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POM Module1 Unit4

The document discusses competitiveness, strategic advantage, and productivity. It defines competitiveness and explains how production operations can help organizations compete in areas like quality, customer service, price, flexibility, and speed. It then discusses how strategic management helps organizations gain long-term strategic advantage and defines productivity as the effective and efficient use of resources to maximize customer satisfaction at minimum cost.

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KATHLYN ROSE OCAY
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74 views

POM Module1 Unit4

The document discusses competitiveness, strategic advantage, and productivity. It defines competitiveness and explains how production operations can help organizations compete in areas like quality, customer service, price, flexibility, and speed. It then discusses how strategic management helps organizations gain long-term strategic advantage and defines productivity as the effective and efficient use of resources to maximize customer satisfaction at minimum cost.

Uploaded by

KATHLYN ROSE OCAY
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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POM

Module 1: Overview of Production Operations Management


Unit 4: Competitiveness, Strategic Advantage & Productivity

Overview:
In this Unit, you will learn the various ways organizations compete and how Production
Operations support them in gaining competitive advantage. You will also learn how
organizations, in general, gain long-term advantage through strategic management and
productivity.

Module Objectives:
After successful completion of this Unit, you should be able to:

• Describe the various areas where organizations may compete in and how
Production Operations support them in gaining competitive advantage;
• Explain how organizations attain strategic advantage;
• Explain how organizations achieve productivity; and
• Calculate productivity measures.

Course Materials:
• Handout: Competitiveness, Strategic Advantage and Productivity

Read:
COMPETITIVENESS

Competitiveness is the ability of an organization to effectively meet or exceed


customer expectations relative to other organizations that offer similar goods or
services. Organizations may compete in at least five areas: quality, customer
service, price, flexibility, and speed.

Quality refers to the customer perception of how well the product serves its
purpose. The quality dimensions for goods or tangible products are as follows:
On the other hand, the quality dimensions for services or intangible products
are:

To support the organization in competing in terms of Quality, Production


Operations (P/O) must have highly skilled workers and more precise
equipment as well as exert more quality assurance effort.

Customer service refers to the treatment received by the customer before,


during and after the sale. P/O may help the organization in providing excellent
customer service through broader development of service personnel, service
parts and equipment; higher investment in inventory; rapid and accurate
information systems; and careful coordination among service units.

Price refers to the amount a customer must pay for a good or service. All other
factors being equal, customers will choose the product with the lowest price. To
compete in terms of low price implies that (1) the organization may have to
settle for lower profit margins; and (2) P/O must focus on lowering production
costs: materials, labor and overhead. Some ways by which P/O can do this
include product redesign, adoption of new production technology, increasing
production rates, reduction of scraps, and reduction of inventories.

Flexibility refers to the ability of the organization to respond to changes in the


volume or variety of products demanded by customers. To have this ability,
P/O may increase its capital investment in idle capacity, use CAD/CAM
(computer aided design / computer aided manufacturing), reduce the amount
of work-in-process through just-in-time (JIT) strategies, and employ versatile
people and equipment.

Speed refers to faster or on-time product development, product introduction,


and product delivery. P/O may implement this competitive strategy through
larger finished goods inventory, faster production rates, better control of
production of orders, quicker shipping methods, better information systems,
and more realistic promises.

STRATEGIC ADVANTAGE

While an organization may outcompete its business rivals at present, this is


not an assurance that it will still be able to do so over the long-term. Strategic
advantage is much broader and long-term than competitive advantage. To
create strategic advantage, an organization must apply strategic management.

We will not be going through the details of strategic management here, but
broadly speaking, it’s a continuous management process that involves strategy
formulation, strategy implementation and strategy evaluation. Strategy
formulation involves planning and organizing, strategy implementation involves
staffing and leading, and strategy evaluation involves controlling. The strategic
management process is illustrated in the following flowchart:
As can be seen in the flowchart, strategy formulation involves establishing
organizational objectives and formulating organizational strategies, which
require that the organization’s top management must first have a clear
understanding of the its vision (dream) and mission (purpose) as well as a good
grasp of its external and internal environment. Some relevant questions that
they need to consider include:

Our Vision: What does our organization see itself becoming into?

Our Mission: What is the purpose of our business? Do our specific


objectives and goals align with our Vision-Mission?

Our Market: Will the growth rate change, up or down and if so, what will
be the impact?

The Economy: What relationship exists with the indices of the economy?
Will it change? Up or down? Why?

Our Customers: What type of customers do we serve? Do they have any


unusual needs? Have their needs changed?

Our Competitors: What are our competitors doing? Do we have any new
types of competitors? What is the impact?
The Industry: Are there any changing technologies that we should know
about that affects us? Are there any new business models that will change
the way we do business?

Our Assumptions: What are the key assumptions that impact our
business – now and in the future?

The Threats to Our Business: What are the key identified threats to our
business and what will be our response?

Our New Opportunities: What are the key identified opportunities that we
must take advantage – sustainable advantage?

Our Resources: How does our company rank in its ability to


conceive/design, produce, finance, market and perform? How well do our
competitors measure up in matching our abilities?

Our Contingency Plan: Do we have one? What are our alternate options
and the advantages?

The purpose of analyzing the external environment is to come up with a


list of the organization’s opportunities and threats. An opportunity is any issue,
event or trend that might help the organization in accomplishing its Mission
and in fulfilling its Vision. A threat is any issue, event or trend that might
hinder the organization from accomplishing its Mission and from fulfilling its
Vision. For example, the CoViD-19 pandemic is a threat to universities, but an
opportunity for food delivery service firms, such as Grab and Food Panda.

The purpose of analyzing the internal environment is to come up with a


list of the organization’s strengths and weaknesses. A strength is any attribute
or ability of the organization that might help it in accomplishing its Mission
and in fulfilling its Vision. A weakness is any attribute or inability of the
organization that might hinder it from accomplishing its Mission and from
fulfilling its Vision. For example, highly skilled employees and state-of-the art
technology are strengths, while lack of coordination among a firm’s
departments and undependable suppliers are weaknesses.

A valuable tool in strategic management is SWOT analysis, wherein the


organization’s strengths and weaknesses are matched with its opportunities to
come up with various strategies to take advantage of opportunities and to
counteract or avoid threats as the firm pursues its Vision-Mission.

Once the organizational objectives and strategies have been established,


these are now cascaded down to the functional and operational units to
support and implement.
The strategic planning process, is not a simple horizontal flow, but
roughly follows the flow illustrated below:

By applying strategic management, the organization gains advantage


over the long-term as all their resources are coordinated towards a single
purpose and direction, while taking into consideration both present and future
conditions in the external environment, which could either help or hinder them
as they progress from where they are now to where they intend to be.
PRODUCTIVITY

Productivity refers to an organization’s ability to effectively use its resources, it


is the ability of the organization to be both effective and efficient; i.e., its ability
to maximize customer satisfaction at the minimum cost possible.

Productivity is an index that measures output (goods and services)


relative to the input (labor, materials, energy, and other resources) used to
produce them.

The basic productivity formula is:

𝑶𝒖𝒕𝒑𝒖𝒕
𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒗𝒊𝒕𝒚 =
𝑰𝒏𝒑𝒖𝒕

Following are some uses of productivity measures:

• Used as scorecards of the effective use of resources.


• Used to track the performance of a department or an organization
over time.
• Used as an indicator of an organization’s competitiveness
Activities/Assessments:

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