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Chapter 2

Chapter 2- Increasing Productivity and Quality.docx

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Management (MGT)

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 product’s 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 -Canada’s 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 nation’s total wealth -when that happens, an increase in one person’s wealth comes only at the expense of others with whom he or she shares an economic system -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 from “Baumol’s disease” -Baumol believed that since the service sector focussed more on hands-on activity that machines couldn’t 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 -Juran’s “Quality Trilogy”—quality planning, quality control, and quality improvement—was the first structured process for managing quality -indentifies management steps for ensuring quality -these theorists also developed quality tools for day-to-day work activities because they knew that without employee participation, real quality improvements would never happen -Ishikawa developed “fishbone diagrams” aka “cause-and-effect diagrams” -this diagram helped teams of employees track down cause of quality problems Managing Quality -total quality management (TQM): a concept that emphasizes that no defects are tolerable and that all employees are responsible for maintaining quality standards -sometimes called quality assurance -includes all the activities necessary for getting high-quality goods and services into the marketplace -must consider all parts of the business includin
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