Chapter 2 - Competitiveness, Strategy And Productivity 704e1s

Competitiveness, Strategy and Productivity

Competitiveness- how effectively an organization meets the wants and needs of customers relative to others that offer similar goods and services

Marketing influences competitiveness by: 1.)Identifying consumer wants and needs 2.)Price and quality 3.)Advertising and promotion

Operations influences competitiveness by: 1.) Product and Service Design 2.) Cost 3.) Location 4.) Quality 5.) Quick Response 6.) Flexibility 7.) Inventory management 8.) Supply Chain management 9.) Service 10.) Managers and worker

Why some organizations fail 1.) Neglecting Operations Strategy 2.) Failing to take advantage of strengths and opportunities and failing to recognize competitive threats

3.) Putting too much importance on short- term financial performance at the expense of research and development 4.) Placing too much emphasis on product and service design and not enough on process design 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

Strategic management refers to:

Strategy formulation Strategy implementation Strategy evaluation Vision Statements Answers the question: “What do we want to become?” First step in strategic planning

Oftentimes a single sentence.

Mission and Strategies Mission- the reason for the existence of an organization Mission statement- States the purpose of an organization Goals- provide detail and scope of the mission

Strategies- plans for achieving organizational goals.

Porter’s three basic business strategies 1.) Cost 2.) Focus 3.) Differentiation

Some examples of different strategies an organization might choose from 1.) Low cost- Outsource operations to third world countries that have low labor cost 2.) Scale based strategiesuse capital intensive methods to achieve high output volume and unit costs. 3.) Specialization- from a narrow product lines or limited service to achieve higher quality 4.) Newness- focus on innovation to create new products and services

Some examples of different strategies an organization might choose from 5.) Flexible operations- focus on quick response and/or customization 6.) High quality- focus on achieving higher quality than competitors 7.) Service- focus on various aspects of services (e.g. helpful courteous and reliable) 8.) Sustainability- focus on environmental-friendly and energy efficient operations.

Distinctive Competencies- the special attributes or abilities that give an organization a competitive edge Operations Strategy- the approach, consistent with the organization strategy that us used to guide the operations function.

Strategy Formulation To formulate an effective strategy, senior management must take into the distinctive competencies of the organizations, and they must scan the environment Order qualifiers- Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential for purchase

Order winners- characteristics of an organizations goods or services that cause it to be perceived as better than the competition.

Environmental scanning- The considering of events and trends that present threats or opportunities for a company. SWOT-Analysis of strengths, weaknesses, opportunity and threats

The Key External FactorsOpportunities and Threats Largely beyond the control of a single organization 1.) Economic Conditions- These include the general health and direction of the economy, inflation and deflation, interest rates , tax laws, tariffs 2.) Political conditions- These include favorable or unfavorable attitudes toward business, political stability or instability and wars 3.) Legal Environment- this includes antitrust laws, government regulations, trade restrictions, minimum wage laws, product liability and recent court experience, labor laws,

The Key External FactorsOpportunities and Threats 4.) Technology- This can include the rate at which product innovations are occurring, current and future process technology an design technology 5.) Competition- this includes the number and strength competitors , the basis of competition (price, quality, special features) and the ease of market entry

6.) Markets- this incudes size, location, brand loyalties, ease of entry, potential for growth, long term stability and demographics.

Internal Factors- Strengths and Weaknesses Controllable activities that are performed well or poorly relative to competitors 1.) Human resources -These include the skills and abilities of managers and workers; special talents (creativity, deg, problem solving) loyalty to the organization, expertise, dedication and experience

2.) Facilities and equipment- Capacities, location, age and cost to maintain or replace can have a significant impact on operations 3.) Financial Resources- Cash flow , access to additional funding, existing debt burden, and cost of capital are important considerations 4.) Customers- loyalty, existing relationships and understanding the wants and needs

Internal Factors- Strengths and Weaknesses 5.) Products and services- These include existing products and services and the potential for new products and services. 6.) Technology- This includes existing technology the ability to integrate new technology and probable impact on current and future operations 7.) Suppliers- Supplier relationships, dependability of suppliers, quality, flexibility and service are typical considerations 8.) Others- Other factors include patents, labor relations, company and product image, distribution channels, relations with distributors, maintenance of facilities and equipment business

Strategic Operations Management Decision Areas Decision Area Product and service design Capacity Process selection and lay out Work design Location Quality Inventory Maintenance Scheduling Supply chain Projects

What the decisions affect Cost, quality, liability and environmental issues Cost, structure, flexibility Cost flexibility, skill level needed, capacity Quality of work life, employees safety, productivity Cost, visibility Ability to meet or exceed customer expectations Costs, shortages Cost, equipment reliability, productivity Flexibility, efficiency Cost, quality, agility, shortages, vendor relations, Costs, new products, services, or operating systems

Supply Chain Strategyspecifies how the supplies chain should function to achieve supply chain goals. It establishes how the organization should work with suppliers and policies relating to customer relationships and sustainability

Sustainability Strategybusiness should be devoting themselves to sustainability strategy Global strategy- many companies realized that strategic decisions with respect to globalization must be made

Quality and Time Based Strategies

Quality-based strategyStrategy that focuses on quality in all phases of an organization Time-based strategystrategy that focuses on reduction of time needed to accomplish task

Organization Strategy Low price

High Quality

Quick response

Implications for operation’s Management Requires low variation in products/services and a high volume, steady flow of goods results in maximum use of resources through the system. Standardized work, material and inventory requirements Entails higher initial cost for product and service design and process design, and more emphasis on assuring supplier quality Requires flexibility, extra capacity, and higher levels of some inventory items

Newness/innovation

Product or service variety

Sustainability

Entails large investments in research and development for new or improved products and services plus the need to adapt operations and supply process to suit new products or services. Requires high variation in resource and more emphasis on product and service design, higher worker skills needed, cost estimation more difficult, scheduling more complex, quality assurance more involved, inventory management and more complex, and matching supply to demand more difficult Affects location planning, product and service design, process and design, outsourcing decisions, returns policies and waste management.

Types of Action/Operational Strategies Vertical Integration Strategy 1.) Forward Integrationgaining ownership or increase control over distributor or retailer 2.) Backward Integrationgaining ownership or increase control over supplier 3.) Horizontal Integrationgaining ownership or increase control over competitor through mergers, acquisitions and take over among competitors.

Intensive Strategies 4.) Market Penetration- increase market share with greater marketing efforts (no change in product or market) through increase the number of salespersons, advertising expenditure, offering extensive sales promotion items or publicity effort(no saturation)

5.) Market Development- is a business strategy whereby a business attempts to find new groups of buyers as potential customers for its existing products and services.

6.)

Product Development-

It is done to improve the existing product or to introduce a new product in the market. It is also done to improve the earlier features or techniques or systems.

Diversification Strategies 7.) Related Diversification- A process that takes place when a business expands its activities into product lines that are similar to those it currently offers.

8.) Unrelated DiversificationA process that takes place when a business expands its activities into different product lines

Defensive Strategies 9.) Retrenchment- Occurs when an organization regroups through cost and asset reduction to reverse declining sales 10.) Divestiture- Selling a division or part of an organization. It is often is used to raise capital for further strategic acquisitions or investments. 11.) Liquidation- It is selling all of a company’s assets.

Productivity Productivity- a measure of the effective use of resources usually expressed as the ratio of output to input

Factors that affect Productivity 1.) Methods 2.) Capital 3.) Quality 4.) Technology

Productivity Other factors that affect productivity 1.) Standardizing 2.) Quality Difference 3.) Use of the internet 4.) Computer viruses 5.) Searching for lost or misplaced items 6.) Scrap rates 7.) New workers 8.) Safety 9.) A shortage of information technology workers and other technical workers 10.) Lay offs 11.) Labor turnover 12.) Design of the workspace 13.) Incentive plans that reward productivity