Chapter 2: Competitiveness, Strategy, and Productivity
Competitiveness: How effectively an organization meets the needs of customers relative to others that offer similar
goods or services.
- An important factor in determining whether a company prospers, barley gets by, or fails.
- Organizations compete through some combination of their marketing and operations functions
- Businesses compete with one another based on product or service attributes and customers wants, including;
1. Price: customers will choose the product that has a lower price (if all other factors are equal)
2.Qualitity: refers to design, material, workmanship, performance and consistency (high performance)
3. Product or Service differentiation: additional features causing the product to be more suitable than others.
4. Variety: choices of models and options available to customers (customization)
5. Timeliness or fast delivery: on time delivery, rapid delivery
6. Customer Service: extra attention during sale or service, or after sale activity such as delivery, warranty, setup
7. Location: being conveniently situated for the customers, essential in producing services
several of these dimensions may overlap, customers choose the “best buy”, or “best value”
Value = quality, timeliness, etc
In forming a successful strategy, organizations must take into account both order qualifiers and order winners
Order Qualifiers: Characteristics that customers perceive as minimum standards of acceptability to be considered
as a potential for purchase
Order Winners: Characteristics of an organizations goods/services that cause it to be perceived as better than the
Strategy: A plan for achieving organizational mission/vision/goals
- the strategy of an organization affects its ability to compete or, in the same of a non-profit organization, the
ability to serve its intended purpose.
Mission: The reason for existence of an organization
Vision: The shared perception of the organizations future, what it will achieve, and a supporting philosophy
Mission/Vision Statement: A statement of purpose, products, and markets
One way to create a vision is ``Future State Visioning`` Its main steps are;
1. Identify the stakeholders of company and their vision of future, disassociated with any current problems 2. Develop a common vision in a participatory way
3. Develop values (fundamental beliefs and motives) that will guide the company to achieve its vision
Goals – a mission/vision statement provides a general direction for an organization and should lead to organizational
goals or objectives which provide substance to the overall mission
Strategies - mission/vision/goals are a destination, where the strategy is the roadmap for reaching the destinations.
A strategy is a set of coordinated broad long-term policies, objectives, and action programs to secure long-term
sustainable advantage over competitors.
Organizations have organizational/business strategies which relate to the entire organization, and they have
functional strategies, which relate to each of the function areas of the organization
Tactics: the medium-term objectives, methods, and actions taken to accomplish strategies.
Strategic Planning is hierarchical in organizations
Corporate Level – What businesses or industries do we want to be in?
Business Level – How can we compete with this business in the market?
Functional Level – How can this function area/department support the business level (SUB) strategy?
Characteristics of Strategic Decisions
1. Long-term perspective/planning horizon
2. Made at top levels of organization
3. Involve a high degree of uncertainty about outcomes
4. Tend to focus on external factors
5. Can require significant cost and lead time to implement
6. Can be difficult to reverse once implemented
7. Cross functional/geographic/organizational boundaries
8. Choices and results can have a powerful (positive or negative) impact competitiveness and survival of the
organization (“high stakes”)
Operations Strategy: consistent with the organization strategy, used to guide the operations function
The operations function has to cooperate with all the other function of the business and these functions should
collectively monitor external marks.
The operations policies, objectives, and action programs are classified into nine major decision making categories;
1. Facility: how to specialize or focus on each facility by market, product group, or process type
2. Capacity: Long term capacity decisions relate to size of plants and major equipment.
3. Vertical Integration: the ownership of a major part or the while of the supply chain.
4. Vendor Relations: using competitive arms-length or cooperative close relationships. (Working with suppliers) 5. Product Mix: variety of products and the rate of new product introduction
6. Process Types and Technology: job shop, batch, assembly line, continuous flow
7. Human Resources: workers/staff are appraised, selected, developed, motivated, prompted, and rewarded
8. Product Quality: quality assurance and improvement through statistical quality control, and continues
9. Operations Infrastructure: choosing a computerized planning and control system, whether to just JIT, and the type
of production/delivery system used
The Steps for Formulation of an Operations Strategy
1. Link the business strategy to the operations strategy: determine operations requirements of the business strategy
2. Conduct an operations audit to determine the strengths/weaknesses of the current operations strategy in each of the
nine decision making categories. Also