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RSM100Y1 (431)
Chapter 12

chapter 12

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Rotman Commerce
Stojanovic Dragan

CHAPTER 12 INCREASING PRODUCTIVITY AND QUALITYTHE PRODUCTIVITYQUALITY CONNECTION y Productivity a measure of economic performance that measures how much is produced relative to the resources used to produce it y Productivity grows if fewer resources are used to produce the right things y Productivity considers both the amounts and the quality of what is produced y By using resources more efficiently quantity of output will be greater but unless theresulting goods are of satisfactory quality no one will want to buy them a products fitness for use in terms of offering the features that consumers want y QualityResponding to the Productivity Challenge y Since quality must be defined in terms of value to the customer companies must design their marketing efforts to cultivate a more customeroriented focus y As qualityimprovement practices are implemented more and more firms will receive payoffs from these efforts y Four factors interact in this process customers quality productivity and profits1 Measuring Productivity y Most countries use labour productivity to measure their level of productivity y Labour productivity of a countrygross domestic producttotal number of workers y This equation compares a countrys total output of goods and services with the resources used to produce that output2 Productivity Among Global Competitors y Differences of productivity lie among nations due to many factors technology human skills economic policies natural resources and even traditions3 Domestic Productivity y Nations must be concerned about domestic productivity regardless of their global standing y A country that improves its ability to make something out of its existing resources can increase the wealth of all its inhabitants and vice versa y When a decline happens an increase in one persons wealth comes at the expense of others with whom he or she shares an economic system y For example additional wealth from higher productivity can be shared among workers investors and customers y When productivity drops wages can be increased only by reducing profits or by increasing prices
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