CHAPTER 2 OPERATIONS STRATEGY AND COMPETITIVENESS

Review and Discussion Questions

1. Can a factory be fast, dependable, flexible, produce high-quality products, and still provide poor service from a customers perspective? Yes, if a customers needs are not considered and does not influence strategy development, an organi ation could be delivering the !rong service or product. "ven though the product or service is delivered fast, dependable, and flexible in design and features and is of high technical quality, overall service could be rated #poor$ by a customer !ho demands a different mix of features and attributes. %t is often best not to be fastest to the mar&et, but to be the best firm in the mar&et as 'udged by the ultimate customer. (. )hy should a service organi ation !orry about being !orld class if it does not compete outside its o!n national border? )hat impact does the %nternet have on this? *s the environment changes, firms can find themselves faced !ith competition from outside their industry or from outside their home country. "ven if they do not, the principles of a !orld class firm can be applied to any and all manufacturing and service concerns. +enchmar&ing or rating your firms performance to the best in your industry or class can provide future strategic directions for improvements. ,he %nternet is global by its very nature. -etail stores must no! compete !ith %nternet stores. .ocal auction houses !ill be in competition !ith %nternet auction sites such as e+ay. /irtually all organi ations !ill be impacted in some form by the %nternet. %t is important that this impact be considered. 0. )hat are the ma'or priorities associated !ith operations strategy? 1o! has their relationship to each other changed over the years? ,he four ma'or imperatives are cost, quality, delivery, and flexibility. %n the sixties, these four imperatives !ere vie!ed from a tradeoffs perspective. 2or example, this meant that improving quality !ould result in higher cost. 1o!ever, more recent thought posits that these four imperatives can improve simultaneously, and in many industries may be necessary for success. ,he problem then becomes one of prioriti ing and managing to!ards orderly improvement.

Chapter (

4. 2or each of the different priorities in question 0, describe the unique characteristics of the mar&et niche !ith !hich it is most compatible. Cost is most compatible !ith products that are commodities 5i.e., highly standardi ed products !ith many alternative suppliers6. 7uality provides companies a means of 516 differentiating a product and !inning orders or 5(6 competing in a mar&et and qualifying for orders. 7uality is no! pervasive among all mar&et niches in that customers no! expect high quality. 8peed and reliability of delivery are essential in those mar&ets !here there is a large degree of customi ation. %n addition, reliable delivery may be a competitive advantage in some regions of the !orld !here delivery is difficult due to geographical or political reasons. 2lexibility is important !here customers demand lo! volume but !ide varieties of products. 3. * fe! years ago the dollar sho!ed relative !ea&ness !ith respect to foreign currencies, such as the yen, mar&, and pound. ,his stimulated exports. )hy !ould long-term reliance on a lo!er valued dollar be at best a short-term solution to the competitiveness problem? ,his approach is dependent on economic policies of other nations. ,his is a fragile dependency. * long-term approach is to increase manufacturing and service industry productivity in order to regain competitive advantage. *t a national level, solutions appear to lie in reversing attitudes and strategies identified in the 9%, Commission -eport. *t a firm level, competitive !eapons are consistent quality, high performance, dependable delivery, competitive pricing, and design flexibility. :. %n your opinion, do business schools have competitive priorities? ,heir competitive priorities include; 7uality of professors and curriculum<consistent quality and high performance .eader in development of ne! curriculum topics<design changes *cademic level of student attracted<consistent quality 7uantity and quality of research published<consistent quality 7uality of library resources<quality )hat companies recruit at the school<after sales service 8uccess rate of graduates<consistent quality *vailability of financial aid<lo! price and after sales service Cost of tuition<lo! price

=perations 8trategy and Competitiveness

>. )hy does the #proper$ operations strategy &eep changing for companies that are !orld-class competitors? ,he top three priorities have generally remained the same over time; ma&e it good, ma&e it fast, and deliver it on time. =thers have changed. ?art of this may be explained by reali ing that !orld class organi ations have achieved excellence in these three areas and are, therefore, focusing attention on some of the more minor areas to gain competitive advantage. ,he changes in the minor priorities may result from recogni ing opportunities or from changes in customer desires or expectations. @. )hat is meant by the expressions order !inners and order qualifiers? )hat !as the order !inner5s6 for your last purchase of a product or service? =rder !inners are dimensions that differentiate the product or service or services of one firm from another. =rder qualifiers are dimensions that are used to screen a product or service as a candidate for purchase. =bviously, ans!ers !ill vary for the order !inners from your last purchase. A. )hat do !e mean !hen !e say productivity is a #relative$ measure? 2or productivity to be meaningful, it must be compared !ith something else. ,he comparisons can be either intracompany or intercompany as in the case of benchmar&ing. %ntercompany comparisons of single factor productivity measures can be some!hat tenuous due to differences in accounting practices 5especially !hen comparing !ith foreign competitors6. ,otal factor productivity measures are some!hat more robust for comparison purposes. 1B. )hat are the typical performance measures for quality, speed of delivery, and flexibility? ,he typical performance measure for quality is percent defective or yield rate. =ther quality indicators include environmental measures of toxic !aste produced, scrap, re!or&, and !aste. 8crap is categori ed as engineered or nonengineered scrap. 8peed of delivery is measured by length and variability in product lead time. 2lexibility is measured by the number of products sold, and the time required to get a ne! product to mar&et. 11. )hat should be the criteria for management to adopt a particular performance measure? ,he choice of performance measure5s6 must be rooted in a deep understanding of the firms distinctive competencies, the mar&et, the competition, and the firms desired future competitive position. ,he choice of performance measures should be consistent !ith the desired future position of the firm. %n addition, total factor productivity measures potentially provide a more compete picture of the firms competitiveness.

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Chapter (

P o!"e#s
?roblem ,otal ?roductivity 9easure 1 ( 0 4 3 : > 1. ,ype of ?roblem 9ultifactor ?artial ?roductivity ?roductivity 9easure 9easure Yes Yes Yes Yes Yes Yes Yes Yes Cifficulty De! ?roblem 9odified ?roblem Chec& 2igure in *ppendix * Yes

Yes

9oderate 9oderate 9oderate "asy "asy "asy "asy

.abor ?roductivity E unitsFhour 9odel Celuxe Car .imited Car =utput in Gnits 4,BBB :,BBB %nput in .abor 1ours (B,BBB 0B,BBB ?roductivity 5=utputF%nput6 B.(B B.(B

.abor ?roductivity E dollars 9odel Celuxe Car .imited Car =utput in Collars 4,BBB5H@,BBB6I H0(,BBB,BBB :,BBB5HA,3BB6I H3>,BBB,BBB %nput in Collars (B,BBB5H1(.BB6I H(4B,BBB 0B,BBB5H14.BB6I H4(B,BBB ?roductivity 5=utputF%nput6 100.00 103.>1

,he labor productivity measure is a conventional measure of productivity. 1o!ever, as a partial measure, it may not provide all of the necessary information that is needed. 2or example, increases in productivity could result from decreases in quality, andFor increases in material cost.

=perations 8trategy and Competitiveness (. .abor ?roductivity Country G.8. .CC =utput in Gnits 1BB,BBB (B,BBB %nput in 1ours (B,BBB 13,BBB ?roductivity 5=utputF%nput6 3.BB 1.00

Capital "quipment ?roductivity Country G.8. .CC =utput in Gnits 1BB,BBB (B,BBB %nput in 1ours :B,BBB 3,BBB ?roductivity 5=utputF%nput6 1.:> 4.BB

Yes. You !ould expect the capital equipment productivity measure to be higher in the G.8. than in a .CC. b. 9ultifactor E .abor and Capital "quipment Country G.8. .CC =utput in Gnits 1BB,BBB (B,BBB %nput in 1ours (B,BBB J :B,BBBI @B,BBB 13,BBB J 3,BBBI (B,BBB ?roductivity 5=utputF%nput6 1.(3 1.BB

Yes, labor and equipment can be substituted for each other. ,herefore, this multifactor measure is a better indicator of productivity in this instance. c. -a! 9aterial ?roductivity Country G.8. .CC =utput in Gnits 1BB,BBB (B,BBB %nput in Collars H(B,BBB 2C H(B,BBBF1BI H(,BBB ?roductivity 5=utputF%nput6 3.BB 1B.BB

,he ra! material productivity measures might be greater in the .CC due to a reduced cost paid for ra! materials, !hich is typical of .CCs.

Chapter ( 0. ,otal ?roductivity Year (BB( =utput in Collars H(BB,BBB %nput in Collars H0B,BBB J 03,BBB J 3,BBB J 3B,BBB J (,BBB I H1((,BBB H4B,BBB J 43,BBB J :,BBB J 3B,BBB J0,BBB I H144,BBB ?roductivity 5=utputF%nput6 1.:4

(BB0

H((B,BBB

1.30

?artial 9easure E .abor Year (BB( (BB0 =utput in Collars H(BB,BBB H((B,BBB %nput in Collars H0B,BBB H4B,BBB ?roductivity 5=utputF%nput6 :.:> 3.3B

?artial 9easure E -a! 9aterials Year (BB( (BB0 =utput in Collars H(BB,BBB H((B,BBB %nput in Collars H03,BBB H43,BBB ?roductivity 5=utputF%nput6 3.>1 4.@A

?artial 9easure E Capital Year (BB( (BB0 =utput in Collars H(BB,BBB H((B,BBB %nput in Collars H3B,BBB H3B,BBB ?roductivity 5=utputF%nput6 4.BB 4.4B

,he overall productivity measure is declining, !hich indicates a possible problem. ,he partial measures can be used to indicate cause of the declining productivity. %n this case, it is a combination of declines in both labor and ra! material productivity, but an increase in the capital productivity. 2urther investigation should be underta&ing to explain the drops in both labor and ra! material productivity. *n increase in the cost of both of these measures, !ithout an accompanying increase in the selling price might explain these measures.

1B

=perations 8trategy and Competitiveness 4. Contract Davy *rmy =utput in Gnits (0BB 33BB %nput in 1ours (35(64B I (BBB 035064B I 4(BB ?roductivity 5=utputF%nput6 1.13 1.01

,he !or&ers !ere most productive on the *rmy contract. 3. 9onth *pril 9ay =utput in Collars H43,BBB H3:,BBB %nput in 1ours 13:B 1@(B ?roductivity 5=utputF%nput6 (@.@3 0B.>> ?ercentage Change

50B.>>-(@.@36F(@.@3 I :.:>K

:. Year (BB4 (BB3 =utput in ?ac&ages 1B0,BBB 11(,BBB %nput in Crivers @4 A: ?roductivity 5=utputF%nput6 1((:.( 11::.> ?ercentage Change

511::.> -1((:.(6F1((:.( I - 4.@3K

>. ?art >BB 1amburgers ABB Cheeseburgers 51.(36 3BB Chic&en 8and!iches 5.@B6 >BB 1amburgers >BB Cheeseburgers 51.(36 >BB Chic&en 8and!iches 5.@B6 =utput in 1amburger "quivalents (((3 (103 %nput in 1ours (BB (BB ?roductivity 5=utputF%nput6 11.1(3 1B.:>3

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