RSM100Y Chapter 12 Increasing Productivity and Quality
The Productivity-Quality Connection
-Productivity and Quality are watchwords in today’s business. Companies are not only
measuring productivity and insisting on improvements but also insisting on quality so they
can bring to market products that satisfy customers, improve sales, and boost profits.
-Productivity: a measure of economic performance that measures how much is produced
relative to the resources used to produce it.
♦The more we are able to produce the right things while using fewer resources the more
productivity grows and the economy, businesses, and workers benefit.
-Productivity considers both the amounts and the quality of what is produced.
-By using resources more efficiently, the quantity of output will be greater, but unless the
resulting goods and services are of satisfactory quality consumers will not want them.
-Quality: A product’s fitness for use in terms of offering the 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 sa
rapidly as that of competitor nations will see its standard of living fall.
-Since quality must be defined in terms of value to the customer, companies must design
their marketing efforts to cultivate a more customer-oriented focus.
-As quality-improvement practices are implemented, more and more firms will receive
payoffs from these efforts.
-Four factors interact in this process customer, quality, productivity, and profits.
-Most countries use Labour Productivity to measure their level of productivity.
♦Labour productivity of a country = GDP ÷ total number of workers
-It compares a country’s total annual output of goods and services with the resources used
to produce that output.
-The focus on labour is preferred because most countries keep accurate records on
employment and hours worked.
-Usually, firms that compete internationally have more incentive to be more productive.
Productivity Among Global Competitors
-The productivity levels different from nation to nation, and the reason lies in many factors
such as technologies, human skills, economic policies, natural resources, and traditions.
-According to Michael Porter, Canada’s competitiveness is a concern because Canadians have been living off
the diet of natural resources, and Canada will have to start emphasizing innovation and develop a more
sophisticated mix of products if it hopes to be successful in international markets.
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