Competitiveness,

Strategy, and
Productivity

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1. Briefly describe the cookie production process.

2. What are two ways that the company has increased productivity? Why did
increasing the length of the ovens result in a faster output rate?

3. Do you think that the company is making the right decision by not automating
the packing of cookies? Explain your reasoning.

4. What obligation does a company have to its employees in a situation such as

this? What obligation does it have to the community?

5. Is the size of the town a factor? Would it make a difference if the company was
located in a large city?

6. Is the size of the company a factor? What if it were a much larger company?
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 7. What factors cause the company to carry minimal amounts of certain
inventories? What benefits result from this policy?

8. As a consumer, what things do you consider in judging the quality of

cookies you buy in a supermarket?

9. What advantages and limitations stem from the company’s not using
preservatives in cookies?

10. Briefly describe the company’s strategy.

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 1. A batch process is used.
 A worker checks the master list for ingredients, and enters that information into the
computer.
 The computer determines ingredient quantities, and then automatically orders the
ingredients, which are automatically sent to mixing machines.
 After mixing, the batter is poured into a cutting machine. Individual cookies are then
dropped onto a continuous band and transported through an oven.
 Filled cookies require an extra step.
 After baking, cookies are cooled on a spiral cooling rack. Cookies are inspected,
defectives are removed, and the remaining cookies are packaged and labeled.

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 2. Productivity was increased by the following:
 Using a computer to determine the amounts of ingredients
needed,
 by cutting cookies diagonally to reduce the space
required,
 by increasing the length of each oven by 25 feet,
 by baking cookies in a sequence that minimizes
downtime for cleaning,
 by using broken cookies in the oatmeal cookies, and by
reclaiming heat from the ovens to heat the building.
 The company recently increased the length of its ovens so that more
cookies can be baked at the same time.
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 3. All companies have a moral obligation to their employees.
 Small companies with local owners, particularly in a small
community, are more likely to be influenced by such considerations
than large companies, in large communities, issue is a difficult one,
often without easy solutions. Cost and efficiency may favor layoffs,
but ill will and the effects on morale of employees who remain are
important considerations.

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 4. perishability/Freshness of cookies
 frequent changes of label requirements,
 and baking to customer order are factors that favor minimal
inventories.
 Benefits include lower inventory costs,
 satisfied customers (due to freshness of product),
 and less need for storage space.

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 5. Freshness, list of ingredients, packaging/display, appearance of
product (size, shape, color), taste are potential factors when judging the
quality of cookies.

 6. Because the cookies do not use preservatives, the product probably

appeals to health-conscious buyers, and there are fewer ingredients to
purchase, store, and mix. However, without preservatives, the shelf life
of the cookies is limited.
 7. The company’s strategy is to provide a high quality (“good food”)
cookie that appeals to a particular market niche.

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 This chapter focuses on three separate, but related
ideas that are vitally important to business
organizations
 Competitiveness
 Strategy
 Productivity

LO 2.1 2-9
 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?

LO 2.1 2-10
Marketing’s Influence Businesses Compete Using
Operations
 Identifying consumer 1. Product and service design
2. Cost
wants and/or needs
3. Location
 Pricing and quality 4. Quality
 Advertising and 5. Quick response
promotion 6. Flexibility
7. Inventory management
8. Supply chain management
9. Service
10. Managers and workers

LO 2.1 2-11
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
7. Failing to consider customer wants and needs

LO 2.2 2-12
 Mission

Goals

Organizational Strategies

Functional Strategies

Tactics

LO 2.3 2-13
 Mission
 The reason for an organization’s existence
 It answers the question “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
 The organizational strategy guides the organization by providing
direction for, and alignment of, the goals and strategies of the
functional units
 The organizational strategy is a major success/failure factor

LO 2.3 2-14
 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?”

LO 2.3 2-15
 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

LO 2.3 2-16
 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

Mission
Goals
Organisati
onal
Function strategies
al
strategies
Tactics
LO 2.3 2-17
 Tactics
 The methods and actions taken to accomplish strategies
 The “how to” part of the process
 Operations
 The actual “doing” part of the process

LO 2.3 2-18
 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

LO 2.3 2-19
Organizational Operations
Strategy Strategy Examples of Companies or Services
Low Price Low Cost U.S. first-class postage
Wal-Mart, Amul ( bulk production – prices low),
Chitale, Spicejet
Responsiveness Short processing times McDonald’s restaurants/ hypermodels- Zepto, Blinkit,
On-time delivery BB daily, FedEx, Uber,

Differentiation: High performance Apple, Disneyland, Five star hotels

High Quality design and/or high Titan Company Limited (Tanishq)
quality processing

Coca-Cola, Mc D, Dominos
Consistent Quality
Differentiation: Innovation 3M, Apple, Google, OYO rooms
Newness
Differentiation: Flexibility Burger King (Have it your way”), Subway
Variety Volume McDonald’s , Star bazaar

Differentiation: Superior customer Disneyland, hospitality industry, IBM, Amazon

Service service

Differentiation: Convenience Supermarkets; Mall Stores, banks , ATMs 2-20

Location
 Select
strategies to
Order focus on
winners and
Core
competencies qualifiers
Link Org. Environmental
Strategy to scanning
Vision and SWOT
Mission

LO 2.4 2-21
 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

LO 2.4 2-22
 Environmental Scanning is necessary to identify
 Internal Factors
 Strengths and Weaknesses: role of operations manager

 External Factors
 Opportunities and Threats: role of marketing managers

LO 2.4 2-23
1. Economic conditions: Tax
2. Political conditions: instability , wars
3. Legal environment- labour laws
4. Technology: innovations in products and services
5. Competition
6. Markets

LO 2.4 2-24
1. Human Resources
2. Facilities and equipment
3. Financial resources
4. Customers
5. Products and services
6. Technology
7. Suppliers
8. Other

LO 2.4 2-25
 Decision Area What the Decisions Affect

Product and service design Costs, quality, liability, and environmental issues

Capacity Cost, structure, flexibility

Process selection and layout Costs, flexibility, skill level needed, 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

LO 2.4 2-26
 Quality-based strategy
 Strategy that focuses on quality in all phases of an
organization

 Pursuit of such a strategy is rooted in a number of factors:

 Trying to overcome a poor quality reputation
 Desire to maintain a quality image
 A desire to catch up with the competition
 A part of a cost reduction strategy

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 Time-based strategies
 Strategies that focus on the reduction of time needed to
accomplish tasks
 It is believed that by reducing time, costs are lower, quality is
higher, productivity is higher, time-to-market is faster, and
customer service is improved

LO 2.5 2-28
 Areas where organizations have achieved time
reductions:
 Planning time
 Product/service design time
 Processing time
 Changeover time
 Delivery time
 Response time for complaints

LO 2.5 2-29
 Agile operations
 A strategic approach for competitive advantage that
emphasizes the use of flexibility to adapt and prosper in
an environment of change
 Involves the blending of several core competencies:
 Cost
 Quality
 Reliability
 Flexibility

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 A top-down management system that organizations can use to
clarify their vision and strategy and transform them into action
 Develop objectives
 Develop metrics and targets for each objective
 Develop initiatives to achieve objectives
 Identify links among the various perspectives
 Finance
 Customer
 Internal business processes
 Learning and growth
 Monitor results

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2-32
 Increase
economic growth
• Higher profit
• Higher wages

Improves
More efficient Income levels
production • Housing , education
, healthcare

Checks inflation Better public

• Controls price rise for services
growing demand • Govt. revenues

Reduced prices of
good and service
• Lower cost – Economies 2-36
LO 2.6 of scale
 High productivity is linked to higher standards of living
 As an economy replaces manufacturing jobs with lower productivity service
jobs, it is more difficult to maintain high standards of living

 Keeps inflation in check

 Improves standard of living

 Higher productivity relative to the competition leads to competitive

advantage in the marketplace
 Pricing and profit effects
 Nonprofit organization: Low cost
 For profit organization: competitive

 For an industry, high relative productivity makes it less likely it will

be supplanted by foreign industry

LO 2.6 2-37
 Current productivity - Previous productivity
Productivity Growth = 100%
Previous productivity

Example: Labor productivity on the ABC assembly line was 25 units per hour in
2014. In 2015, labor productivity was 23 units per hour. What was the
productivity growth from 2014 to 2015?

23 - 25
Productivity Growth = 100%  8%
25


LO 2.6 2-38
 Output
Productivity =
Input

Output Ouput Output

Partial Measures ; ;
Single Input Labor Capital

Output Ouput Output

Multifactor Measures ; ;
Multiple Inputs Labor +Machine Labor +Capital + Energy

Goods or services produced

Total Measure
All inputs used to produce them

LO 2.6 2-39
2-40
 Methods
 Capital
 Technology
 Management
 Quality differences
 Standardizing processes and procedures- reduce variability
 Computer viruses
 Searching for misplaced items
 New workers –productivity lag
 Safety
Technology
 A short of tech savvy workers Xerox,
Workers Phones,
 Layoffs- positive and negatives calculators, 3-
D printing

 Labor turnover
 Workspace design- placement of tools etc.
 Incentive plans
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1. Develop productivity measures for all operations
2. Determine critical (bottleneck) operations
3. Develop methods for productivity improvements
4. Establish reasonable goals
5. Make it clear that management supports and encourages productivity
improvement
6. Measure and publicize improvements
Don’t confuse productivity with efficiency

LO 2.7 2-42
Week Output (lbs.) MFP
1 30,000 6 450 2,880 4,320 2,700 9,900 3.03
2 33,600 7 470 3,360 5,040 2,820 11,220 2.99
3 32,200 7 460 3,360 5,040 2,760 11,160 2.89
4 35,400 8 480 3,840 5,760 2,880 12,480 2.84

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