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Chapter 2Productivity,

Competitiveness, and Strategy

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Productivity• Partial measures

– output/(single input)

• Multi-factor measures– output/(multiple inputs)

• Total measure– output/(total inputs)

Productivity = Outputs

Inputs

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Measures of ProductivityTable 2-1

Partial Output Output Output Outputmeasures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them

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Example10,000 Units Produced

Sold for $10/unit

500 labor hours

Labor rate: $9/hr

Cost of raw material: $5,000

Cost of purchased material: $25,000

What is the labor productivity?

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•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?

Example--Labor Productivity

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Example--Multifactor Productivity

MFP = OutputLabor + Materials

MFP = (10,000 units)*($10)(500)*($9) + ($5000) + ($25000)

MFP = 2.90

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Factors Affecting Productivity

Capital Quality

Technology Management

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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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Bottleneck Operation

OperationOperation

BottleneckOperation

BottleneckOperation

OperationOperation

OperationOperation

OperationOperation

Figure 2-2

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Competitiveness

Quality

Price

Time

Flexibility

Differentiation

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Mission/Strategy/Tactics

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

Strategy TacticsMission

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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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Strategy Example

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: Live a good life•Goal: Successful career, good income

•Strategy: Obtain a college education

•Tactics: Select a college and a major

•Operations: Register, buy books, take courses, study, graduate, get job

Example 3

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Planning and Decision Making

Mission

Goals

Organizational strategy

Functional strategies

Finance Marketing Operations

Tactics Tactics Tactics

Finance operations

Marketingoperations

Operationsoperations

Figure 2-3

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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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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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Time-based Strategies

JAN FEB MAR APR MAY JUN

Planning

Processing

Changeover On time!

Designing

Delivery

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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.