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Chapter 2

Chapter 2- Increasing Productivity and Quality


Department
Management (MGT)
Course Code
MGTA02H3
Professor
Bill Mc Conkey
Chapter
2

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Chapter 2- Increasing Productivity and Quality
1- Describe the connection between 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
The more we produce the right things while using less resources, the higher
productivity grows
Quality- a products fitness for use in terms of offering the features that consumers want
Responding to the Productivity Challenge
Productivity more wealth
Productivity standard of living falls
Companies must design their marketing efforts to cultivate a more customer-
oriented focus
4 factors interact in this process:
oCustomers
oQuality
oProductivity
oProfits
Measuring Productivity
Labour productivity- partial productivity ratio calculated by dividing gross domestic
product by total number of workers
It compares a country’s total annual output of goods and services with the
resources used to produce that output
Productivity among Global Competitors
Productivity differ from nation to nation because of many factors: human skills,
economic policies, natural resources, traditions
Domestic Productivity
Nations must be concerned about domestic productivity regardless of their global
standing
Workers: higher wages when productivity , lower wages when productivity
Investors: higher profits when productivity , lower profits when productivity
Customers: lower prices when productivity , higher prices when productivity
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Manufacturing versus Service Productivity
Manufacturing productivity is higher than service productivity
Many organizations have increased their productivity by becoming more like
factories, and they use modern information technology to eliminate inefficiencies
2- Understand the importance of increasing productivity
Industry productivity
Industries within sectors (manufacturing and service) differ greatly in terms of
productivity
Labour unions: need to take it into account in negotiating contract, since highly
productive industries can give raises more easily than can less productive
industries
Investors and suppliers: consider industry productivity when making loans,
buying securities, and planning their own future production
Company productivity
High productivity gives a company a competitive edge because its costs are
lower
oOffer a product at a lower price, which means more customers/greater
profit
oAllows companies to pay workers higher wages without raising prices
Investors: comparing the productivity of several companies in the same industry
can help determine buying or selling stocks
Workers: employee profit- sharing plans are often based on the company’s
productivity improvement
Managers: uses info on productivity trends to plan for new products, factories,
and funds
TOTAL QUALITY MANAGEMENT
3- Identify the activities involved in total quality management
Managing for Quality
Total quality management (TQM)/ quality assurance- a concept that emphasizes that no
defects are tolerable and that all employees are responsible for maintaining quality
standards
Must consider all parts of the business, including customers, suppliers, and
employees
Including all the activities necessary for getting high-quality goods and services
into the marketplace
The strategic approach to TQM beings with leadership and the desire for TQM
oInvolves getting peoples attention, getting them to think in an entirely new
way about what they do, and then getting them to improve both processes
and products
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