Competitiveness, Strategy and Productivity | M A Hoque

Competitiveness, Strategy and Productivity

1. Competitiveness
Definition. Competitiveness means the ability of a person or a system that leads to the possession
of a strong edge (power) to be more successful to the competitors. That means that the quality of
(a person/system) being as good as or better than others who have similar offerings. In operations
management it is defined as ‘how effectively an organization can meet customers’ wants and needs
relative to others that offer similar goods or services’. Organizational competition, or
competitiveness, pertains to better ability and performance of a firm, to sell and supply goods and
services in a given market, in relation to the ability and performance of other firms in the same
market.

Operations Based Business Competition

1. Product and service design – Competition depends on the design of products and services.
2. Cost- Competition depends on the cost of producing a product and service, and hence on the
price of a product/service.
3. Location - Competition depends on facilities (factories, warehouses, retail stores, etc.) location.
4. Quality- Competition depends on qualities of products/services.
5. Quick response- Competition depends on quick responses (shorter delivery time, responses to
questions, shorter production time, shorter warranty responses, etc.) to customers.
6. Flexibility- Competition depends on flexibility (responsiveness or adaptability) of providing
various categories of expected products/services (e. g., various categories of cars of the same
company, various categories of oil bottles of a company, various categories of services
provided by a bank, hospitals, etc.) to customers.
7. Inventory management- Competition depends on meeting customers’ demand satisfactorily by
keeping minimum inventory.
8. Supply chain management- Competition depends on proper synchronization (harmonization)
of the supply chain of producing products/services and delivering them to customers.
9. Service and service quality- Competition depends on various types of services provided to
customers and also on the quality of those services.
10. Managers and workers - Competition depends on managerial decisions and also on the skills
of the concerned workers.

Some Organizations Fail because of the following reasons:

1. Too much emphasis on short-term financial performance – Some companies want to make
more profit in a shorter time and hence they fail to achieve long term trustworthiness of their
business.
2. Failing to take advantage of strengths and opportunities – Some companies fail to utilize their
full strength and opportunities in business and hence they fail to succeed in the competitive
market.
3. Neglecting operations strategy - Some companies fail to adapt an appropriate strategy for their
business and hence fail to compete in the market, which in turn leads to business failure.
4. Failing to recognize competitive threats - Some companies has the tendency of negligence to
their competitors and hence fail to compete with them. Consequently, they fail in business.
 Competitiveness, Strategy and Productivity | M A Hoque

5. Too much emphasis in product and service design and not enough on improvement – Some
companies do not spend enough time in improvement of product and service design, and hence
they cannot compete in the market. As a result they fail in business in the long run.
6. Neglecting investments in capital and human resources – Some companies do not want to
invest in assets and human resources and hence they fail to succeed in business.
7. Failing to establish good internal communications – Some companies fail to establish proper
internal communications for supply chain management and hence they fail to compete in the
market.
8. Failing to consider customer wants and needs – Some companies fail to identify the expected
needs and wants of customers, that is, they fail to forecast demand of their products/services
and hence they fail in business.

2. Vision/Mission/Strategy/Tactics
A vision is a vivid mental image of what a person wants to achieve at some point in the future,
based on his/her goals and aspiration. Having a vision means have a clear focus of achievement
and it prevents to go in a wrong direction.
A mission is a list of assignments to be carried out to achieve the goal. A business mission is a
sentence describing a company's operations function, markets and competitive advantages, that is,
a short written statement of how to achieve business goals based on assumed philosophies.
Strategy
A strategy is a master plan which is implemented by the management of a company to secure a
competitive position in the market, carry on its operations, satisfy customers and to achieve the
desired goals of the business.
Tactics
Tactics are the actions taken to support the strategy. Most businesses deal with five types of
strategy and the tactics used to achieve strategic goals: product manufacturing, pricing, marketing,
operational and financial strategies.
A general example: Nusrat is a student. She would like to have a career in business, have a good
job, and earn enough income to live comfortably
Vision: Live a good life
Mission: Assignments to be carried out to achieve the vision
 Goal: Successful career, good income
 Strategy: Obtain an university education
 Tactics: Select an university and a major
Operations: Registering, buying books, taking courses, studying, graduating, getting job
Strategy Attributes in business:

 Low cost – producing products or providing services with reasonable minimum cost.
 Scale-based strategies – to follow competitive strategies in producing products/services.
 Specialization – try to be specialized in producing products/services.
 Flexible operations - the ability of a system to produce/provide various types of a
product/service without major setups.
 High quality – high quality of products/services should be maintained.
 Service – high quality customers’ service should be delivered.
 Competitiveness, Strategy and Productivity | M A Hoque

Distinctive Competencies: The special attributes or abilities that give an organization a

competitive edge.
Strategy Factors
 Price – reasonable prices should be maintained.
 Quality – at least standard quality should be maintained.
 Time – minimum production and delivery time should be maintained.
 Flexibility – acceptable flexibility should be maintained.
 Service – better customer service should be maintained.
 Location – convenient location for comfortable customer service should be maintained.

Examples of Operations Strategies:

Factors Operations strategy Example

Price Low Cost Neighborhood tea stalls

ASUS laptops, Tata Nano
High-performance design or high Apple iPhone, MacBook
Quality quality, consistent quality Samsung Galaxy, BMW, Mercedes

Time Rapid delivery Fedex,

On-time delivery, One-hour photo
Flexibility Variety volume Meenabazar, Agora

Service Superior customer service Disneyland

Location Convenience ATMs, Flexiload

Global strategy
 Strategic decisions must be made with respect to globalization - means that one should
consider his/her global strategy considering issues of global competition.
 What works in one country may not work in another – the global issues may not be the same
for different countries.
 Strategies must be changed to account for these differences – strategies must be changed by
taking into account these global issues.
 Other issues – like political, social, cultural, and economic differences should be taken into
account.

Strategy Formulation
 Order qualifiers
 Competitiveness, Strategy and Productivity | M A Hoque

 Characteristics that customers perceive as minimum standards of acceptability to be

considered as a potential purchase – at least minimum standard qualified products/services
should be produced/delivered by an organization.

 Order winners
 Characteristics of an organization’s goods or services that cause it to be perceived as better
than the competitors - the highest standard qualified products/service should be
produced/delivered so that they can win in the international competitive market.

Operations Strategy
 Operations strategy – The approach, consistent with organization strategy that is used to guide
the operations function. It means that the operations function strategy should be decided
following the organization strategy, otherwise difficulty may arise in implementing operations
function.

Strategic OM Decisions

Decision Area Affects

Product and service design Costs, quality, reliability and environment
Capacity Cost structure, flexibility
Process selection and layout Costs, flexibility, skill level, capacity
Work design Quality of work life, employee safety, productivity
Location Costs, visibility
Quality Ability to meet or exceed customers’ expectations
Inventory Costs, shortages
Maintenance Costs, equipment reliability, productivity
Scheduling Flexibility, efficiency
Supply chain Costs, quality, agility, shortages, vendor relation
project Costs, new products, services or operating systems

Quality and time based Strategies

 Quality-based strategies
 Focuses on maintaining or improving the quality of an organization’s products or services
 Quality at the source means the inputs or resources used to make a product or to deliver a
service must be qualified.
 Time-based strategies
 Focuses on reduction of time needed to accomplish tasks – to produce a product or to
deliver a service in minimum time.

3. Productivity
 Productivity
 Competitiveness, Strategy and Productivity | M A Hoque

 A measure of the effective use of resources – Productivity is usually expressed as the ratio
of aggregate output to an aggregate input used in the production process, which is called
total productivity measure. Sometimes, productivity measure is expressed as the ratio of
an aggregate output to a single input or to multiple inputs, that is, output per unit of input
or output per multiple inputs, typically over a specific period of time. Thus

Productivity = Aggregate output/Aggregate input;

Partial productivity = Aggregate output/(Partial input/inputs).

Example: Suppose 7040 units are produced incurring costs of TK 1000 for labor, TK 520
for materials and TK 2000 as overhead cost.
Productivity = Aggregate output/Aggregate input
= 7040/(1000+520+2000) =7040/3520 = 2;
Partial productivity = 7040/(1000+2000) = 7040/3000 = 2.35.

General examples of partial measures:

Labor productivity means units of output per labor hour or units of output per shift or value-
added per labor hour.
Machine productivity means units of output per machine hour used.
Capital productivity means units of output per currency input or monetary value of output per
currency input.
Energy output means units of output per kilowatt-hour or monetary value of output per kilowatt-
hour.
Productivity Growth = (Current period productivity – Previous period productivity)/Previous period productivity

 Productivity ratios are used for

 Planning workforce requirements – low productivity ratio implies for recruitment of high
skilled employees, that is, indicates for more skilled workforce.
 Scheduling equipment - low productivity ratio implies for modified scheduling of
equipment.
 Financial analysis - low productivity ratio implies for more analysis of money used at
different categories of production.

 Process Yield: Process yield is the ratio of output of good (non-defective) products to
Input, that is, defective product is not included in the output
 Service example:
Ratio of number of students admitted to the number of students applied.

Factors affecting productivity are as follows:

 Capital – Lack of capital always affects productivity.
 Quality – Defective products leads lesser productivity.
 Technology – Adoption of a better technology increases output per unit time.
 Management - Proper management of a production process improves productivity.
 Standardization – It means setting identical characteristics for a particular good or service, and
hence standardization of products increase productivity.
 Competitiveness, Strategy and Productivity | M A Hoque

 Use of Internet – It helps to synchronize the production flow of producing non-defective

products by better communication through internet.
 Computer viruses – Nowadays, computer plays a vital role in a production process and
computers viruses interrupt a production process.
 Searching for lost or misplaced items – It means waste of time of the concerned employees of
a production process and hence it lead to decreased productivity.
 Scrap rates – If rate of defective products (which cannot be repaired) is higher, then
productivity decreases.
 New workers – New workers are unskilled and hence their works generally lead to defective
products and hence productivity decreases.
 Safety – Without maintaining safety, a production process may fall down and leads
unimaginable lesser productivity level.
 Shortage of IT workers – Nowadays, a production process is dependent on technology and IT
workers help in technological management. Therefore, shortage of IT workers may lead to
disruption of a production process and hence reduces productivity.
 Layoffs – It means dismissal of workers. So, sudden layoffs of skilled workers may lead to
lesser productivity.
 Labor turnover - Labor turnover, also known as staffing turnover, refers to the ratio of a
number of employees who leave a company through attrition (the process of reducing something's
strength or effectiveness through sustained attack or pressure), dismissal or resignation in a period.
So, labor turnover definitely reduces productivity.
 Design of the workspace – It means planning of the workforce in a production process.
Sometimes, productivity of a process decreases for lack of proper design in the production
process.
 Incentive plans that reward productivity – Incentive plans motivate the workforce for a
dedicated and committed work, and hence it increases productivity.

Productivity Improvement
 Develop productivity measures – evaluation of a productivity is a crucial requirement.
 Determine critical (bottleneck) operations – Bottleneck means main obstacle. So,
identification of a bottleneck operations in a production process and its remedy leads to
increased productivity.
 Develop methods for productivity improvements – Requirement for use of innovative
methods for productivity improvement. This could be achieved by following continuous
improvement procedure.
 Establish reasonable goals – Always a reasonable goal should be established so that it can be
achieved.
 Get management support – Management support is very much necessary in reaching a goal.
So, operations manager needs to convince the higher management for full support for
improving productivity.
 Measure and publicize improvements – Evaluation and publicizing the productivity
improvement helps for further productivity improvement.
 Don’t confuse productivity with efficiency - Efficiency in production most often relates to the
cost per unit of production rather than just the non-defective number of units produced per
unit of inputs used in a period. Thus using of efficiency in place of productivity may confuse
productivity improvement process.
Competitiveness, Strategy and Productivity | M A Hoque