Operations management 12th stevenson ch02 competitiveness strategy

Chapter 2
Competitiveness,
Strategy, and
Productivity

McGraw-Hill/Irwin

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.


Chapter 2: Learning Objectives
 You should be able to:
1. List the three primary ways that business organizations compete
2. Explain five reasons for the poor competitiveness of some
companies
3. Define the term strategy and explain why strategy is important
4. Discuss and compare organization strategy and operations
strategy, and explain why it is important to link the two
5. Describe and give examples of time-based strategies
6. Define the term productivity and explain why it is important to
organizations and countries
7. Provide some reasons for poor productivity and some ways of
improving it

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A Cold Hard Fact
Better quality, higher productivity, lower costs,

and the ability to respond quickly to customer
needs are more important than ever and…

the bar is getting higher

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Chapter Focus
This chapter focuses on three separate, but

related that are vitally important to business
organizations
 Competitiveness
 Strategy
 Productivity

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Competitiveness
Competitiveness:
 How effectively an organization meets the

wants and needs of customers relative to others
that offer similar goods or services

 Organizations compete through some
combination of their marketing and operations
functions
• What do customers want?
• How can these customer needs best be satisfied?

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Marketing’s Influence
Identifying consumer wants and/or needs
Pricing
Advertising and promotion

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Businesses Compete Using
Operations
1.
2.
3.
4.
5.
6.
7.

8.
9.
10.

Product and service design
Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service
Managers and workers

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Why Some Organizations Fail
1. Neglecting operations strategy
2. Failing to take advantage of strengths and

opportunities and/or failing to recognize
competitive threats
3. Too much emphasis on short-term financial
performance at the expense of R&D
4. Too much emphasis in 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
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7. Failing to consider customer wants and needs


Hierarchical Planning
Mission
Goals
Organizational Strategies
Functional Strategies
Tactics
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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


Mission, Goals, and Strategy
 Mission
 The reason for an organization’s existence

 Mission statement
 States the purpose of the organization
 The mission statement should answer the question of
“What business are we in?”
 Goals
 Provide detail and the scope of the mission
 Goals can be viewed as organizational destinations

 Strategy
 A plan for achieving organizational goals
 Serves as a roadmap for reaching the organizational
destinations
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Mission
Mission
 The reason for an organization’s existence

Mission statement
 States the purpose of the organization
 The mission statement should answer the

question of “What business are we in?”

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Fed Ex Mission Statement
 FedEx Corporation will produce superior financial returns for

its shareowners by providing high value-added logistics,
transportation and related information services through

focused operating companies. Customer requirements will
be met in the highest quality manner appropriate to each
market segment served. FedEx Corporation will strive to
develop mutually rewarding relationships with its
employees, partners and suppliers. Safety will be the first
consideration in all operations. Corporate activities will be
conducted to the highest ethical and professional standards.
/>
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McDonald’s Mission Statement
 McDonald's brand mission is to "be our customers'

favorite place and way to eat." Our worldwide
operations have been aligned around a global
strategy called the Plan to Win centering on the five
basics of an exceptional customer experience -People, Products, Place, Price and Promotion. We are
committed to improving our operations and
enhancing our customers' experience.
 />

IBM’s Mission Statement
 We create, develop, and manufacture the

industry’s most advanced information
technologies, including computer systems,
software, networking systems, storage devices,

and microelectronics.
 We have two fundamental missions:
 We strive to lead in the creation, development,
and manufacture of the most advanced
information technologies.
 We translate advanced technologies into value
for our customers as the world’s largest
information services company. Our professionals
worldwide provide expertise within specific
industries, consulting services, systems
integration, and solution development and
technical support.


CSUN’s Mission Statement
 California State University, Northridge exists to

enable students to realize their educational
goals. The University’s first priority is to
promote the welfare and intellectual progress of
students. To fulfill this mission, we design
programs and activities to help students
develop the academic competencies,
professional skills, critical and creative abilities,
and ethical values of learned persons who live in
a democratic society, an interdependent world,
and a technological age; we seek to foster a
rigorous and contemporary understanding of the
liberal arts, sciences, and professional
disciplines, and we believe in the following

values…


Goals
The mission statement serves as the

basis for organizational goals
Goals
 Provide detail and the scope of the mission
Goals can be viewed as organizational destinations
 Goals serve as the basis for organizational

strategies

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Strategies
 Strategy
 A plan for achieving organizational goals
 Serves as a roadmap for reaching the organizational
destinations
 Organizations have
 Organizational strategies
 Overall strategies that relate to the entire organization
 Support the achievement of organizational goals and

mission

 Functional level strategies
 Strategies that relate to each of the functional areas and

that support achievement of the organizational strategy

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Tactics and Operations
Tactics
 The methods and actions taken to accomplish

strategies
 The “how to” part of the process
Operations
 The actual “doing” part of the process

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Core Competencies
Core Competencies

The special attributes or abilities that give an
organization a competitive edge

 To

be effective core competencies and strategies
need to be aligned

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Sample Operations Strategies
Organizational
Strategy

Operations Strategy

Examples of Companies or Services

Low Price

Low Cost

U.S. first-class postage
Wal-Mart

Responsiveness
Differentiation:
High Quality

Short processing times

McDonald’s restaurants

On-time delivery

FedEx

High performance design
and/or high quality
processing

Sony TV

Consistent Quality

Coca-Cola

Differentiation:
Newness

Innovation

3M, Apple

Differentiation:
Variety

Flexibility

Burger King (Have it your way”)

Volume

McDonald’s (“Buses Welcome”)

Differentiation:
Service

Superior customer service

Disneyland

Differentiation:
Location

Convenience

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IBM
Supermarkets; Mall Stores

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Strategy Formulation
Effective strategy formulation requires taking

into account:

 Core competencies
 Environmental scanning
SWOT

Successful strategy formulation also requires

taking into account:
 Order qualifiers
 Order winners

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Strategy Formulation
Order qualifiers
 Characteristics that customers perceive as
minimum standards of acceptability for a
product or service to be considered as a
potential for 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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Environmental Scanning
Environmental Scanning is

necessary to identify
 Internal Factors
Strengths and Weaknesses
 External Factors
Opportunities and Threats

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Key External Factors
1. Economic conditions
2. Political conditions
3. Legal environment
4. Technology
5. Competition
6. Markets

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