competitiveness, strategy, and productivity y.-h. chen, ph.d. international college ming-chuan...
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Competitiveness, Strategy, and Productivity
Y.-H. Chen, Ph.D.International College
Ming-Chuan University
Business Goals
Better quality Higher productivity Lower cost The ability to quickly respond to
customer needsHow to achieve these goals?
Competitiveness, Strategy, and Productivity Competitiveness: How effective an
organization is in the marketplace compared with other organizations that offer similar products or services.
Strategy: The plans that determine the direction an organization takes in pursuing its goals.
Productivity: The effective use of resources.
Competitiveness
How to achieve competitiveness? Identifying consumer wants and /
or needs Pricing and quality Advertising and promotion
Operations and CompetitivenessHow do operations affect competitiveness? Product and service design Cost Location Quality Quick response Flexibility Inventory management Supply chain management Service Managers and workers
Why some organizations fail? Too much emphasis on short-term financial
performance Failing to take advantage of strengths and
opportunities Failing to recognize competitive threats Neglecting operations strategy Too much emphasis in product and service
design and not enough on improvement Neglecting investments in capital and human
resources Failing to establish good internal
communications Failing to consider customer wants and needs
Competitiveness Summary
What customers want? What is the best way to satisfy
those wants?
Strategies
Plans for achieving organizational goals.
Can be long term, intermediate term, or short term.
Must be designed to support the organization’s missions and its goals.
Mission, Strategy, and Tactic
Mission: The reason for existence for an organization. The basis for organizational goals. Mission Statement: A clear statement of
purpose. (Table 2.1, p.39) Strategy: A plan (roadmap) for achieving
organizational goals. Tactics: The methods or actions taken to
accomplish strategies.
Mission, Strategy, and Tactics in Production / Operations Management
Mission
Goals
Organizational strategy
Functional strategies
Finance Marketing Operations
Tactics Tactics Tactics
Finance operations
Marketingoperations
Operationsoperations
Mission, Strategy, and Tactic Example
Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably.
Mission: Live a good lifeGoal/Mission: 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
Strategy Formulation
Take into account the realities of operations' strength and weakness.
Capitalizing on strength and dealing with weakness. (This is generally ignored in a business.)
SWOT approach (strength, weakness, opportunity, and threat) critically examines factors that could have either positive or negative effects.
SWOT Analysis
StrengthDomain knowledge.Breadth of solution.Business strategy.
OpportunityService to existing customers.Improve resource util. by integrating products.Strengths are our best weapons.
WeaknessLack of trans. knowledge.Frequent change of strategy.Lack of customer references.Overlapped products.
ThreatNetwork effect of company X.Lack of product compatibility to legacy products.Multiple business acquisition consumes resource.
Strategy Examples
Distinctive competencies Environmental scanning Technological change Order qualifiers and order winners Quality and time Outsourcing Globalization
Quality
Price
Time
Flexibility
Differentiation
Distinctive Competencies
The special attributes or abilities that give an organization a competitive edge.
Price Quality Time Flexibility Service Location
Distinct Competitiveness Examples
Banks, ATMsConvenienceLocationLocation
DisneylandNordstroms
Superior customer service
ServiceService
Burger KingSupermarkets
VarietyVolume
FlexibilityFlexibility
Express Mail, Fedex,One-hour photo, UPS
Rapid deliveryOn-time delivery
TimeTime
Sony TVLexus, CadillacPepsi, Kodak, Motorola
High-performance design or high quality Consistent quality
QualityQuality
U.S. first-class postageMotel-6, Red Roof Inns
Low CostPricePrice
Environmental Scanning Strategy External factors
Economic conditions
Political conditions Legal environment Technology Competition Markets
Internal factors Human Resources Facilities and
equipment Financial resources Customers Products and
services Technology Suppliers
Technological Change Strategy
Technological changes occur in Products
High-definition TV, improved computer chips, improved cellular telephone systems, and improved design of earthquake structures.
Services Fast order processing and fast delivery.
Processes Robotics, automation, computer-assisted
processing, point-of-sale scanners, and flexible manufacturing systems.
Order Qualifiers and Order Winners Strategies
Order qualifiers Characteristics that customers perceive
as minimum standards of acceptability to be considered as a potential purchase
Order winners Characteristics of an organization’s
goods or services that cause it to be perceived as better than the competition
Quality and Time Strategies Quality-based strategies focus on satisfying c
ustomers by integrating quality into all phases of the organization.
Time-based strategies focus on reducing the time required to accomplish various activities. The rationale is that, by reducing time, cost is gen
erally less, productivity is higher, quality tends to be higher, product innovation appears on the market sooner, and customer service is improved.
A company that can bring out new products three times faster than its competitors enjoys a huge advantage.
Outsourcing Strategy
Reduce overhead Gain flexibility Take advantage of suppliers’
expertise
Globalization
Increased market share Risks
May work only locally Political or social upheaval Coordination and management
Productivity Effective use of resources. An index that measures output
relative to the input.
Productivity = Outputs
Inputs
Productivity Reality Check?
Productivity gains involves getting employees to work harder.False. The fact is that many productivity gains in the past have come from technological improvements.
Productivity is the same as efficiency.
Efficiency is a narrow concept that pertains to getting the most out of a given set of resources; productivity is a broader concept that pertains to effective use of overall resources.Example: An efficiency perspective on mowing a lawn given a hand mower would focus on the best way to use the hand mower; a productivity perspective would include the possibility of using a power mower.
Productivity
Productivity is directly related to Competitiveness Standard of living Inflation
Productivity measures can be used to track performance over time. When improvements are needed.
Capital Quality
Technology Management
Factors Affect Productivity
methods, capital, quality, technology, and management.
Examples: Standardization, Internet, computer
viruses, scrap rate, new worker, safety, short of IT skill, layoff, labor turnover, workplace design, training, equipment breakdown, material shortage.
Productivity Improvement Establish reasonable goals Develop productivity measures Look at the system as a whole Develop methods for achieving
productivity improvement (e.g. quality circle)
Management support Measure and publish results
Productivity Measures
Partial measures output/(single input)
Multi-factor measures output/(multiple inputs)
Total measure output/(total inputs)
Productivity Measures
Partial Output Output Output Outputmeasures Labor Machine Capital Energy
Multifactor Output Output
measures Labor + Machine Labor + Capital + Energy
Total Goods or Services Produced
measure All inputs used to produce them
Productivity MeasureExample
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
What is the labor productivity?
Productivity MeasureExample, Labor Productivity
10,000 units/500hrs = 20 units/hour
(10,000 unit* $10/unit)/(500hrs* $9/hr) = 22.22
or we can arrive at a unitless figure
Productivity MeasureExample, Multifactor Productivity
MFP = OutputLabor + Materials
MFP = (10,000 units)*($10)(500)*($9) + ($5000) + ($25000)
MFP = 2.90
Productivity MeasureExample #1
Determine the productivity for these cases :
a. Four workers installed 720 square yards of carpeting in eight hours.
b. A machine produced 68 usable pieces in two hours.
a. Four workers installed 720 square yards of carpeting in eight hours.
b. A machine produced 68 usable pieces in two hours.
Productivity MeasureExample #1 Solution
Productivity=720 square yards
4 workers
720 square yards
4 workers x 8 hours/worker
Productivity=
or
= 180 square yards/worker or 22.5 square yards/hour
68 pieces
2 hours
= 34 pieces/hour
Productivity MeasureExample #2
Determine the multifactor productivity for the combined input using the following data:
Output: 1760 unitsInput: Labor $1000, Material $520,
Overhead $2000.
Output
Labor + Material + Overhead
Productivity MeasureExample #2 Solution
Output: 1760 unitsInput: Labor $1000, Material $520, Overhead
$2000.
Multifactor Productivity
=
=1760 units
$1000 + $520 + $2000= 0.50 units/dollar
Productivity Measure Summary
Calculation of multifactor productivity requires a common unit of measurement.
It is best to treat productivities as approximate indicators rather than precise measurements.