Chapter 02: Competitiveness, Strategy & Productivity - BUS 2501 PDF

CHAPTER 2 Competitiveness, Strategy And Productivity BUS 2501 Prof. Maria Mema...

CHAPTER 2 Competitiveness, Strategy And Productivity BUS 2501 Prof. Maria Memar Zadeh Slides’ copyright belongs to: (1) Prof. Vedmani and (2) Stevenson & Hojati, 2011, McGraw-Hill Inc. Learning Objectives Explain how organizations compete Define a company’s strategic planning Describe how firms formulate their strategies Identify and measure the term productivity 2  Competitiveness the ability and performance of an organization in the marketplace compared to other organizations that offer similar goods or services Competitiveness is how well a company performs in the market compared to others that sell similar products or services. It’s about being able to attract more customers, make more sales, and stay ahead of competitors by offering better value, quality, or innovation. 3 Competitive Edge: Strategic Fit Business competitive Strategy Business Environment Operations Strategy Marketing Strategy Order Qualifiers & Competitive Priorities Order Winners Strategic Decisions Tactical Decisions Operational Decisions 1. Competitive Edge: This is what makes a business stand out from its competitors. It could be anything from lower prices, unique products, better customer service, or a strong brand. 2. Strategic Fit: This refers to how well a company's strategy aligns with its strengths, resources, and the market demands. It ensures that all parts of the business work together towards the same goals. 3. Business Competitive Strategy: This is the plan a company uses to gain an advantage over its competitors. It includes deciding whether to focus on cost leadership (being the cheapest) or differentiation (offering unique products). 4. Operations Strategy: This involves planning how to produce goods or services efficiently. It focuses on processes, resources, and technology to ensure that the business runs smoothly. 5. Competitive Priorities: These are the key areas a company focuses on to compete effectively. Common priorities include cost, quality, speed, and flexibility. 6. Strategic Decisions: These are long-term choices that set the direction for the business, like entering a new market or launching a new product line. 7. Tactical Decisions These are short-term decisions that support strategic goals, like setting a marketing budget or scheduling staff shifts. 8. Operational Decisions These are day-to-day choices that keep the business running, like managing inventory or dealing with customer inquiries. 9. Marketing Strategy This is the plan for promoting and selling products or services. It includes identifying target customers, setting prices, and choosing advertising methods. 10. Order Qualifiers & Order Winners Order Qualifiers: These are the minimum standards a product must meet to be considered by customers (e.g., basic quality or acceptable price). Order Winners: These are the features that differentiate a product and make customers choose it over competitors (e.g., superior quality or unique features). 11. Business Environment This refers to all external factors that can affect a business, including economic trends, competition, regulations, and social changes. Understanding the environment helps businesses adapt and thrive. Definitions I Competitive strategy of a business – the plan of a firm to compete in the market (e.g., Product markets and segments, Standardization vs. customization, and Innovation leadership or followership strategy). Vision is like a big picture of where an organization wants to be in the future. It’s a long-term goal that inspires everyone. Mission is the plan or steps the organization takes to reach that vision. It outlines the purpose of the organization and how it intends to achieve its goals. In short, the vision tells you where you want to go, and the mission shows you how to get there! 7 Definitions II Order qualifiers – Perceived as minimum standard of acceptability by customers – Allow product to be considered Order winners – Perceived as better than competition by customers – Allow product to be purchased Photo Source: https://www.imore.com 8 Definitions III Operations strategy – set of coordinated policies, objectives, and action plans, directly affecting the operations function. – consistent with organization strategy – support competitive priorities Tactical Plans – The specific methods and actions taken to accomplish strategies. Short term decisions. Operational Plans – The day-to-day actions that are specified in firms’ tactical plans. 9 Definitions IIII Competitive priority Emphasis Examples of Organization Cost Low cost Loblaw WestJet Wal-Mart Quality High-performance Sony, Samsung Lexus, Cadillac Consistent quality Coca-Cola, Pepsi Cola Xerox, Toyota, Pizza Hut Flexibility Variety Home Depot, Wal-Mart Hospital emergency room Quantity flexibility Air Canada Timeliness Rapid delivery McDonald’s , Purolator Domino’s Pizza On-time delivery WestJet Just-in-time suppliers, e.g., Magna Innovation Creative products Apple, Tesla 10 Source: Stevenson & Hojati, 2011 Strategic Decision Categories Vertical Facility Capacity Integration Product Mix Process Types Supplier and New and Relations Products Technology Operations Human Quality Infrastructure Resources and Systems 11 1. **Facility**: This involves decisions about the location, layout, and design of physical spaces where products are made or services are delivered. Choosing the right facility can impact efficiency and costs. 2. **Capacity**: This refers to how much a business can produce in a given time. Decisions here involve determining the right amount of resources (like machines and labor) to meet customer demand without overproducing. 3. **Vertical Integration**: This is about whether a company should own its supply chain (like making its own parts) or rely on outside suppliers. It affects control over production, costs, and quality. 4. **Supplier Relations**: This involves how a business interacts with its suppliers. Good relationships can lead to better prices, reliability, and innovation, while poor ones can cause disruptions. 5. **Product Mix and New Products**: This is about deciding which products to offer and how to develop new ones. A good mix can attract different customers and meet changing market demands. 6. **Process Types and Technology**: This focuses on the methods used to produce goods or services, including the technology involved. Choosing the right processes can improve efficiency and quality. 7. **Human Resources**: This includes decisions about hiring, training, and managing employees. A strong HR strategy helps attract and retain talent, which is crucial for success. 8. **Quality**: This refers to the standards of products or services. Decisions about quality affect customer satisfaction and can differentiate a business from its competitors. 9. **Operations Infrastructure and Systems**: This involves the underlying systems and processes that support operations, like software and workflows. A solid infrastructure ensures smooth and efficient business operations. Operations Management OM is the management of processes or systems that create goods and/or provide services Inputs Output Transformation OM is used to improve productivity: – Efficiency (minimize cost and time) 𝒐𝒖𝒕𝒑𝒖𝒕 𝒑𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒗𝒊𝒕𝒚 = – Effectiveness (achieve intended goals) 𝒊𝒏𝒑𝒖𝒕 13 Productivity Growth 𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒑𝒆𝒓𝒊𝒐𝒅 𝒑𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒗𝒊𝒕𝒚 − 𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒑𝒆𝒓𝒊𝒐𝒅 𝒑𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒗𝒊𝒕𝒚 𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒑𝒆𝒓𝒊𝒐𝒅 𝒑𝒓𝒐𝒅𝒖 𝒕𝒊𝒗𝒊𝒕𝒚 14 Productivity Measures Partial Measure 𝒐𝒖𝒕𝒑𝒖𝒕 𝒐𝒖𝒕𝒑𝒖𝒕 𝒐𝒖𝒕𝒑𝒖𝒕 𝒐𝒖𝒕𝒑𝒖𝒕 𝒐𝒖𝒕𝒑𝒖𝒕 (𝒔𝒊𝒏𝒈𝒍𝒆 𝒊𝒏𝒑𝒖𝒕) 𝒎𝒂𝒄𝒉𝒊𝒏𝒆 𝒍𝒂𝒃𝒐𝒖𝒓 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 𝒆𝒏𝒆𝒓𝒈𝒚 Mutli-factorMeasure 𝒐𝒖𝒕𝒑𝒖𝒕 𝒐𝒖𝒕𝒑𝒖𝒕 𝒐𝒖𝒕𝒑𝒖𝒕 (𝒎𝒖𝒍𝒕𝒊𝒑𝒍𝒆 𝒊𝒏𝒑𝒖𝒕𝒔) 𝒎𝒂𝒄𝒉𝒊𝒏𝒆+𝒍𝒂𝒃𝒐𝒖𝒓 𝒎𝒂𝒄𝒗𝒉𝒊𝒏𝒆+𝒍𝒂𝒃𝒐𝒖𝒓+𝒆𝒏𝒆𝒓𝒈𝒚 Total Measure 𝒐𝒖𝒕𝒑𝒖𝒕 𝒈𝒐𝒐𝒅𝒔 𝒐𝒓 𝒔𝒆𝒓𝒗𝒊𝒄𝒆𝒔 𝒑𝒓𝒐𝒅𝒖𝒄𝒆𝒅 (𝒕𝒐𝒕𝒂𝒍 𝒊𝒏𝒑𝒖𝒕𝒔) 𝒂𝒍𝒍 𝒊𝒏𝒑𝒖𝒕𝒔 𝒖𝒔𝒆𝒅 𝒕𝒐 𝒑𝒓𝒐𝒅𝒖𝒄𝒆 𝒕𝒉𝒆𝒎 15 Example What is the multifactor productivity? 7040 Units Produced Cost of labour: $1,000 Cost of materials: $520 Cost of overhead: $2000 16 Solution 𝒐𝒖𝒕𝒑𝒖𝒕 MFP = 𝒍𝒂𝒃𝒐𝒖𝒓+𝒎𝒂𝒕𝒆𝒓𝒊𝒂𝒍𝒔+𝒐𝒗𝒆𝒓𝒉𝒆𝒂𝒅 MFP =(7040 units)/$1000 + $520 + $2000 =2 Productivity is 2.0 units per dollar of input 17 Usefulness of Productivity Measure Productivity and efficiency are related but different concepts. Productivity measures how much output (like goods or services) is produced from a certain amount of input (like time, labor, or resources). It's about the quantity of work done. Efficiency on the other hand, focuses on how well resources are used to achieve that output. It looks at minimizing waste and maximizing results. Usefulness of Productivity Measures 1. Track Performance Over Time By measuring productivity regularly, businesses can see how their output changes and identify trends. 2. Determine Areas for Improvement Productivity data can highlight where a team or process may be falling short, helping to find ways to work better. 3. Compare Competitiveness Businesses can use productivity measures to compare their performance against competitors, helping them understand their market position. In summary, measuring productivity helps organizations improve, adapt, and stay competitive… 18  Productivity Measurement of Services Measuring productivity in services is challenging for a few reasons: 1. Intangibility: Unlike products you can’t touch or see, services are often invisible. You can’t measure them easily, making it hard to determine how much service is being provided. 2. Emotional and intellectual engagement: Services often require personal interaction and thinking, like in healthcare or consulting. This makes it tough to measure inputs because they can vary widely from one person to another. 3. Variability: The quality and nature of services can change from one time to another, depending on factors like who is providing the service or the specific circumstances. This inconsistency makes it difficult to create standard measures of productivity. Overall, these factors mean that assessing how effectively services are delivered can be quite complex. 19  Productivity Improvement Figure Source: Bottleneck Analysis | Creative Safety Supply 1. Develop productivity measures: Create ways to measure how efficiently tasks are being done. This could be tracking time, output, or quality. 2. Look for bottlenecks: Identify parts of the process that slow everything down. These are the areas where work gets stuck or takes longer than it should. 3. Develop methods for improvement: Find strategies to fix these bottlenecks and make processes smoother. This might include training, reorganizing tasks, or changing workflows. 4. Establish reasonable goals: Set achievable targets for how much you want to improve productivity. These goals should be specific and realistic. 5. Gather top administration support: Get backing from management to ensure everyone is on board and resources are available for changes. 6. Measure improvements and publicize them: After making changes, track how much better things are working. Share these successes with the team to motivate and encourage further improvements. 7. Use technology/capital: Invest in tools or technology that can help make processes more efficient, like software or new equipment. This approach helps organizations work better and achieve their goals more effectively! Bottleneck Input Output 20 Sample Question #1 In an assembly operation at a furniture factory, six employees assembled an average of 450 standard dining chairs per 5-day week. What is the labour productivity of this operation? A. 90 chairs/worker/day B. 20 chairs/worker/day C. 15 chairs/worker/day D. 75 chairs/worker/day E. None of the choices are correct. Solution: productivity= output/input = 450/(6X5)= 15 Sample Question #2 Of the following, which aspect of strategic planning involves medium or short-term projects to accomplish specific objectives? A. Goals and objectives B. Functional strategies C. Action plans D. Forecasts E. value creation