, equipment reliability, and productivity.
• Scheduling affects flexibility and efficiency.
• Supply chains affect costs, quality, agility, shortages, and vendor relations.
• Projects affect costs, new products/services, and operating systems.

Organization Strategy Effects

• Quality-based strategies improve products/services in customer retention.
• Time Based Strategies - reduce the time required to accomplish various activities to improve customer service and competitive advantage.
• Quality and time strategies benefit by increased productivity.
• Agile operations use flexibility for competitive advantage.
• Key characteristics of agile operations include cost, quality, reliability, and quick change overs.
• Organization strategy impacts operations and supply chain strategies.
• Organization strategies affect variation in resourcing to produce goods and in the quality checks needed to complete the product.

Examples of Strategy

• Low price requires steady flow of goods to maximize utilization through standarized material and inventories.
• High quality entails higher initial costs for product service and design, while focusing on supplier quality.
• Quick Rresponse needs flexibility, extra capacity, and higher inventory levels.
• Newness/Innovation requires the need to adapt operations/supply processes
• Product/service variety requires high variation in resource need while increasing difficult and complex tasks.
• Sustainability affects location/process design, outsourcing, returns, and waste management.

Balanced Scorecard

• The Balanced Scorecard clarifies vision, strategy, and transforms them into action.
• It integrates financial, customer, internal business processes, learning, and growth perspectives.
• Managers set objectives, metrics, targets, and initiatives for each area, monitoring results.
• The four perspectives balance financial/nonfinancial, internal/external, current/future performance.
• Helps focus organizations on differentiating themselves from competition.
• Limited in strategy formulation.
• Does not address government regulations, and community, environmental, and sustainability.

Productivity

• Productivity measures and describes output relative to input.
• Expressed as a ratio of output to input: output/input.
  • Partial measures: output/(single input)
  • Multi-factor measures: output/(multiple inputs)
  • Total measure: output/(total inputs)
• Productivity Growth = (Current Period Productivity – Previous Period Productivity) / Previous Period Productivity
• Productivity in the service sector is more problematic than in manufacturing.
• Process yield closely relates to productivity, defined as the ratio of output to raw material input.

Factors That Affect Productivity

• Productivity factors include methods, capital, quality, and technology.
• A common misconception is that productivity relies on workers' actions to work harder and faster.
• Technological improvements can improve outcomes of resources.
• New innovation does not guarantee results which must be used thoughtfully.
• Standardization can reduce variability which creates efficient processes.

Improving Productivity

• Develop productivity measures for all operations.
• Look at the system as a whole in deciding which operations are most critical to ensure maximum customer value.
• Develop methods for achieving productivity improvements, examining working procedure, and collecting worker ideas.
• Establish reasonable goals for improvement.
• Support and incentivize workers to reach goals.
• Measure and publicize productivity.
• Implement methods which use a fixed sets of resource while being practical.