Businesses Compete

2-1 Competitiveness, Usingand

Strategy, Marketing
Productivity

SWOT Analysis
Businesses Compete
2-2 Competitiveness, Usingand
Strategy, Marketing
Productivity

SWOT Analysis
Key External Factors
Businesses Compete
2-3 Competitiveness, Usingand
Strategy, Marketing
Productivity

SWOT Analysis
Key Internal Factors

• Human Resources
• Facilities and
equipment
• Financial resources
• Customers
• Products and services
• Technology
• Suppliers
Businesses Compete
2-5 Competitiveness, Usingand
Strategy, Marketing
Productivity

Key Steps in Strategy Formulation

1. Link strategy directly to the organization’s mission or

vision statement.

2. Assess strengths, weaknesses, threats and

opportunities and identify distinct competency/ies.

3. Identify order winners and order qualifiers.

4. Select one or two strategies to focus on.

Businesses Compete
2-6 Competitiveness, Usingand
Strategy, Marketing
Productivity

Organization
Operations
Strategy
strategy
- Provides • Deals with operations aspect of
overall the organization.
direction of
an organization
• Relates to products, processes,
methods, operating resources,
quality, costs, scheduling, etc.
Businesses Compete
2-7 Competitiveness, Usingand
Strategy, Marketing
Productivity
Businesses Compete
2-8 Competitiveness, Usingand
Strategy, Marketing
Productivity

Strategic Operations
Management Decisions
Businesses Compete
2-9 Competitiveness, Usingand
Strategy, Marketing
Productivity

Quality and Time Strategies

• Quality-based strategies
– Focus on maintaining or improving
the quality of an organization’s
products/services

• Time-based strategies
– Focus on reduction of time
needed to accomplish tasks
Businesses Compete
2-10 Competitiveness, Usingand
Strategy, Marketing
Productivity

…. productive use of an organization’s

resources
Businesses Compete
2-11 Competitiveness, Usingand
Strategy, Marketing
Productivity

• Productivity
– measures output relative to the input
used to produce it
– expressed as the ratio of output to input

• Productivity ratios can be computed

– single operation
– a department
– an organization
– an entire nation
Businesses Compete
2-13 Competitiveness, Usingand
Strategy, Marketing
Productivity
Businesses Compete
2-14 Competitiveness, Usingand
Strategy, Marketing
Productivity

Improving Productivity at
Starbucks
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Stop requiring signatures Saved 8 seconds
on credit card purchases per transaction
under P500
Change the size of the ice Saved 14 seconds
scoop per drink
New espresso machines Saved 12 seconds
per shot
2-15 Competitiveness, Strategy, and Productivity

Improving Productivity at
Starbucks
A team of 10 analysts
continually look for ways
to shave time. Some
improvements:
Operations improvements have
helped StarbucksSaved
Stop requiring signatures increase yearly
8 seconds
revenue per outlet
on credit card purchases bytransaction
per P250,000 to
under P500 P1,000,000 in seven years.
Change the size Productivity
of the ice has improved
Saved 14by 27%, or
seconds
scoop about 4.5% per year.
per drink
New espresso machines Saved 12 seconds
per shot
Businesses Compete
2-16 Competitiveness, Usingand
Strategy, Marketing
Productivity

Productivity measures can be based on:

 Single productivity
- output/(single input)
 Multi-factor productivity
– output/(multiple inputs)
 Total productivity
– output/(total inputs)
Businesses Compete
2-17 Competitiveness, Usingand
Strategy, Marketing
Productivity

• Productivity has important implications for a

business organization and for entire nations

Productivity Growth

Current Period Productivity – Previous Period Productivity

x 100
Previous Period Productivity

Productivity Growth = 84 – 80 x 100

80
Businesses Compete
2-18 Competitiveness, Usingand
Strategy, Marketing
Productivity

Learning Exercise

Labor productivity on the LakesMile assembly

line was 25 units per hour in 2011. In 2012,
labor productivity was 23 units per hour. What
was the productivity growth/decline for the
said period?

23 – 25
Productivity Decline = __________ x 100% = - 8%
25
Businesses Compete
2-19 Competitiveness, Usingand
Strategy, Marketing
Productivity

Measures of Productivity

Single Output Output Output Output

measure 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
Businesses Compete
2-20 Competitiveness, Usingand
Strategy, Marketing
Productivity

Examples of Productivity Measures

Labor Units of output per labor hour

Productivity Units of output per shift
Value-added per labor hour

Machine Units of output per machine hour

Productivity

Capital Units of output per dollar input

Productivity Peso value of output per peso input

Energy Units of output per kilowatt-hour

Productivity Peso value of output per kilowatt-hour
Businesses Compete
2-21 Competitiveness, Usingand
Strategy, Marketing
Productivity

Why have productivity

measures?
Businesses Compete
2-22 Competitiveness, Usingand
Strategy, Marketing
Productivity

Why have productivity measures?

• Track performance overtime
• Indicate where improvements must be made
• Show how much improvement is achieved
• Serve as performance scorecards for departments or
organizations
Businesses Compete
2-23 Competitiveness, Usingand
Strategy, Marketing
Productivity

Learning Exercise 1
Determine the multifactor productivity for the combined
input of labor, materials and overhead using the
following data:

7,040 Units Produced

Cost of labor of P1,000
Cost of materials: P520
Cost of overhead: P2,000
Businesses Compete
2-24 Competitiveness, Usingand
Strategy, Marketing
Productivity

Learning Exercise 1 Solution

MFP = Output
Labor + Materials + Overhead

MFP = 7040 units

P1000 + P520 + P2000

MFP = 2 units/peso input

Businesses Compete
2-25 Competitiveness, Usingand
Strategy, Marketing
Productivity

Learning Exercise 2

Determine the productivity for these cases:

a. Four workers installed 720 square yards of

carpeting in eight hours.

b. A machine produced 70 pieces in two hours.

However, two pieces were unusable.
Businesses Compete
2-26 Competitiveness, Usingand
Strategy, Marketing
Productivity

LE 2 Solution
Yards of carpet installed
a. Productivity =
Labor hours worked

720 yards
=
32 hours (4*8)
= 22.5 yards/hour

Usable pieces
b. Productivity =
Production time

70 – 2 = 68 usable pieces
=
2 hours
= 34 pieces/hour
Businesses Compete
2-27 Competitiveness, Usingand
Strategy, Marketing
Productivity

Learning Exercise 3

Develop a productivity measures for a product

that utilizes labor machine time, raw materials
and purchased materials. Assume 10,000 units
are produced in 500 hours and are sold
P10/unit. The labor rate is P9/hour, the cost of
raw materials is P5,000 and the cost of
purchased materials is P25,000.
Businesses Compete
2-28 Competitiveness, Usingand
Strategy, Marketing
Productivity

LE 3 Solution

Output = P10,000* 10 = 100,000

Input = 500*9 + 5,000 + 25,000 = 34,500

10,000
= = 2.9 units
34,500
Businesses Compete
2-29 Competitiveness, Usingand
Strategy, Marketing
Productivity

LE 3 Solution

Output = P10,000* 10 = 100,000

Input = 500*9 + 5,000 + 25,000 = 34,500

10,000
= = 2.9
34,500
Businesses Compete
2-32 Competitiveness, Usingand
Strategy, Marketing
Productivity

Factors Affecting Productivity

Labor Capital

Technology Management
Businesses Compete
2-33 Competitiveness, Usingand
Strategy, Marketing
Productivity

Other Factors Affecting Productivity

• Standardization
• Quality
• Use of Internet
• Computer viruses
• Searching for lost/misplaced items
• Scrap rates
• New workers
Businesses Compete
2-34 Competitiveness, Usingand
Strategy, Marketing
Productivity

Improving Productivity

• Develop productivity measures.

• Look at the system as a whole.
• Develop methods for achieving productivity
improvements.
• Establish reasonable goals for improvement
• Get management support.
• Measure and publicize improvements.
6-35 Process Selection and Facility Layout of Layout Decisions
Importance
Businesses Compete
2-36 Competitiveness, Usingand
Strategy, Marketing
Productivity

Seat Work:

1. Kalantas Enterprise processes fruits and

vegetables and is able to produce 400 cases of
canned peaches in one-half hour with four
workers. What is labor productivity?

2. Masigasig Paper Philippines produced 2,000

rolls of paper one day. Labor cost was P160,
material cost was P50, and overhead was P320.
Determine the multifactor productivity.
Businesses Compete
2-37 Competitiveness, Usingand
Strategy, Marketing
Productivity

Seat Work (cont’d):

3. Compute the multifactor productivity

measure for an eight-hour day in which the
usable output was 300 units, produced by
three workers who used 600 pounds of
materials. Workers have an hourly wage of
P20, and material cost is P1 per pound.
Overhead is 1.5 times labor cost
Businesses Compete
2-38 Competitiveness, Usingand
Strategy, Marketing
Productivity

Solution:

Quantity Produced
Labor productivity = --------------------------------------------------
Labor hours

400 cases
Multifactor productivity = --------------------------------------------------
4 workers X ½ hour/worker

Multifactor productivity = 200 cases

Businesses Compete
2-39 Competitiveness, Usingand
Strategy, Marketing
Productivity

Solution

Quantity Produced
Multifactor productivity = --------------------------------------------------
Labor + Material + Overhead

2,000 rolss
Multifactor productivity = --------------------------------------------------
P160 + P50 + P320

Multifactor productivity = 3.77 roll per peso input

Businesses Compete
2-40 Competitiveness, Usingand
Strategy, Marketing
Productivity

Solution
Businesses Compete
2-41 Competitiveness, Usingand
Strategy, Marketing
Productivity

CLS Activity 2

Do the following:
Read the article, “Pay Rise without Higher Productivity
CLS 1
‘Dangerous’ and answer the questions.

CLS 2 Read the article, “An American Tragedy: How a Good

Company Died”’ and answer the questions.

CLS 3 Read the case entitled, “Home-Style Cookies” and

answer the questions 1-3.

CLS 4 Read the case entitled, “Home-Style Cookies” and

answer the questions 4-7.

Read the article, “The U.S. Postal Service” and answer

CLS 5
the questions.
Businesses Compete
2-42 Competitiveness, Usingand
Strategy, Marketing
Productivity

Case Study 2

An American Company: How a Good

Company Died?
Questions

1. Write a brief report that outlines the reasons (both internal and
external) for Burgmaster’s demise, and whether operations
management played a significant role in the demise.
2. Do you think that inadequate strategic planning was a factor that
resulted in the company’s asking for trade protection?
3. Can you think of a strategy that could have increased
Burgmaster’s chance of survival? Explain why you think that
strategy would have been effective.