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Chapter 2

chapter 2 notes

Management (MGT)
Course Code
Chris Bovaird

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Chapter 2 Increasing Productivity and Quality Notes
The Productivity-Quality Connection
x productivity—a measure of efficiency that compares how much is produced with the resources used to produce it
x by using resources more efficiently, the quantity of output will be greater, but unless the resulting goods and services are of
satisfactory quality (the “right things”), consumers will not want them
x qualitya product’s fitness for use in terms of offering the features that consumers want
Responding to the Productivity Challenge
x companies must design their marketing efforts to cultivate a more customer-oriented focus
x as quality-improvement practices are implemented, more and more firms will receive payoffs from these efforts and 4 factors
interact in this process: customers, quality, productivity, and profits
Measuring Productivity
x labour productivity—partial productivity ratio calculated by dividing gross domestic product by total number of workers
x it compares a country’s total annual output of goods and services with the resources used to produce that output
x the focus on labour, rather than on other resources (such as capital or energy) is preferred because most countries keep accurate
records on employment and hours worked
Domestic Productivity
x nations must be concerned about domestic productivity regardless of their global standing
x a country that improves its ability to make something out of its existing resources can increase the wealth of all its inhabitants,
conversely, a decline in productivity shrinks a nation’s total wealth
x when that happens, increase in 1 person’s wealth comes only at expense of others with whom he or she shares economic system
Industry Productivity
x there are differences between manufacturing and service sectors, industries within sectors differ vastly in terms of productivity
x productivity of specific industries concerns many people for different reasons: labour unions need to take it into account in
negotiating contracts, since highly productive industries can give raises more easily than can less productive industries
Company Productivity
x high productivity gives a company a competitive edge because its costs are lower and as a result, it can offer is product at a lower
price (and gain more customers), or it can make a greater profit on each item sold as well as allowing companies to pay workers
higher wages without raising prices; productivity of individual companies is also important to investors, workers, and managers
Total Quality Management
Managing for Quality
x total quality management (TQM)—a concept that emphasizes that no defects are tolerable and that all employees are responsible
for maintaining quality standards
x strategic approach to TQM begins with leadership and desire for TQM, which involves getting people’s attention, getting tem to
think in an entirely new way about what they do, and then getting them to improve both processes and products
x customer focus is starting point as companies must develop methods for determining what customers want, and then direct all
their resources toward fulfillment of those needs to gain greater customer satisfaction
x total participation is mandatory—unless all employees are working toward improved quality, the firm is wasting potential
contributions from its HR, and is missing a chance to become a stronger competitor in the marketplace
x TQM in today’s competitive markets demands unending and continuous improvement of products, after-sales services, and all of
the companys internal processes, such as accounting, delivery, billing, and information flow
Planning for Quality
x performance quality—overall degree of quality; how well features of product meet consumers’ needs and product performs
x quality reliability—the consistency of quality from unit to unit of a product
Organizing for Quality
x everyone must work to ensure quality, however, responsibility for specific aspects of TQM is often assigned to specific
departments and jobs, in fact, many companies have quality assurance, or quality control, departments staffed by quality experts
Leading for Quality
x leading for quality means that managers must inspire and motivate employees throughout the company to achieve quality goals
x they need to help employees see how they affect quality and how quality affects their jobs and their company
x quality ownership—the concept that quality belongs to each employee who creates or destroys it in producing a good or service;
the idea that all workers must take responsibility for producing a quality product
Controlling for Quality
x by monitoring its products and services, a company can detect mistakes and make corrections
x to do so, however, managers must first establish quality standards and measurements
Process Re-engineering
x business process re-engineering—redesigning of business processes to improve performance, quality, and productivity
x re-engineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in
measures of performance, such as cost, quality, service, and speed
The Re-engineering Process
x process starts with statement of benefits envisioned for customers and company and then flows logically through next 5 steps:
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