MGTA02H3 Chapter Notes - Chapter 2: Total Quality Management, Supply Chain, Natural Resources Canada
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Chapter 2 – Increasing Productivity and Quality
THE PRODUCTIVITY – QUALITY CONNECTION
Productivity is a measure of economic performance.
Productivity measures how much is produced relative to the resources used to
The more we are able to produce the right things while fewer resources, the more
productivity grows and everyone benefits.
Productivity considers both the amounts and the quality of what is produced.
Quality means fitness of use – offering features that consumers want.
Responding to the Productivity Challenge
Productivity has both international and domestic ramifications.
When one country is more productive than another, it will accumulate more wealth.
A nation whose productivity fails to increase as rapidly as that of competitor nations
will see its standard of living fall.
Companies must design their marketing efforts to cultivate a more customer-
oriented focus since quality must be defined in terms of value to the customer.
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.
Most countries use labour productivity to measure their level of productivity:
oLabour of productivity of a country = GDP/total # of workers
The equation above compares a country’s total annual output of goods and services
with the resources used to produce that output. The focus of labour, rather than on
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other resources, is preferred because most countries keep accurate records on
employment and hours worked.
Productivity Among Global Competitors
Among 23 participating countries, Belgium is highest in productivity while New
Zealand is the lowest.
There are differences in productivity levels due to the following factors: technologies,
human skills, economic policies, natural resources, and even in traditions.
According to Michael Porter, Canada’s competitiveness is a concern because we have
been living off our rich diet of natural resources.
oCanada will have to start emphasizing innovation and develop a more
sophisticated mix of products if it hopes to be successful in international
oHe criticizes Canadian business, government, and labour for failing to
abandon outdated ways of thinking regarding productivity and innovation.
A country that improves its ability to make something out of its existing resources
can increase the wealth of all its inhabitants.
A decline in productivity shrinks a nation’s total wealth.
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.
Manufacturing Versus Service Productivity
Manufacturing productivity is higher than service productivity.
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