COMPETITIVENESS, STRATEGY, AND PRODUCTIVITY

COMPETITIVENESS, STRATEGY, AND PRODUCTIVITY

February 15, 2025
CCP MBA SY 2024-2025
BA301 (1-2A) OPERATIONS MANAGEMENT WITH TQM
MR. NEIL JASPER V. COROZA (3-6PM)
REPORTED BY: CARLA PATRICIA A. VICENTE-MORENO

COMPETITIVENESS

It is an important factor in determining whether a company prospers, barely gets by, or fails. Business organizations compete through some combination of price, delivery time, and product or service differentiation.

WHAT IS COMPETITIVENESS?

Marketing influences competitiveness in several ways, including identifying consumer

wants and needs, pricing, and advertising and promotion.

1. Identifying consumer wants and/or needs is a basic input in an organization’s decision-

making process, and central to competitiveness. The ideal is to achieve a perfect match

between those wants and needs and the organization’s goods and/or services.

2. Price and quality are key factors in consumer buying decisions. It is important to

understand the trade-off decision consumers make between price and quality.

3. Advertising and promotion are ways organizations can inform potential customers

about features of their products or services, and attract buyers.

Operations has a major influence on competitiveness through product and service design, cost, location, quality, response time, flexibility, inventory and supply chain management, and service. Many of these are interrelated.

Product and service design should reflect joint efforts of many areas of the firm to achieve a match between financial resources, operations capabilities, supply chain capabilities, and consumer wants and needs. Special characteristics or features of a product or service can be a key factor in consumer buying decisions. Other key factors include

innovation and the time-to-market for new products and services.

PRODUCT AND DESIGN

Cost of an organization’s output is a key variable that affects pricing decisions and profits. Cost-reduction efforts are generally ongoing in business organizations. Productivity (discussed later in the chapter) is an important determinant of cost. Organizations with higher productivity rates than their competitors have a competitive cost advantage. A company may outsource a portion of its operation to achieve lower costs, higher productivity, or better quality.

COST

Location can be important in terms of cost and convenience for customers. Location near inputs can result in lower input costs. Location near markets can result in lower transportation costs and quicker delivery times. Convenient location is particularly important in the retail sector.

LOCATION

Quality refers to materials, workmanship, design, and service. Consumers judge quality in terms of how well they think a product or service will satisfy its intended purpose. Customers are generally willing to pay more for a product or service if they perceive the product or service has a higher quality than that of a competitor.

QUALITY

Quick response can be a competitive advantage. One way is quickly bringing new or improved products or services to the market. Another is being able to quickly deliver existing products and services to a customer after they are ordered, and still another is quickly handling customer complaints.

RESPONSE TIME

Flexibility is the ability to respond to changes. Changes might relate to alterations in design features of a product or service, or to the volume demanded by customers, or themix of products or services offered by an organization. High flexibility can be a competitive advantage in a changeable environment.

FLEXIBILITY

Inventory management can be a competitive advantage by effectively matching supplies of goods with demand.

INVENTORY MANAGEMENT

Supply chain management involves coordinating internal and external operations (buyers and suppliers) to achieve timely and cost-effective delivery of goods throughout the system.

​​SUPPLY CHAIN MANAGEMENT

Service might involve after-sale activities customers perceive as value-added, such as delivery, setup, warranty work, and technical support. Or it might involve extra attention while work is in progress, such as courtesy, keeping the customer informed, and attention to details. Service quality can be a key differentiator; and it is one that is often sustainable. Moreover, businesses rated highly by their customers for service quality tend to be more profitable, and grow faster, than businesses that are not rated highly.

​​SERVICE

Managers and workers are the people at the heart and soul of an organization, and if they are competent and motivated, they can provide a distinct competitive edge via their skills and the ideas they create. One often overlooked skill is answering the telephone. How complaint calls or requests for information are handled can be a positive or a negative. If a person answering is rude or not helpful, that can produce a negative image. Conversely, if calls are handled promptly and cheerfully, that can produce a positive image and, potentially, a competitive advantage.

MANAGERS AND WORKERS

Open Ended

What are some reasons why certain organizations continue to fail?

1. Neglecting operations strategy.

2. Failing to take advantage of strengths and opportunities, and/or failing to recognize competitive threats.

3. Putting too much emphasis on short-term financial performance at the expense of research and development.

4. Placing too much emphasis on product and service design and not enough on process design and improvement.

​5. Neglecting investments in capital and human resources.

6. Failing to establish good internal communications and cooperation among different functional areas.

7. Failing to consider customer wants and needs.

Organizations fail, or perform poorly, for a variety of reasons. Being aware of those reasons can help managers avoid making similar mistakes. Among the chief reasons are the following:

Open Ended

Can you share some of the key competitive practices in your organization that have contributed to its success in the industry?

STRATEGIES

An organization’s mission is the reason for its existence. It is expressed in its mission statement. For a business organization, the mission statement should answer the question: “What business are we in?”. Missions vary from organization to organization, depending on the nature of their business.

The mission statement forms the foundation for setting organizational goals, which offer more specific details and outline the scope of the mission. Both the mission and goals often align with how the organization aims to be perceived by the public, as well as by its employees, suppliers, and customers. These goals then support the development of organizational strategies, which guide the actions of the company’s functional units.

Organizational strategy is crucial as it provides direction and ensures that the goals and strategies of all functional units are aligned, helping the organization move forward cohesively.

Match

Match the company/companies with the corresponding strategy/strategies they use.

• STRATEGY:

  NO BRAND COMMERCIALS ON TVS, ETC.

• STRATEGY: CHANGING THE RULES IN THE MUSIC INDUSTRY

• STRATEGY: MEAL BUNDLES, KIDS MENU, COLLECTIBLES, FAST SERVICE, MULTIPLE LOCATIONS, DINE IN/TAKE OUT/DRIVE THRU

• STRATEGY: STRATEGY: LOW COST, FAST SHIPPING, FREE DELIVERY, VOUCHERS/DISCOUNTS, QUICK CS RESPONSE

• STRATEGY: MOST CAR PARTS ARE AVAILABLE NATIONWIDE

ROLLS ROYCE & BENTLEY

SPOTIFY

FASTFOOD RESTAURANTS

SHOPEE, LAZADA, AND THE LIKES

TOYOTA

• ROLLS ROYCE & BENTLEY

• SPOTIFY

• FASTFOOD RESTAURANTS

• SHOPEE, LAZADA, AND THE LIKES

• TOYOTA

LOW COST

RESPONSIVENESS

DIFFERENTIATION FROM COMPETITORS

...are the three basic business strategies.

Tactics are the methods and actions used to accomplish strategies. They are more specific

than strategies, and they provide guidance and direction for carrying out actual operations,

which need the most specific and detailed plans and decision making in an organization.

Here are some examples of different strategies an organization might choose from:

Low cost. Outsource operations to third-world countries that have low labor costs.

Scale-based strategies. Use capital-intensive methods to achieve high output volume

and low unit costs.

Specialization. Focus on narrow product lines or limited service to achieve higher quality.

Newness. Focus on innovation to create new products or services.

Flexible operations. Focus on quick response and/or customization.

High quality. Focus on achieving higher quality than competitors.

Service. Focus on various aspects of service (e.g., helpful, courteous, reliable, etc.).

Sustainability. Focus on environmental-friendly and energy-efficient operations.

DISTINCTIVE COMPETENCIES

The special attributes or abilities that give an organization a competitive edge.

• Price

• Quality

• Time

• Flexibility

• Service

• Location

To formulate an effective strategy, senior managers must take into account the core competencies of the organizations, and they must scan the environment. They must determine what competitors are doing, or planning to do, and take that into account. They must critically examine other factors that could have either positive or negative effects. This is sometimes referred to as the SWOT analysis (strengths, weaknesses, opportunities, and threats).

Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase.

ORDER QUALIFIERS

Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition.

ORDER WINNERS

Categorize

Options (5)

Price

Body style

Gas mileage

Safety ratings

Outstanding warranty

Let's say you are buying a car and you find three cars with the price, body style, and gas mileage you want. Of these three cars, one model has impressive safety ratings and an outstanding warranty. You choose to buy that model. Identify which are the order qualifiers and the order winners in this scenario.

ORDER QUALIFIERS

ORDER WINNERS

Environmental scanning is the monitoring of events and trends that present either threats or opportunities for the organization. Generally, these include competitors’ activities; changing consumer needs; legal, economic, political, and environmental issues; the potential for new markets; and the like.

Another key factor to consider when developing strategies is technological change, which can present real opportunities and threats to an organization. Technological changes occur in products (high-definition TV, improved computer chips, improved cellular telephone systems, and improved designs for earthquake-proof structures); in services (faster order processing, faster delivery); and in processes (robotics, automation, computer-assisted processing, point-

of-sale scanners, and flexible manufacturing systems). The obvious benefit is a competitive edge; the risk is that incorrect choices, poor execution, and higher-than-expected operating costs will create competitive disadvantages.

Important factors may be internal or external.

The following are key external factors:

1. Economic conditions. These include the general health and direction of the economy, inflation and deflation, interest rates, tax laws, and tariffs.

2. Political conditions. These include favorable or unfavorable attitudes toward business, political stability or instability, and wars.

3. Legal environment. This includes antitrust laws, government regulations, trade restrictions, minimum wage laws, product liability laws and recent court experience, labor laws, and patents.

4. Technology. This can include the rate at which product innovations are occurring, current and future process technology (equipment, materials handling), and design technology.

5. Competition. This includes the number and strength of competitors, the basis of competition (price, quality, special features), and the ease of market entry.

6. Customers. Loyalty, existing relationships, and understanding of wants and needs are important.
7. Suppliers. Supplier relationships, dependability of suppliers, quality, flexibility, and

service are typical considerations.

8. Markets. This includes size, location, brand loyalties, ease of entry, potential for

growth, long-term stability, and demographics.

The organization also must take into account various internal factors that relate to possible strengths or weaknesses.

Among the key internal factors are the following:

1. Human resources. These include the skills and abilities of managers and workers, special talents (creativity, designing, problem solving), loyalty to the organization, expertise, dedication, and experience.

2. Facilities and equipment. Capacities, location, age, and cost to maintain or replace can have a significant impact on operations.

3. Financial resources. Cash flow, access to additional funding, existing debt burden, and cost of capital are important considerations.

4. Products and services. These include existing products and services, and the potential for new products and services.

5. Technology. This includes existing technology, the ability to integrate new technology, and the probable impact of technology on current and future operations.

6. Other. Other factors include patents, labor relations, company or product image, distribution channels, relationships with distributors, maintenance of facilities and equipment, access to resources, and access to markets.

After assessing internal and external factors and an organization’s distinctive competence, a strategy or strategies must be formulated that will give the organization the best chance of success. Among the types of questions that may need to be addressed are the following:

• What role, if any, will the internet play?

• Will the organization have a global presence?

• To what extent will outsourcing be used?

• What will the supply chain management strategy be?

• To what extent will new products or services be introduced?

• What rate of growth is desirable and sustainable?

• What emphasis, if any, should be placed on lean production?

• How will the organization differentiate its products and/or services from competitors’?

The organization may decide to have a single, dominant strategy (e.g., be the price leader) or have multiple strategies. A single strategy would allow the organization to concentrate on one particular strength or market condition. On the other hand, multiple strategies may be needed to address a particular set of conditions.

Reorder

Identify the key steps in strategy formulation.

• Link strategy directly to the organization’s mission or vision

  statement.

• Assess strengths, weaknesses, threats, and opportunities,

  and identify core competencies.

• Identify order winners and order qualifiers.

• Select one or two strategies (e.g., low cost, speed, customer

  service) to focus on.

1

2

3

4

• 1
• 2
• 3
• 4

Multiple Choice

It is a type of strategy specifies how the supply chain should function to achieve supply

chain goals. This strategy should be aligned with the business strategy. If it is

well executed, it can create value for the organization. It establishes how the organization

should work with suppliers and policies relating to customer relationships and sustainability.

• Sustainability Strategy

• Supply Chain Strategy

• Global Strategy

Multiple Choice

Society is placing increasing emphasis on corporate sustainability practices in the form of governmental regulations and interest groups. For these and other reasons, business organizations are or should be devoting attention to sustainability goals. That requires elevating sustainability to the level of organizational governance; formulating goals for products and services, for processes, and for the entire supply chain; measuring achievements and striving for improvements; and possibly linking executive compensation to the achievement of sustainability goals. What type of strategy is this?

• Supply Chain Strategy

• Global Strategy

• Sustainability Strategy

Multiple Choice

This strategy has two aspects. One relates to where parts or products are made,

or where services such as customer support are performed. The other relates to where products or service are sold.

• Global Strategy

• Sustainability Strategy

• Supply Chain Strategy

Operations strategy is narrower in scope, dealing primarily with the operations aspect of the organization. Operations strategy relates to products, processes, methods, operating resources, quality, costs, lead times, and scheduling.

Table below provides a comparison of an organization’s mission, its overall strategy, and its operations strategy, tactics, and operations.

In order for operations strategy to be truly effective, it is important to link it to organization strategy; that is, the two should not be formulated independently. Rather, formulation of organization strategy should take into account the realities of operations’ strengths and weaknesses,

OPERATIONS STRATEGY

Quality-based strategies focus on maintaining or improving the quality of an organization’s products or services. Quality is generally a factor in both attracting and retaining customers. They may reflect an effort to overcome an image of poor quality, a desire to catch up with the competition, a desire to maintain an existing image of high quality, or some combination of these and other factors. Interestingly enough, quality-based strategies can be part of another strategy such as cost reduction, increased productivity, or time, all of which benefit from higher quality.

QUALITY-BASED STRATEGIES

Time-based strategies focus on reducing the time required to accomplish various activities (e.g., develop new products or services and market them, respond to a change in customer demand, or deliver a product or perform a service). Time-based strategies focus on reducing the time needed to conduct the various activities in a process. The rationale is that by reducing time, costs are generally less, productivity is higher, quality tends to be higher, product innovations appear on the market sooner, and customer service is improved.

TIME-BASED STRATEGIES

PRODUCTIVITY

One of the primary responsibilities of a manager is to achieve productive use of an organization’s resources. The term productivity is used to describe this. Productivity is an index that measures output (goods and services) relative to the input (labor, materials, energy, and other resources) used to produce it. It is usually expressed as the ratio of output to input:


Although productivity is important for all business organizations, it is particularly important for organizations that use a strategy of low cost, because the higher the productivity, the lower the cost of the output.

A productivity ratio can be computed for a single operation, a department, an organization, or an entire country. In business organizations, productivity ratios are used for planning workforce requirements, scheduling equipment, financial analysis, and other important tasks.

Productivity has important implications for business organizations and for entire nations. For nonprofit organizations, higher productivity means lower costs; for profit-based organiza- tions, productivity is an important factor in determining how competitive a company is. For a nation, the rate of productivity growth is of great importance. Productivity growth is the increase in productivity from one period to the next relative to the productivity in the preceding period. Thus,

Productivity growth is a key factor in a country’s rate of inflation and the standard of living of its people. Productivity increases add value to the economy while keeping inflation in check.

Math Response

7040 Units Produced  
Sold for $1.10/unit

Cost of labor of $1,000

Cost of materials: $520

Cost of overhead: $2000

What is the multifactor productivity? 

Type answer here

Correct Answer: 2.20

Deg^°

Rad

Drag and Drop

What are some factors that affect productivity?​​

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Drag these tiles and drop them in the correct blank above

Workforce skills and education

Technology and innovation

Management, work environment and culture

Incentive plans

Government policies and regulations

Improving productivity

• Develop productivity measures

–First measure, then manipulate

• Develop methods for productivity improvements

–Venues for ideas to prosper

• Establish reasonable goals

–High challenges vs. trivialities

• Publicize improvements

–Incentives, positive feedback, awards

• Get management support

• Productivity is more general than efficiency

–Set the rules of the game to win it

• Determine the critical operations = bottleneck

Don’t confuse productivity with efficiency.

Efficiency is a narrower concept that pertains to getting the most out of a fixed set of resources; productivity is a broader concept that pertains to effective use of overall resources.

BEST CASE STUDY? SHEIN.

WHY?

• COMPETITIVENESS - Global brand, pricing, "clothing is essential" = people need it

• STRATEGIES - Social media presence, updated fashion trends, wide variety of products, lower pricing, fast/free delivery, vouchers/discounts, partnership

• PRODUCTIVITY - Fast-paced daily operations, organized process, multiple number of workers per department, factory system, manufacturing system