LESSON 2 – Competitiveness, Strategy and

Productivity
❑ TOPICS ✓ LEARNING OUTCOMES

❑ Difference between competitiveness, ✓ Know the different ways companies compete

strategy and productivity and why some firms do a very good job in
❑ Operations Strategy competition.

❑ Operations Competitive Dimensions ✓ Know how effective strategies can lead to

competitive organizations.
❑ Corporate Strategy Design Process
✓ Know what productivity is, why is it important,
❑ Strategic Fit – Fitting Operational Activities and what organizations can do to improve it.
to Strategy
❑ Attacking Operations ✓ To understand the terms that are widely use in
business organization
❑ Productivity Measurement
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 ❑Competitiveness – effectiveness of an organization in the
marketplace relative to other organizations that offer similar
products or services.

❑Strategy – plans that determine how an organization pursues its

goals.

❑Productivity – effective use of resources, and it has a direct

impact on competitiveness

❑ REFERENCE: Operations Management 7th Edition by William J. Stevenson

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 • Competitiveness - How effectively an organization meets the
needs of customers relative to others that offer similar goods or
services.

• Companies must be competitive to sell their goods and services in

the marketplace. Competitiveness is an important factor in
determining whether a company prospers, barely gets by, or fails.
Business organizations compete with one another in a variety of
ways.

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 Price is the amount a Quality refers to materials Flexibility is the ability to Product or service
customer must pay for the and workmanship as well respond to changes. The differentiation refers to
product or service. If all as design. Usually, it better a company or any special features (e.g.,
other factors are equal, relates to a buyer's department is at design, cost, quality, ease
customers will choose the perceptions of how well responding to changes, of use, convenient
product or service that has the product or service will the greater its competitive location, warranty) that
the lowest price. serve its intended purpose advantage over another cause a product or service
Organizations that company that is not as to be perceived by the
compete on price may responsive. The changes buyer as more suitable
settle for lower profit might relate to increases than a competitor's
margins, but most focus or decreases in volume product or service
on lowering costs of goods demanded, or to changes
or services. in the design of goods or
service
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Time refers to a number of Service might involve after- Managers and workers are
different aspects of an sale activities that are the people at the heart and
organization's operations. perceived by customers as soul of an organization, and
One is how quickly a value added, such as if they are competent and
product or service is delivery, setup, warranty motivated, they can
delivered to a customer. work, technical support, or provide a distinct
This can be facilitated by extra attention while work competitive edge by their
faster movement of is in progress, such as skills and the ideas they
information backward courtesy, keeping the create. One skill that is
through the supply chain. customer informed, and often overlooked is
attention to little details. answering the telephone.
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 • Organizations fail, or perform poorly, for a variety of reasons. Being aware of those
reasons can help managers avoid making similar mistakes. Among the chief reasons
are the following:
• 1. Putting too much emphasis on short-term financial performance at the expense of
research and development.
• 2. Failing to take advantage of strengths and opportunities, and/or failing to recognize
competitive threats.
• 3. Neglecting operations strategy.
• 4. Placing too much emphasis on product and service design and not enough on
process design and improvement.
• 5. Neglecting investments in capital and human resources.

• 6. Failing to establish good internal communications and cooperation among different

functional areas.
• 7. Failing to consider customer wants and needs

The key to successfully competing is to determine what customers want and then directing
efforts toward meeting (or even exceeding) customer expectations. There are two basic issues
that must be addressed. First: What do the customers want? Which items on the preceding list
of the ways business organizations compete are important to customers? Second: What is the
best way to satisfy those wants? Operations must work with marketing to obtain information on
the relative importance of the various items to each major customer or target market.
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Understanding competitive issues can help managers develop successful strategies
 Strategy

Strategies are plans for achieving goals. An organization's

strategy has a long-term impact on the nature and
characteristics of the organization. In large measure,
strategies affect the ability of an organization to compete or,
in the case of a nonprofit organization, the ability to serve its
intended purpose.

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• MISSION An organization's mission is the basis of the organization-the
reason for its existence.
• Missions vary from organization to organization, depending on the nature
of their business. It is important that an organization have a clear and
simple mission statement, one which answers the question, "What
business are we in?
• " The mission statement should serve to guide formulation of strategies for
the organization as well as decision making at all levels. Not all
organizations have mission statements; perhaps their leaders lack an
awareness of how important such a statement is, or perhaps they are
unclear about what the mission should be. Without a clear mission, an
organization is unlikely to achieve its true potential, because there is little
direction for formulating strategies.

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 • Example 1
• Rita is a high school student in Southern California. She would like
to have a career in business, have a good job, and earn enough
income to live comfortably. A possible scenario for achieving her
goals might look something like this:
• Mission: Live a good life.
• Goal: Successful career, good income.
• Strategy: Obtain a college education.
• Tactics: Select a college and a major; decide how to finance
college.
• Operations: Register, buy books, take courses, study.

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 • STRATEGY FORMULATION To formulate an effective strategy, senior
management must take into account the distinctive competencies of
the organizations, and they must scan the environment. They must
determine what competitors are doing, or planning to do, and take that
into account. They must critically examine other factors that could have
either positive or negative effects. This is sometimes referred to as the
SWOT approach (strengths, weaknesses, opportunities, and threats). In
formulating a successful strategy, organizations must take into account
both order

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 • Environmental scanning
• is the considering of events and trends that present either threats or
opportunities for the organization. Generally these include competitors'
activities; changing consumer needs; legal, economic, political, and
environmental issues; the potential for new markets; and the like.
Depending on the nature of an organization and the locations of its
customers, these issues may be global, national, regional, or local.

• Technological change, which can present real opportunities and threats

to an organization. Technological changes occur in products (high-
definition TV, improved computer chips, improved cellular telephone
systems, and improved designs for earthquakeproof structures); in
services (faster order processing, faster delivery); and in processes
(robotics, automation, computer-assisted processing, point-of-sale
scanners, and flexible manufacturing systems). The obvious benefit is a
competitive edge; the risk is that incorrect choices, poor execution, and
higher-than-expected operating costs will create competitive
disadvantages. Important factors may be internal or external.

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 • External factors are: Internal factors are:

• 1. Economic conditions. These include the general • 1. Human resources. These include the skills and abilities of managers
health and direction ofthe economy, inflation and and workers; special talents (creativity, designing, problem solving);
deflation, interest rates, tax laws, and tariffs. loyalty to the organization; expertise; dedication; and experience.
•
• 2. Political conditions. These include favorable or 2. Facilities and equipment. Capacities, location, age, and cost to
maintain or replace can have a significant impact on operations.
unfavorable attitudes toward business, political
stability or instability, and wars. • 3. Financial Resources. Cashflow, access to additional funding, existing
debt burden and cost of capital
• 3. Legal environment. This includes antitrust laws,
government regulations, trade restrictions, • 4. Customers. Loyalty, existing relationships and understanding of wants
minimum wage laws, product liability laws and and needs are important
recent court experience, labor laws, and patents. • 5. Products and services. These include existing products and services,
4. Technology.This can include the rate at which and the potential for new products and services.
product innovations are occurring, current and
future process technology (equipment, materials • 6. Technology. This includes existing technology, the ability to integrate
handling), and design technology. new technology, and the probable impact of technology on current and
future operations.
• 5. Competition. This includes the number and
strength of competitors, the basis of competition • 7. Suppliers. Supplier relationships, dependability of suppliers, quality,
flexibility, and service are typical considerations.
(price, quality, special features), and the ease of
market entry. • 8. Other. Other factors include patents, labor relations, company or
product image, distribution channels, relationships with distributors,
• 6. Markets. This includes size, location, brand maintenance of facilities and equipment, access to resources, and
loyalties, ease of entry, potential for growth, long- access to markets.
term stability, and demographics.

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 Productivity
• Productivity is an index that measures output (goods and services)
relative to the input (labor, materials, energy, and other resources)
used to produce them. It is usually expressed as the ratio of:
Productivity = Output/Input
• Productivity growth is the increase in productivity from one period
to the next relative to the productivity
Productivity

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Prob Solving #1

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Prob Solving #2

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