ch2 competitiveness

8/6/2019 Ch2 Competitiveness

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Competitiveness

Competitiveness: It relates to how effectively an organization meets the wants and needsof customers compared to others that offer similar goods and services.Companies must be competitive to sell their goods and services in the marketplace.

Competitiveness is an important factor determining whether a company prosper, barelygets by, or fails.

* Business organizations compete through the combination of their(a) marketing functionsand(b) operations functions.

(a) Marketing influences competitiveness by

(i) identifying customer wants and needs(ii) pricing

(iii) advertising and promotion.

(i) Identifying customer wants and needs: It is a basic input in an organizationsdecision making process and central to competitiveness. The ideal is to achieve aperfect match between customer wants and needs and organizations goodsand services.

(ii) Pricing: It is a key factor in consumer buying decisions. It is important tounderstand the trade-off decision consumers make between price and quality ofgoods or services.

(iii) Advertising and promotion: These are the ways the organizations can inform theconsumers about the features of their goods and services.

(b) Operations influences competitiveness through

(i) product and service design (ii) cost (iii) location(iv) quality (v) quick response (vi) flexibility(vii) inventory management (viii) supply chain management

and (ix) service(i) Product and service design: It reflects on achieving a match between financial

resources, operations capabilities and consumer wants and needs. Alsospecial characteristics or features of goods or services can be a key factor inconsumers buying decisions.

(ii) Cost: Cost of an organization affects the pricing decisions, productivity, andprofits.

(iii) Location: It is important in terms of cost and convenience for customers.Location near inputs results in lower input costs, Location near market results inlower transportation costs and quicker delivery times.

(iv) Quality: Quality is important for both attracting and retaining customers.Consumers judge quality according in terms of how well they think a product


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will satisfy its intended purpose. They are willing to pay more if the quality of aproduct if high.

(v) Quick response: It is a competitive advantage. New or improved product needsto bring quickly to the market. Existing product to be delivered to the consumerif they ordered.

(vi) Flexibility: It is the ability to response to change. Changes might be relate toalterations in design feature of a product, or the volume or the mix of productsordered by an organization etc. It is a competitive advantage.

(vii) Inventory management: It is important for effective matching of supplies ofproducts with demand.

(viii) Supply chain management: It is important to achieve timely cost effectivedelivery of products through the system.

(ix) Service: It involves after sale activities such as delivery, set up, warranty work,technical support etc.

Why some organizations fail:

Some organizations fails or perform poorly for the following reasons:(i) Putting too much emphasis on short term financial profit at the expense ofresearch and development

(ii) Failing to take advantage of opportunities.(iii) Neglecting operations strategy(iv) Placing not enough emphasis on process design and improvement(v) Neglecting investment in human resources(vi) Failing to establish good internal communications among different functional

areas.(vii) Failing to consider customer wants and needs

Strategy: Strategies are plans for achieving organizational goals. It has a major impacton what an organization does and how it does it. Strategies can be long term,intermediate term or short term.

Mission: An organizations mission is the reason for its existence. It states the purposeof an organization. It answers the question what business are we in? Missions varyfrom organization to organization depending on the nature of their business.

Goals: Goals provide detail and describe the scope of the mission. It provides the basisfor strategies and tactics.

If goals are destinations, then the strategies are the roadmaps for reaching thedestinations. Strategies focus on decision making.

Organizations strategies are called organizational strategies. It supports the goalsand mission of the organizations.

The strategies which relate to functional areas of the organization are calledfunctional strategies.


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Tactics: Tactics are the methods and actions used to accomplish strategies. Tactics arespecific in nature than strategies. Tactics provide guidance for carrying out actualoperations.Operations strategy: Operations strategy is consistent with organizations strategy. Itdeals with the operations aspect of the organization. It relates to products, processes,

methods, operating resources, quality, costs, and scheduling.*In order for operations strategy to be truly effective, it is important to link it to theorganizational strategy.

Planning and decision making in organizations:

Quality-based strategies: It focus on maintaining or improving the quality of anorganizations products.

Time-based strategies: It focus on reducing the time required to accomplish variousactivities. By doing these, organizations seek to improve service to the customer.

Productivity: Productivity is an index that measures output relative to input used toproduce them. It is usually expressed as the ratio of output to input as follows:

Productivity = output/inputA productivity ration can be computed for a single operation, for a department, for anorganization, or for an entire country.* In business organizations, it is used for planning workforce requirement, schedulingequipments, financial analysis etc.

Mission

Organizationalgoals

Organizationalstrategies

Functionalgoals

Finance

strategies

Marketing

strategies

Operations

strategies

Tactics Tactics Tactics


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Example: For a nation, the rate of productivity growth is of great importance. It isdefined as

%100

=

growthtyproductiviprevious

growthtyproductivipreviousgrowthtyproductiviCurrentgrowthtyproductivi

If productivity increased from 80 to 88, thenThe rate of productivity growth is = %10%100

80

8088=

.

Partial productivity: Productivity measured based on a single input is called partialproductivity.

Example:Capital

output

Machine

output

Labor

output,,

Multifactor productivity: Productivity measured based on more than one input iscalled multifactor productivity.

Example:LaborCapital

output

CapitalMachine

output

MachineLabor

output

+++

,,

Total productivity: Productivity measured based on all inputs is called totalproductivity.

Example:themproducetoinputsAll

producedgoods

Example 1: Determine the productivity for the following cases:(a) Four workers installed 720 square yards of carpeting in 8 hours.(b) A machine produced 68 useable pieces in 2 hours.

Solutions:(a) Productivity =

84

720

=

usedhoursLabor

installedcarpetofyardssquare yards / hour

= 22.5 square yards / hour.

(b) Productivity =2

68=

timeproduction

piecesuseablepieces / hour = 34 pieces / hour.

Example 2: Determine the multifactor productivity for the combined input of labor,machine time, and overhead for the following data.output = 7,040 @ $1.1 eachinput: Labor: $1,000, Materials: $520, overhead: $2,000.

Solution: Multifactor productivity =2.2

20005201000

1.1040,7=

++

=

++ overhaedMaterialsLabor

outputunits/dollar.

Example 3: A company that process fruits and vegetables is able to produce 400 casesof canned peaches in one-half hour with 4 workers. What is the labor productivity?


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Solution: Labor productivity =

2

14

400

=

usedLabor

producedQuantity

= 200 cases / labor hour

Example 4: A wrapping company produces 2000 rolls of paper one day. Standard priceis $1/roll. Labor cost was $160, material cost $50 and overhead $320. Determine the

multifactor productivity.

Example 5: A company produced 300 bookcases last week using 8 workers and itproduces 240 bookcases this week using 6 workers. In which period was productivityhigher?

Example 6: The manager of a crew that installs carpeting has tracked the crews outputover the past several weeks, obtaining the following figures:

Week Crewsize

Yardsinstalled

1 4 960

2 3 7023 4 968

4 2 500

5 3 696

6 2 500

Compute the labor productivity for each of the week. On the basis of your calculations,what can you conclude about crew size and productivity?

Example 7: An operation has a 10% scrap rate. As a result, 72 pieces per hour areproduced. What is the potential increase in labor productivity that could be achieved byeliminating the scrap?

Key steps for improving productivity:

(i) Develop methods for achieving productivity improvements, such as solicitingideas from workers

(ii) Establishing reasonable goals for improvement(iii) Arranging proper training for the employees(iv) Consider incentives to reward workers for contributions.(v) Measure improvements and publicize them.

Rita is a high school student in Dhaka. She would like to have a career in business, havea good job and earn enough income to live comfortably.

A possible scenario for achieving her goals might look like:Mission: Live a good life.Goal: Successful career, good incomeStrategy: Obtain a college educationTactics: Select a college and a major, decide how to finance collegeOperations: Registrar, buy books, take courses, study

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