The document discusses different measures of productivity including partial, multi-factor, and total measures. It provides examples of calculating labor productivity and multi-factor productivity. Key factors that can affect productivity are also identified such as capital quality, technology, and management. Different strategies for improving productivity and competitiveness are outlined including developing appropriate measures, determining critical operations, and establishing goals. The relationship between mission, strategy, and tactics is explained.

1. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-1
Chapter 2
Productivity,
Competitiveness,
and Strategy

2. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-2
Productivity
• Partial measures
– output/(single input)
• Multi-factor measures
– output/(multiple inputs)
• Total measure
– output/(total inputs)
Productivity =
Outputs
Inputs

3. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-3
Measures of Productivity
Table 2-1
Partial Output Output Output Output
measures Labor Machine Capital Energy
Multifactor Output Output
measures Labor + Machine Labor + Capital + Energy
Total Goods or Services Produced
measure All inputs used to produce them

4. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-4
Example
10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
What is the
labor productivity?

5. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-5
•10,000 units/500hrs = 20 units/hour
or we can arrive at a unitless figure
•(10,000 unit* $10/unit)/(500hrs* $9/hr) =
22.22
Can you think of any advantages or
disadvantages of each approach?
Example--Labor Productivity

6. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-6
Example--Multifactor Productivity
MFP = Output
Labor + Materials
MFP = (10,000 units)*($10)
(500)*($9) + ($5000) + ($25000)
MFP = 2.90

7. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-7
Factors Affecting Productivity
Capital Quality
Technology Management

8. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-8
Improving Productivity
• Develop productivity measures
• Determine critical operations
• Develop methods for productivity
improvements
• Establish reasonable goals
• Get management support
• Measure and publicize improvements
• Don’t confuse productivity with
efficiency

9. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-9
Bottleneck Operation
Operation
Bottleneck
Operation
Operation
Operation
Operation
Figure 2-2

10. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-10
Competitiveness
Quality
Price
Time

11. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-11
Mission/Strategy/Tactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?
Strategy Tactics
Mission

12. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-12
Strategy
• Mission
– The reason for existence for an
organization
• Mission Statement
– A clear statement of purpose
• Strategy
– A plan for achieving organizational
goals
• Tactics
– The actions taken to accomplish
strategies

13. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-13
Strategy Example
Rita is a high school student. She would like to
have a career in business, have a good job, and
earn enough income to live comfortably
Mission: Live a good life
•Goal: Successful career, good income
•Strategy: Obtain a college education
•Tactics: Select a college and a major
•Operations: Register, buy books, take
courses, study, graduate, get job
Example 3

14. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-14
Planning and Decision Making
Mission
Goals
Organizational strategy
Functional strategies
Finance Marketing Operations
Tactics Tactics Tactics
Finance
operations
Marketing
operations
Operations
operations
Figure 2-3

15. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-15
Strategy Formulation
• Distinctive Competencies
– The special attributes or abilities that
give an organization a competitive
edge.
• Environmental Scanning
– The considering of events and trends
that present threats or opportunities
for a company.

16. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-16
New Strategies
• Quality-based
strategies
– Focuses on quality in all
phases of an organization
– Quality at the source
• Time-based strategies
– Focuses on reduction of
time needed to
accomplish tasks

17. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-17
Time-based Strategies
JAN FEB MAR APR MAY JUN
Planning
Processing
Changeover On time!
Designing
Delivery

18. CHAPTER TWO
Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 1999
PRODUCTIVITY, COMPETITIVENESS, AND STRATEGY
2-18
Production
• Craft Production - Highly skilled workers
use simple flexible tools to produce small
quantities of customized goods.
• Mass Production - Lower-skilled workers
use specialized machinery high volumes
of standardized goods.
• Lean Production - Uses minimal amounts
of resources high volume of high-quality
goods.