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Chapter 2

Management II Chapter 2.doc

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University of Toronto Scarborough
Management (MGT)

Chapter 2: Increasing Productivity and Quality THE PRODUCTIVITY – QUALITY CONNECTION Productivity – a measure of efficiency that compares how much is produced with the resources used to produce it. It measures how much is produced relative to the resources used to produce it. It considers both the amounts and the quality of what is produced  using more resources more efficiently, the quantity of output will be greater. If the quality of the outputs is not satisfactory, the consumers will not purchase them. Therefore, quality is a product’s fitness for use in terms of offering the features that consumers want. Responding to the Productivity Challenge • As quality-improvement practices are implemented, more and more firms will receive payoffs from these efforts. Four factors interact in this process: customers, quality, productivity and profits. o Measuring Productivity: • Labour productivity – partial productivity ratio calculated by dividing gross domestic product by total number of workers. To calculate this: labour productivity of a country = (GDP/total number of workers) • 2005 Stats Canada report showed that foreign-controlled manufacturing plants in Canada accounted for 2/3 of the growth in labour productivity during the period 1980- 1999b/c 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. o Productivity Among Global Competitors: • Read this paragraph o Domestic Productivity: • A country that improves its abilities to make something out of its existing resources can increase the wealth of all its inhabitants. • Additional wealth from higher productivity can be shared among works (as higher wages), investors (as higher profits) and customers (as stable prices). o Manufacturing vs. Service Productivity: • Manufacturing productivity is higher than service productivity. • Read the rest from the book o Industry Productivity: • Agriculture is more productive in Canada than in many other nations because we use more sophisticated technology and superior natural resources. (read on) • One reason for the improvement is a new technology called continuous casting. • Productivity of specific industries concerns many people for different reasons. Labour unions take it into account in negotiating contracts, since highly productive industries can give raises. Investors & suppliers consider industry productivity when making loans, buying securities, and planning their own future. o Company Productivity: • Read it. It’s mostly common sense. If you don’t understand that paragraph, then just sign up for community college. THE TOTAL QUALITY MANAGEMENT • It is no longer enough for business to simply measure productivity in terms of numbers of items produced. They must also take into account the quality of the product. • Quality advocates such as Joseph Juran and Kaoru Ishikawa introduced methods and tools for implementing quality. Juran’s “Quality Trilogy”— quality planning, quality control and quality improvement –was the first structured process for managing quality. • Ishikawa developed the “Ishikawa diagrams” that help teams of employees investigate and track down causes of quality problems in their work areas. o Managing for Quality • Total quality management (TQM) – a concept that emphasizes that no defects are tolerable and that all employees are responsible for maintaining quality standards. The strategic approach to TQM begins w/leadership and the desire for TQM. • Customer focus is the starting point. Companies must develop methods for determining what customers want and then direct all their resources towards fulfilling these needs. Therefore total participation is mandatory.
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