Competitiveness, Strategy, and Productivity

Competitiveness, Strategy, and Productivity Overview

• Competitiveness, strategy, and productivity are three separate but related topics vitally important to business organizations.
• Competitiveness relates to an organization's effectiveness relative to others offering similar products/services.
• Operations and marketing significantly impact competitiveness.
• Strategy relates to the plans determining how an organization pursues its goals.
• Operation strategy is particularly important.
• Productivity relates to the effective use of resources.
• Productivity directly impacts competitiveness and is chiefly the responsibility of OM (Operations Management).

Competitiveness

• Competitiveness is crucial for companies to sell goods and services.
• It determines whether a company prospers, survives, or fails.
• It measures how well an organization meets customer wants and needs compared to competitors.

Marketing in Business

• Business organizations compete through marketing and operations functions.
• Identifying consumer wants/needs is crucial; the ideal situation is a perfect match with the organization's goods/services.
• Pricing is a key factor in consumer buying decisions.
• Advertising and promotion is how potential customers learn about product/service features and attract buyers.

Operations in Business

• Operations significantly influences competitiveness through various factors.
• These factors include product/service design, cost, location, quality, response time, flexibility, inventory, supply chain management, and service, many of which are interrelated.
• Product and service design should reflect joint efforts across the organization.
• Cost affects pricing decisions and profits.
• The location relates to cost effectiveness and convenience for customers.
• Quality refers to materials, workmanship, design, and service.
• Quick response involves bringing new or improved products to market quickly.
• Flexibility is the ability to respond to changes in design, volume, or product/service mix.
• Inventory management provides a competitive edge.
• Supply chain management involves coordinating internal/external operations for timely and cost-effective delivery.
• Service includes after-sale activities that add value for customers.
• Managers and workers give organizations a competitive edge through competence, motivation, skills, and ideas.

Why Organizations Fail

• Too much emphasis is placed on short-term financial performance over research and development.
• There is failure to capitalize on strengths/opportunities or to recognize threats from competitors.
• Neglecting operations strategy reduces effectiveness
• Placing too much focus on product/service design rather than process design/improvement is a factor in failure
• Neglecting investments in capital and human resources reduces performance
• Failing to establish effective internal communications and cooperation across different functional areas affects output.
• Not considering customer wants and needs reduces competitiveness.

Strategies

• Strategies are plans geared toward achieving goals, whose importance cannot be overstated.
• Strategies strongly influence the organization's actions.

Mission and Goals

• An organization's mission is its reason for existence.
• A mission statement states the purpose of the organization.
• A mission statement is the basis for goals, which offer more detail and describe the mission's scope.
• The mission and goals relate to how the organization wants to be viewed by the public, employees, suppliers, and customers.
• Goals serve as a foundation for the development of strategies
• Strategies in turn provide the basis for strategies and tactics of the functional units of the organization.

Tactics Breakdown

• Tactics are the methods and actions used to carry out strategies
• Tactics are more specific than strategies
• Tactics provide guidance and direction for operations
• Tactics represent the "how-to" part of the process, while operations are the "doing" part.

Strategy Example

• Mission: To live a good life.
• Goal: Have a successful career and good income.
• Strategy: Obtain a college education.
• Tactics: Select a college and major, and decide how to finance college.
• Operations: Register, buy books, take courses, and study.

Strategy Examples

• Low Cost: Outsource operations to countries with low labor costs to reduce overall expenses.
• Scale-based: Use capital-intensive methods for high output and low unit costs.
• Specialization: Focus on narrow product lines/services to improve quality.
• Flexible Operations: Prioritize quick response and customization to customer needs.
• High Quality: Achieve higher quality than competitors.
• Service: Focus on various aspects of service
• Sustainability: Focus on environmentally friendly and energy efficient operations.

Strategy Formulation

• Effective strategy formulation requires senior managers to consider: Distinctive competencies and the Environment.
• Senior managers scan the environment to determine what competitors are doing and planning.
• A firm needs to assess its own characteristics, including its "Primary Purpose", its "Mission Statement", and its "Distinctive Competencies".
• The distinctive technology, automated production units, skilled workforce, and ability for innovative products offer firms an advantage over rivals.

Operations Strategy Content

• Operations strategy aims to align operations resources with market requirements.
• This alignment is based on decisions establishing long-term capacity.
• It sets performance objectives related to quality, speed, dependability, flexibility, and cost.
• Capabilities of operations resources are utilized through decision-making to best deploy resources to meet market needs.

Environmental Scanning

• Environmental scanning includes considering trends and events representing threats/opportunities for organizations.
• These events include competitors' activities, changing customer needs, legal/economic/political/environmental issues, and potential new markets.
• Performing external analysis is how a firm assesses opportunities to exploit and threats to counter
• Opportunities for one firm may represent threats to others.

External Key Factors

• Economic conditions include the general health of the economy, inflation, interest rates, tax laws, and tariffs.
• Political involves favorable or unfavorable attitudes toward business, political stability, and wars.
• Legal includes laws like antitrust, government regulations, trade and labor restrictions
• Technology encompasses the rate of product innovation and future process technology.
• Competition includes the number/strength of competitors and the ease of market entry.
• Markets include the size, location, brand loyalties, ease of entry, growth potential, and demographics.

Internal Analysis

• Internal analysis involves evaluating an organization's resources represented - Its assets include financial, physical, human, and intangible assets develop,.
• Firm capabilities relate to the skills and abilities of its human capital in performing functional activities including operation.

Internal Key Factors

• Human Resources: The skills and abilities of managers/workers, special talents, loyalty, expertise, dedication and experience.
• Facilities and Equipment: Capacities, location, age, and cost to maintain or replace assets.
• Financial Resources: Cash flow, access to funding, debt burden, and the cost of capital.
• Customers: Important consideration of loyalty, understanding of wants and needs.
• Products and Services: Existing products and services, and the potential for services to be provided
• Technology: The ability to integrate technology, and how it affects current and future operations.
• Suppliers: Important relationships with suppliers, considering supplier dependability and quality.
• Labor relations, distribution channels, maintenance of facilities, and access to resources/markets.

Core Competencies

• Core competencies are value-creating capabilities and skills of the organization.
• They reflect the collective learning, coordinating processes and integrating technologies within its systems.

Order Qualifiers

• Order Qualifiers are characteristics that qualify a product/service for consideration by customers.
• Order Winner is the characteristic that wins orders from customers.
• Order winners and qualifiers develop over time.
• A firm must provide high quality in its products to win new customers.

Product Design

• Customized products, designed per customer specifications, are produced in small batches, requiring flexibility and on-time delivery.
• Standard products entail few limited varieties/types/models of products.

Production Processes

• "Product Focused" Production operations often are referred to as "production lines" and "assembly lines".
• Required man power, machinery or other equipment are kept together to produce products
• Typically "Processed" or "production" systems that focus systems are designed to generate unique products as high volumes
• Typically designed for "custom made" or "processed" to be relatively inexpensive.

Quality-Based Strategies

• Quality-based strategies focus on maintaining/improving product/service quality.
• They address poor quality perception, match competition, maintain high quality, or a combination of factors.
• Quality-based strategies can be part of other strategies, such as cost reduction, increased productivity, or improving timeliness.

Time-Based Strategies

• Focus on reducing the time for activities like new product development, responding to demand, or delivering products/services.
• This reduces costs, increases productivity, improves product innovations, and enhances customer service.

Productivity

• Productivity measures output relative to input.
• It is expressed as the ratio of output to input.
• The ratio can be computed for a single operation, department, organization, or country.

Productivity in Business

• Productivity ratios are important for workforce planning, scheduling, financial analysis, and more
• For non-profits, is is important in means lower costs.
• For profit-based organizations, measures how competitive a company is.
• For a nation, the rate of productivity growth is of great importance.
• Productivity growth is the increase in productivity from one period to the next relative to the productivity in the preceding period.

Productivity Improvement Equation

• Productivity growth = (current productivity - previous productivity) / previous productivity) X 100
• If productivity rises from 80 to 84, the growth rate will be 5%

Computing Productivity

• Productivity measures can be based on a single input. These are called 'partial productivity".
• The units of output used in productivity measures depend on the type of job to be preformed
• Productivity can also be calculated by calculating a single hour.

Improve Productivity

• Develop productivity measures for all operations.
• Measurement is the first step in managing and controlling an operation.
• Look at the system as a whole in deciding which operations are most critical.
• Develop methods for achieving productivity improvements.
• Establish reasonable goals for improvement.
• Make it clear that management supports and encourages productivity improvement. Consider incentives to reward workers for contributions.
• Measure improvements and publicize them.