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study guide


Department
Management (MGT)
Course Code
MGTA02H3
Professor
Chris Bovaird

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Chapter 2: Increased Productivity and Quality
THE PRODUCTIVITY-QUALITY CONNECTION
-productivity: a measure of the efficiency that compares that how much is produced with the
resources used to produce it
-productivity considers both the amounts and the quality of what is produced
-by using resources more efficiently, the quantity of output will be greater
-quality: a products fitness for use in terms of offering the features that consumers want
Responding to the Productivity Challenge
-a nation whose productivity fails to increase as rapidly as that of competitor nations will see its
standard of living falling
-quality is defined in terms of value to the customer, therefore companies must design their
marketing efforts to cultivate a more customer-oriented focus
-four factors interact in this process: customers, quality, productivity, and profits
Measuring Productivity
-labour productivity: partial productivity ratio calculated by dividing gross domestic product by
total number of workers
-the focus on labour rather than on other resources (such as capital) is preferred since most
countries keep accurate records on employment and hours worked
-Canadian producers that had foreign units were just as productive as foreign-owned plants
-firms that compete internationally have more incentive to be more productive
Productivity Among Global Competitors
-there are differences from nation to nation
-the answer lies in many factors: technologies, human skills, economic policies, natural resources
—and even in tradition
-Canadas competitiveness is a concern because we have been living off our rich diet of natural
resources
-Canada will have to start developing a more sophisticated mix of products if it hopes to be
successful in international markets
Domestic Productivity
-nations must be concerned about domestic productivity regardless of their global standing
-a decline in productivity shrinks a nations total wealth
-when that happens, an increase in one persons wealth comes only at the expense of others with
whom he or she shares an economic system
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-when productivity drops, wages can be increased only by reducing profits (penalizing investors)
or by increasing prices (penalizing customers)
-investors, suppliers, managers and workers are all concerned about the productivity of specific
industries and companies
Manufacturing Versus Service Productivity
-manufacturing productivity is higher than service productivity
-for years, it was believed than the service sector suffered fromBaumols disease”
-Baumol believed that since the service sector focussed more on hands-on activity that machines
couldnt replace, it would be more difficult to increase productivity services
-many service sectors have increased their productivity by becoming more like factories, and they
use modern information technology to eliminate inefficiencies
Industry Productivity
-industries within these sectors differ vastly in terms of productivity
-more sophisticated technology and superior nature resources
-a new technology called continuous casting has caused improvement
-new processes have meant immense savings in both labour and energy
-the productivity of specific industries concerns many people for different reasons
-highly productive industries can give raises more easily than can less productive industries
-investors and suppliers consider industry productivity when making loans and buying securities
Company Productivity
-high productivity gives a company a competitive edge because its costs are lower
-it can offer its product at a lower price (and gain more customers), or it can make a greater profit
on each item sold
-increased productivity allows companies to pay workers higher wages without raising prices
-productivity of individual companies is important to investors, workers and managers
-comparing the productivity of several companies in the same industry helps investors in buying
and selling stocks
-managers use information about productivity trends to plan for new products, and funds to stay
competitive in the years ahead
TOTAL QUALITY MANAGEMENT
-must take quality into account
-JuransQuality Trilogy”—quality planning, quality control, and quality improvement—was the
first structured process for managing quality
-indentifies management steps for ensuring quality
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