Competitiveness,

Strategy and Productivity

Module 2

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COMPETITIVENESS
- Refers to how effectively
an organization meets
the wants and needs of
customers relative to
others that offer similar
goods or service
How Marketing Influences Competitiveness

1. Identifying consumer
wants and/or needs
2. Price and quality
3. Advertising and
promotion
Influence of Operations on Competitiveness
1. Product and service design
2. Cost
3. Location
4. Quality
5. Flexibility and quick response
6. Supply chain / inventory management
7. Service
8. Managers and workers
Why Some Organizations Fail
1. Neglecting operations
strategy.
2. Failing to take advantage of
strengths and opportunities,
and/or failing to recognize
competitive threats.
Why Some Organizations Fail
3. Putting too much emphasis on
short-term financial performance
at the expense of research and
development.
4. Placing too much emphasis on
product and service design and not
enough on process design and
improvement.
Why Some Organizations Fail
5. Neglecting investments in capital
and human resources.
6. Failing to establish good internal
communications and cooperation
among different functional areas.
7. Failing to consider customer
wants and needs.
Mission and
Strategies

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MISSION AND STRATEGIES
An organization’s mission is
the reason for its existence.
It is expressed in its mission
statement which serves as
the basis for organizational
goals.
MISSION AND STRATEGIES
Goals serve as a foundation
for the development of
organizational strategies.
Strategies are the plans for
achieving organizational
goals.
Strategies and Tactics
Tactics are the methods
and actions taken to
accomplish strategies.
Simple illustration: You would like
to have a career in business, have a
good job, and earn enough income
to live comfortably.
Strategies and Tactics
Mission: Live a good life.
Goal: Successful career, good income.
Strategy: Obtain a college education.
Tactics: Select a college and a major;
decide how to finance college.
Operations: Register, buy books, take
courses, study
 Mission
Organizational Goals
Organizational Strategies
Functional Goals
Marketing Finance Operations
strategies strategies strategies
Tactics Tactics Tactics
Operating Operating Operating
P Procedures Procedures Procedures
Strategy Formulation
-To formulate an effective
strategy, the core competencies
of the organization must be
taken into account.
Core competencies are the special
attributes or abilities that give an
organization a competitive edge.
Strategy Formulation
- Perform a SWOT analysis,
(strengths, weaknesses,
opportunities, and threats).
- Perform environmental
scanning to determine what
competitors are doing, or
planning to do.
Strategy Formulation
 Environmental scanning
is the monitoring of
events and trends that
present either threats or
opportunities for the
organization.
Key Factors in Environmental Scanning
External:
1. Economic conditions - these
include the general health and
direction of the economy,
inflation and deflation, interest
rates, tax laws, and tariffs.
Key Factors in Environmental Scanning
External:
2. Political conditions - these
include favorable or unfavorable
attitudes toward business,
political stability or instability,
and wars.
Key Factors in Environmental Scanning
External:
3. Legal environment - this includes
antitrust laws, government
regulations, trade restrictions,
minimum wage laws, product
liability laws and recent court
experience, labor laws, and patents
Key Factors in Environmental Scanning
External:
4. Technology - this can include
the rate at which product
innovations are occurring, current
and future process technology
(equipment, materials handling),
and design technology.
Key Factors in Environmental Scanning
External:
5. Competition - this includes the
number and strength of
competitors, the basis of com
petition (price, quality, special
features), and the ease of
market entry.
Key Factors in Environmental Scanning
External:
6. Customers - loyalty,
existing relationships, and
understanding of wants
and needs are important.
Key Factors in Environmental Scanning
External:
7. Suppliers - relationships,
dependability of suppliers,
quality, flexibility, and
service are typical
considerations.
Key Factors in Environmental Scanning
External:
8. Markets - this includes size,
location, brand loyalties, ease
of entry, potential for growth,
long-term stability, and
demographics.
Internal Factors That Relates to Possible
Strengths or Weaknesses
1. Human resources - these
include the skills and abilities of
managers and workers, special
talents (creativity, designing,
problem solving), loyalty,
expertise, dedication, and
experience.
Internal Factors That Relates to Possible
Strengths or Weaknesses
2. Facilities and equipment -
capacities, location, age, and
cost to maintain or replace
can have a significant impact
on operations.
Internal Factors That Relates to Possible
Strengths or Weaknesses
3. Financial resources - cash
flow, access to additional
funding, existing debt
burden, and cost of capital
are important considerations.
Internal Factors That Relates to Possible
Strengths or Weaknesses
4. Products and services -
these include existing
products and services, and
the potential for new
products and services.
Internal Factors That Relates to Possible
Strengths or Weaknesses
5. Technology - this includes
existing technology, the ability
to integrate new technology,
and the probable impact of
technology on current and
future operations.
Internal Factors That Relates to Possible
Strengths or Weaknesses
6. Other factors - include patents,
labor relations, company or
product image, distribution
channels, relationships with
distributors, maintenance of
facilities and equipment, access to
resources, and access to markets.
Strategy Formulation
- The five forces model can be used as
an alternative to SWOT.
threat of new competition,
threat of substitute products or
services,
the bargaining power of customers,
the bargaining power of suppliers,
the intensity of competition.
Strategy Formulation Key Steps
1. Link strategy directly to the
organization’s mission or vision
statement.
2. Assess strengths, weaknesses,
threats, and opportunities, and
identify core competencies.
Strategy Formulation Key Steps
3. Identify order winners and
order qualifiers.
4. Select one or two
strategies (e.g., low cost,
speed, customer service) to
focus on.
Strategy Formulation Key Steps
Order qualifiers are those
characteristics that potential
customers perceive as minimum
standards of acceptability for a
product to be considered for purchase.
Order winners are those characteristics
of an organization’s goods or services
that cause them to be perceived as
better than the competition.
OPERATIONS
STRATEGY

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 Mission
Organizational Goals
Organizational Strategies
Functional Goals
Marketing Finance Operations
strategies strategies strategies
Tactics Tactics Tactics
Operating Operating Operating
P Procedures Procedures Procedures
OPERATIONS STRATEGY
- deals primarily with the
operations aspect of the
organization.
- relates to products, processes,
methods, operating
resources, quality, costs, lead
times, and scheduling.
Productivity

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PRODUCTIVITY
- A measure of the effective use of
resources, usually expressed as
the ratio of output to input.
- An index that measures output
(goods and services) relative to
the input (labor, materials,
energy, and other resources)
used to produce it.
Productivity = Output
Input

Productivity growth
= Current productivity − Previous productivity

Previous productivity
Examples of partial productivity measures

- Labor productivity = Units of

output per labor hour
- Machine productivity = Units of
output per machine hour
- Energy productivity = Units of
output per kilowatt-hour
Productivity in the Service Sector
Where services are involved,
process yield measurement is
often dependent on the
particular process.
Example: in a car rental
agency, a measure of yield is the
ratio of cars rented to cars available
for a given day.
Productivity in the Service Sector
In education, a measure for college
and university admission yield is the
ratio of student acceptances to the
total number of students approved
for admission.
For subscription services, yield is the
ratio of new subscriptions to the
number of calls made or the number
of letters mailed.
Factors that Affect Productivity

Generally, they are

methods, capital, quality,
technology, and
management.
Factors that Affect Productivity
- Standardizing processes and
procedures wherever possible to
reduce variability can have a
significant benefit for both
productivity and quality.
- Use of the internet can lower costs
of a wide range of transactions,
thereby increasing productivity.
Factors that Affect Productivity
- Computer viruses can have an
immense negative impact on
productivity.
- Scrap rates and reworks have an
adverse effect on productivity,
signaling inefficient use of
resources.
Factors that Affect Productivity
- Labor turnover has a
negative effect on
productivity; replacements
need time to get up to speed.
- Design of the workspace can
impact productivity.
Factors that Affect Productivity
- Equipment breakdowns and
shortages of parts or
materials.
- Incentive plans that reward
productivity increases can
boost productivity.
Improving Productivity
1. Develop productivity
measures for all operations.
Measurement is the first step in
managing and controlling an
operation.
2. Look at the system as a whole.
3. Solicit ideas from workers.
Improving Productivity
4. Consider incentives to reward
workers for contributions.
5. Establish reasonable goals for
improvement.
6. Measure improvements and
publicize them.
Forecasting
Module 3

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FORECASTING
- an attempt to predict future
outcomes based on past
events and management
insight.
- a forecast is an estimate
about the future value of a
variable such as demand.
Uses of Forecast
 Accounting – new product or
process cost estimates, profit
projections, cash management.
Finance – equipment and
equipment replacement needs,
timing and amount of funding
or borrowing needs.
Uses of Forecast
Human resources - hiring
activities, including recruitment,
interviewing, training; layoff
planning, outplacement
counseling.
MIS – new / revised information
systems, internet services
Uses of Forecast
 Operations - schedules,
capacity planning, work
assignments and workloads,
inventory planning, make-or-
buy decisions, outsourcing,
project management.
Uses of Forecast
 Product or service design -
revision of current features,
design of new products or
services.
 Marketing - pricing and
promotion, e-business
strategies, global competition
strategies.
FEATURES COMMON TO ALL FORECASTS
Forecasts are not perfect -
actual results usually differ
from predicted values; the
presence of randomness
precludes a perfect forecast.
Allowances should be made for
forecast errors.
FEATURES COMMON TO ALL FORECASTS
Forecasts for groups of items
tend to be more accurate than
forecasts for individual items
because forecasting errors
among items in a group usually
have a canceling effect.
FEATURES COMMON TO ALL FORECASTS

Forecast accuracy
decreases as the time
period covered by the
forecast (the time
horizon) increases.
ELEMENTS OF A GOOD FORECAST
Timely - usually, a certain
amount of time is needed to
respond to the information
contained in a forecast.
•for example, capacity cannot be
expanded overnight, nor can
inventory levels be changed
immediately.
ELEMENTS OF A GOOD FORECAST
 Accurate, and the degree of
accuracy should be stated.
This will enable users to plan
for possible errors and will
provide a basis for comparing
alternative forecasts.
ELEMENTS OF A GOOD FORECAST
Reliable – a result of
accuracy; it should work
consistently.
Expressed in meaningful
units (quantifiable).
ELEMENTS OF A GOOD FORECAST
Should be in writing.
Simple to understand and
use.
Cost-effective - the
benefits should outweigh
the costs.
STEPS IN THE FORECASTING PROCESS
1. Determine the purpose
of the forecast.
2. Establish a time horizon.
3. Obtain, clean, and
analyze appropriate data.
STEPS IN THE FORECASTING PROCESS
4. Select a forecasting
technique.
5. Make the forecast.
6. Monitor the forecast
errors.
APPROACHES TO FORECASTING
2 general approaches:
- qualitative: consist mainly of
subjective inputs, which often defy
precise numerical description.
- quantitative: uses mathematical
models and statistical techniques to
make predictions.
QUALITATIVE FORECASTS
- normally resorted to when
quantitative data are not available
- forecasts are based on
executive opinions, consumer
surveys, opinions of the sales
staff, and opinions of experts
QUALITATIVE FORECASTS
Executive Opinions - A small
group of upper-level managers
may meet and collectively
develop a forecast. This
approach is often used as a part
of long-range planning and new
product development.
QUALITATIVE FORECASTS
Salesforce Opinions - sales staff
or the customer service staff
are often good sources of
information because of their
direct contact with
consumers.
QUALITATIVE FORECASTS
Consumer Surveys - it is the
consumers who ultimately
determine demand, hence
their inputs can produced
valued information.
QUALITATIVE FORECASTS
Delphi method - involves
circulating a series of
questionnaires among individuals
who possess the knowledge and
ability to contribute meaningfully.
The goal is to predict when a
certain event will occur.
FORECASTS BASED ON TIME-SERIES DATA
- a time series is a time-ordered
sequence of observations taken at
regular intervals.
- forecasting techniques based on
time-series data are made on the
assumption that future values of the
series can be estimated from past
values.
Components of Time Series Analysis
1. Trend refers to a long-term
upward or downward movement
in the data.
2. Seasonality refers to short-
term, fairly regular variations
generally related to factors such
as the calendar or time of day.
Components of Time Series Analysis
3. Cycles are wavelike
variations of more than one
year’s duration.
4. Irregular variations are due
to unusual circumstances.
Components of Time Series Analysis
5. Random variations are residual
variations that remain after all
other behaviors have been
accounted for.
A demand forecast should be
based on a time series of past
demand rather than unit sales.