COMPETITIVENESS,

STRATEGY, AND
PRODUCTIVITY
This chapter discusses
competitiveness, strategy, and
productivity, three separate but
related topics that are vitally
important to business
organizations.
COMPETITIVENESS

Competitiveness relates to the effectiveness of an

organization in the marketplace relative to other
organizations that offer similar products or
services. Operations and marketing have a major
impact on competitiveness.
Marketing influences competitiveness in
several ways, such as:
1. Identifying consumer wants and/or needs is a basic input in an
organization’s decision-making process, and central to
competitiveness. The ideal is to achieve a perfect match between those
wants and needs and the organization’s goods and/or services.
2. Price and quality are key factors in consumer buying decisions. It is
important to understand the trade-off decision consumers make
between price and quality.
3. Advertising and promotion are ways organizations can inform
potential customers about features of their products or services, and
attract buyers.
Business compete using operations:
1.Product and service design 6.Flexibility
2.Cost 7.Inventory management
3.Location 8.Supply chain management
4.Quality 9.Service
5.Quick response 10.Managers and workers
Why Some Organizations Fail:
1. Neglecting operations strategy. 5. Neglecting investments in capital and
2. Failing to take advantage of strengths human resources.
and opportunities, and/or failing to 6. Failing to establish good internal
recognize competitive threats. communications and cooperation
3. Putting too much emphasis on short- among different functional areas.
term financial performance at the 7. Failing to consider customer wants
expense of research and development. and needs.
4. Placing too much emphasis on
product and service design and not
enough on process design and
improvement.
MISSION AND STRATEGIES
An organization’s mission is the reason for its existence. It is expressed in
its mission statement. For a business organization, the mission statement
should answer the question “What business are we in?” Missions vary
from organization to organization, depending on the nature of their
business.
A mission statement serves as the basis for organizational goals, which
provide more detail and describe the scope of the mission. Goals serve as
a foundation for the development of organizational strategies.
Organizational strategy is important because it guides the organization
by providing direction for, and alignment of, the goals and strategies of
the functional units.
Hierarchical Planning and Decision Making
Missi reason for an organization’s existence
on
provide more detail and describe the Organization
scope of the mission al Goals
Overall strategies that relate to the
Organizational entire organization
Strategies
support the overall Functional Goals
organizational strategies Finance MarketingOperations
Strategies Strategies Strategies
the “how to” part of the
Tacti Tactics Tacti process
cs cs
the actual “doing” Operating Operating Operating
part of the process Procedures ProceduresProcedures
Business Strategies
Involves leveraging the core competencies of the organization to
achieve a defined high-level goal or objective
The three basic business strategies:
• Low cost
• Responsiveness
- relates to ability to respond to changing demands.
• Differentiation from competitors
- can relate to product or service features, quality, reputation, or
customer service.
Strategy Formulation
Effective strategy formulation requires taking into account:
Core Competencies
The special attributes or abilities possessed by an organization that give it a
competitive edge.

Michael Porter’s Five Forces Model:

1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products
Strategy Formulation
Environment Scanning
The considering of events and trends that presents the threats or
opportunities for a company.
Environmental Scanning is necessary to identify:
Internal Factors
Strengths and Weaknesses
External Factors
Opportunities and Threats
Strategy Formulation
Internal Factors External Factors
• Human resources • Economic conditions
• Facilities and equipment • Political conditions
• Financial resources • Legal environment
• Customers
• Technology
• Product and services
• Competitions
• Technology
• Market
• Suppliers
Strategy Formulation
Successful strategy formulation also requires taking into account:
Order Qualifiers
The characteristics that potential customers perceive as minimum
standards of acceptability for a product to be considered for
purchase

Order Winners
The characteristics of an organization’s goods or services that
cause them to be perceived as better than the competition.
Strategy Formulation
The key steps in strategy formulation are:
1. Link strategy directly to the organization’s mission or vision
statement.
2. Assess strengths, weaknesses, threats and opportunities, and
identify core competencies.
3. Identify order winners and order qualifiers.
4. Select one or two strategies (e.g., low cost, speed, customer
service) to focus on.
Supply Chain Strategy
A supply chain strategy specifies how the supply chain should
function to achieve supply chain goals. It is an iterative process that
evaluates the cost benefit trade-offs of operational components.
Sustainability Strategy
Sustainability is a business approach to creating long-term value by
taking into consideration how a given organization operates in the
ecological, social and economic environment. Sustainability is built
on the assumption that developing such strategies foster company
longevity.
Global Strategy
A global strategy is one that a company takes when it wants to
compete and expand in the global market. In other words, a strategy
businesses pursue when they wish to expand internationally.
Operations Strategy
It is the approach, consistent with organization strategy that is used
to guide the operations function.
It is a plan specifying how an organization will allocate resources in
order to support infrastructure and production. An operations
strategy is typically driven by the overall business strategy of the
organization, and is designed to maximize the effectiveness of
production and support elements while minimizing costs.
Quality and Time Strategies
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 part of a cost reduction strategy
Quality and Time Strategies
Time-based strategies
Strategy 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.
Quality and Time Strategies
Time-based strategies
Areas where organizations have achieved time reductions:
 Planning time
 Product/service design time
 Processing time
 Changeover time
 Delivery time
 Response time for complaints
TRANSFORMING STRATEGY INTO ACTION:
The Balanced Scorecard
The Balanced Scorecard (BSC) is a top-down management system that
organizations can use to clarify their vision and strategy and transform them
into action.

The idea of BSC is to move away from a purely financial perspective of the
organization and integrate other perspectives such as customers, internal
business processes, and learning and growth.

Although the Balanced Scorecard helps focus managers’ attention on strategic

issues and the implementation of strategy, it is important to note that it has no
role in strategy formulation.
TRANSFORMING STRATEGY INTO ACTION:
THE BALANCED SCORECARD
Financial
Performance

Customer/ Vision Efficiency of

Stakeholder and Internal
Satisfaction Strategy Business Processes

Organizational
Knowledge
and Innovation

Strategy Objectives
Strategy Initiatives
Performance Measures &
Targets
Importance of Strategy in Productivity
Addressing productivity strategically means defining the scope to include the
entire system required to produce goods and services for customers and
aligning priorities to support the business plan, and ensuring that managers
understand these priorities and agree upon high-leverage opportunities for
productivity improvement. Successful implementation is ensured by
formulating step-by-step actions that specify who must do what, when, with
whom, and with what resources.