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Rotman Commerce (1,103)
RSM219H1 (86)
Lecture 2

Lecture 2 Notes

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Rotman Commerce
Chris Bovaird

Chapter 2 The Productivity-Quality Connection o Productivity: measure of efficiency that compares how much is produced with the resources used to produce it; measure of economic performance  Measures how much is produced relative to the resources used to produce it  The more we are able to produce the right things while using fewer resources, the more productivity grows o Productivity considers both the amounts and the quality of what is produced  By using resources more efficiently, the quantity of output will be greater  Unless the resulting goods and services are of satisfactory quality, consumers will not want them o Quality: a product’s fitness for use in terms of offering the features that consumers want  Responding to the Productivity Challenge  When one country is more productive than another, it will accumulate more wealth  A nation whose productivity fails to increase as rapidly as that of competitor nations will see its standard of living fall  Since quality must be defined in terms of value to the customer, companies must design their marketing efforts to cultivate a more customer-oriented focus  As quality-improvement practices are implemented, more and more firms will receive payoffs from these efforts  Four factors interact in this process: o Customers o Quality o Productivity o Profits o Measuring Productivity  Labour productivity: partial productivity ratio calculated by dividing gross domestic product by total number of workers  Labour productivity = gross domestic product / total number of workers  This equation compares a country’s total annual output of goods and services with the resources used to produce that output  Focus on labour is preferred more than focus on other resources because most countries keep accurate records on em
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