Operation management 9e stevenson mcgrwhill chap002

2

Competitiveness,
Strategy,
and Productivity

McGraw-Hill/Irwin

Copyright © 2007 by The McGraw-Hill Companies, Inc. All


Learning Objectives
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List and briefly discuss the primary ways that
business organizations compete.
List five reasons for the poor competitiveness of
some companies.
Define the term strategy and explain why
strategy is important for competitiveness.
Contrast strategy and tactics.

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Learning Objectives
 Discuss and compare organization strategy and
operations strategy, and explain why it is

important to link the two.
 Describe and give examples of time-based
strategies.
 Define the term productivity and explain why it is
important to organizations and to countries.
 List some of the reasons for poor productivity and
some ways of improving it.

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Competitiveness:
How effectively an organization meets the
wants and needs of customers relative to
others that offer similar goods or services

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Businesses Compete Using
Marketing
 Identifying consumer wants and needs
 Pricing
 Advertising and promotion

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Businesses Compete Using
Operations

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Product and service design
Cost
Location
Quality
Quick response

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Businesses Compete Using
Operations
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Flexibility
Inventory management
Supply chain management
Service and service quality
Managers and workers

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Why Some Organizations Fail
 Too much emphasis on short-term financial
performance
 Failing to take advantage of strengths and
opportunities
 Neglecting operations strategy
 Failing to recognize competitive threats

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Why Some Organizations Fail
 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

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Mission/Strategy/Tactics
Mission

Strategy

Tactics

How does mission, strategies and tactics relate to
decision making and distinctive competencies?

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Strategy
 Mission


The reason for existence for an organization

 Mission Statement
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States the purpose of an organization

 Goals
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Provide detail and scope of mission

Strategies
 Plans for achieving organizational goals

 Tactics


The methods and actions taken to accomplish strategies
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Planning and Decision Making
Figure 2.1
Mission
Goals
Organizational Strategies
Functional Goals
Finance
Strategies

Tactics
Operating
procedures

Marketing
Strategies

Tactics
Operating
procedures

Operations
Strategies

Tactics
Operating
procedures
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Strategy Example
Example 1

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:
 Goal:
 Strategy:
 Tactics:
 Operations:
job

Live a good life
Successful career, good income
Obtain a college education
Select a college and a major
Register, buy books, take
courses, study, graduate, get

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Examples of Strategies
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Low cost
Scale-based strategies
Specialization
Flexible operations
High quality
Service

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Strategy and Tactics
 Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.


Strategy Factors
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Price
Quality
Time
Flexibility
Service
Location

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Examples of Operations Strategies
Table 2.2

Price

Low Cost

U.S. first-class postage
Motel-6, Red Roof Inns

Quality

High-performance design Sony TV
or high quality Consistent Lexus, Cadillac
quality
Pepsi, Kodak, Motorola

Time

Rapid delivery
On-time delivery

Express Mail, Fedex,
One-hour photo, UPS

Flexibility

Variety
Volume

Burger King
Supermarkets

Service

Superior customer
service

Disneyland
Nordstroms

Location

Convenience

Banks, ATMs
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Global Strategy
 Strategic decisions must be made with respect to
globalization
 What works in one country may not work in
another
 Strategies must be changed to account for these
differences
 Other issues
 Political, social, cultural, and economic differences

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Strategy Formulation
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Distinctive competencies
Environmental scanning
SWOT
Order qualifiers
Order winners

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Strategy Formulation
 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

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Key External Factors
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Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets

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Key Internal Factors
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Human Resources
Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers

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Operations Strategy
 Operations strategy – The approach,
consistent with organization strategy, that is
used to guide the operations function.

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Strategic OM Decisions
Table 2.4

Decision Area

Affects

Product and service design

Costs, quality liability and environmental

Capacity

Cost structure, flexibility

Process selection and layout

Costs, flexibility, skill level, capacity

Work design

Quality of work life, employee safety, productivity

Location

Costs, visibility

Quality

Ability to meet or exceed customer expectations

Inventory

Costs, shortages

Maintenance

Costs, equipment reliability, productivity

Scheduling

Flexibility, efficiency

Supply chains

Costs, quality, agility, shortages, vendor relations

Projects

Costs, new products, services, or operating systems
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Quality and Time Strategies
 Quality-based
strategies
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

Focuses on maintaining or
improving the quality of an
organization’s products or
services
Quality at the source

 Time-based strategies


Focuses on reduction of
time needed to accomplish
tasks
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Time-based Strategies
JAN

FEB

MAR

APR

MAY

JUN

Planning
Designing

Processing
Changeover

On time!

Delivery

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