CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Chapter 2
Productivity,
Competitiveness,
and Strategy
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Productivity
• Partial measures
–
output/(single input)
• Multi-factor measures
–
output/(multiple inputs)
• Total measure
–
output/(total inputs)
Outputs
Productivity =
Inputs
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Table 2-1
Measures of Productivity
Partial
measures
Output
Labor
Multifactor
measures
Output
Labor + Machine
Total
measure
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Output
Machine
Output
Capital
Output
Energy
Output
Labor + Capital + Energy
Goods or Services Produced
All inputs used to produce them
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Example
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
What is the
labor productivity?
Cost of raw material: $5,000
Cost of purchased material: $25,000
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Example--Labor Productivity
•10,000 units/500hrs = 20 units/hour
or we can arrive at a unitless figure
•(10,000 unit* $10/unit)/(500hrs* $9/hr) =
22.22
Can you think of any advantages or
disadvantages of each approach?
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Example--Multifactor Productivity
MFP =
Output
Labor + Materials
MFP =
(10,000 units)*($10)
(500)*($9) + ($5000) + ($25000)
MFP =
2.90
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Factors Affecting Productivity
Capital
Quality
Technology
Management
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Improving Productivity
• Develop productivity measures
• Determine critical operations
• Develop methods for productivity
improvements
• Establish reasonable goals
• Get management support
• Measure and publicize improvements
• Don’t confuse productivity with
efficiency
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Bottleneck Operation
Figure 2-2
Operation
Operation
Bottleneck
Operation
Operation
Operation
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Competitiveness
Price
Quality
Time
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Mission/Strategy/Tactics
Mission
Strategy
Tactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Strategy
• Mission
–
The reason for existence for an
organization
• Mission Statement
–
A clear statement of purpose
• Strategy
–
A plan for achieving organizational
goals
• Tactics
–
The actions taken to accomplish
strategies
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Strategy Example
Example 3
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:
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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 job
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Planning and Decision Making
Figure 2-3
Mission
Goals
Organizational strategy
Functional strategies
Finance
Tactics
Finance
operations
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Marketing Operations
Tactics
Tactics
Marketing
operations
Operations
operations
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Strategy Formulation
• Distinctive Competencies
–
The special attributes or abilities that
give an organization a competitive
edge.
• Environmental Scanning
–
The considering of events and trends
that present threats or opportunities
for a company.
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
New Strategies
• Quality-based
strategies
–
–
Focuses on quality in all
phases of an organization
Quality at the source
• Time-based strategies
–
Focuses on reduction of
time needed to
accomplish tasks
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Time-based Strategies
JAN
FEB
MAR
APR
MAY
JUN
Planning
Designing
Processing
Changeover
On time!
Delivery
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CHAPTER TWO
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
Production
• Craft Production - Highly skilled workers
use simple flexible tools to produce small
quantities of customized goods.
• Mass Production - Lower-skilled workers
use specialized machinery high volumes
of standardized goods.
• Lean Production - Uses minimal amounts
of resources high volume of high-quality
goods.
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