Chapter 02 - Competitiveness, Strategy, and Productivity
CHAPTER 02
COMPETITIVENESS, STRATEGY, AND PRODUCTIVITY
Teaching Notes
The topics covered in this chapter can be used to help get your course in OM off to an interesting start.
Most of your students are aware that U.S. firms are having a difficult time competing with foreign firms
in both the domestic and international markets. Many of them have grown up using products produced by
foreign firms on an everyday basis and they have developed a great deal of respect for the quality of their
products. Students are probably as familiar with names like Minolta, Honda, Toyota, Sony, BP Oil, Nestlé
& BIC as they are with Ford, GM, GE, IBM, Texaco, Hershey, and Parker.
I think students will relate to the fact that companies must be productive to be competitive and that to be
competitive they must have some well thought out approach, plan, or strategy on how to achieve this
position. In other words, students will be able to understand why it is important to learn what productivity
really is, how we measure it, what factors affect it, and how firms can improve their productivity.
Students will become aware that business firms compete with each other in a variety of ways and will
study the key competitive factors, which are of primary concern in today’s global business environment.
Finally, the students will focus on operations strategy with special attention being given to some of the
newer strategies based on quality, time, and lean production systems.
Reading: Why Productivity Matters
1. Higher productivity relative to competitors is very important for a nation because it provides the
nation with a competitive advantage in the marketplace. Productivity increases add value to the
economy while controlling inflation. In addition, higher productivity provides the basis for a
sustainable long-term growth in the economy. It allows companies to undercut competitors’
prices to improve their market share or to realize higher profit margin at the same price level.
Relative higher productivity also makes it more difficult for foreign companies to compete.
2. In general, service jobs have lower productivity than their manufacturing counterparts do because
service productivity is very difficult to measure and, consequently, difficult to improve. In many
cases, service jobs include intellectual activities and a high degree of variability, which makes
productivity improvements difficult to achieve. Manufacturing jobs, on the other hand, lend
themselves to productivity improvements mainly because they are able to utilize computer-based
technology such as robotics to increase worker productivity.
3. Higher productivity allows companies to undercut competitors’ prices to improve their market
share, or to realize higher profit margin at the same price level. Relative higher productivity also
makes it more difficult for foreign companies to enter a new market because it is difficult for
them to compete against companies that have relatively higher productivity.
Reading: Dutch Tomato Growers Productivity Advantage
1. The factors that enable Dutch tomato growers to achieve much higher productivity than Italian
and Greek growers include the following:
Computerized, climate controlled greenhouses and soil spun from basalt and chalk that allow for
precise control of humidity and nutrition and enable growers to produce their crops year round.
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, Chapter 02 - Competitiveness, Strategy, and Productivity
2. The Dutch growers’ supply chain is an important factor because a Dutch trading company works
closely with supermarket chains in Europe so that farmers are able to sell their output in high
volume, which enables Dutch farmers to match supply and demand closely.
Answers to Discussion and Review Questions
1. They would be helpful in the sense that they would give U.S. manufacturers time to step up the
use of industrial robots and other measures, which would make them better able to compete in
domestic and world markets. The higher profits possible from reduced competition or higher
prices on foreign cars could be used for research and development costs. Possible pitfalls include
higher prices and less choice, which U.S. consumers would have to endure, and the possibility
that U.S. companies would not use this as an opportunity to improve, but merely as a crutch.
From the Japanese standpoint, they would be penalized for doing what many would see as a good
job.
2. Business organizations compete with one another in a variety of ways. Key among these ways are
price, quality, product differentiation, flexibility, and delivery time.
3. Characteristics such as price, quality, delivery speed, delivery reliability all can be order
qualifiers or order winners. It is important to determine the set of order qualifier and order winner
characteristics so that companies can emphasize or de-emphasize a given characteristic based on
its classification of importance. Marketing must play a major role in determining order qualifiers
and order winners. In classifying order winners and order qualifiers, marketing and operations
must work together to match the market needs with the operational capability of the firm.
4. One store that many of us shop at is Wal-Mart. In the last decade, Wal-Mart has been growing
steadily and gaining market share. There are numerous reasons why Wal-Mart has been
successful in a very competitive market. Wal-Mart’s ability to provide a very wide variety of
goods with reasonable prices gives the company a competitive edge. Another reason involves the
firm’s ability to integrate various aspects of its operations with suppliers. In other words,
successful supply chain management provides Wal-Mart with another competitive advantage.
Many of us travel around the country and the world and stay at various hotels/motels. One of the
hotel chains that has been successful is Super 8. The company is able to compete successfully
because it is able to offer a safe, clean overnight stay at very reasonable prices in small markets.
The specific tactics followed by the company are consistent with the basic niche that the company
has carved out for itself.
5. The B alanced Scorecard is a top-down management system that helps managers focus attention
on strategic issues related to finance, internal processes, customers, and learning and growth.
6. Strategy is the basic approach used by an organization to achieve its goal. Tactics are the methods
and actions that are taken to accomplish strategies and carry out operations.
7. Organization strategy provides the overall direction for the organization and is broad in scope,
e.g., low cost, scale-based strategies, specialization, newness, flexible operations, high quality,
service, or sustainability. Operations strategy is narrower in scope, dealing primarily with the
operations aspect of the organization. Operations strategy must be consistent with organization
strategy and deals with products, processes, methods, operating resources, quality, costs, lead
times, and scheduling.
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CHAPTER 02
COMPETITIVENESS, STRATEGY, AND PRODUCTIVITY
Teaching Notes
The topics covered in this chapter can be used to help get your course in OM off to an interesting start.
Most of your students are aware that U.S. firms are having a difficult time competing with foreign firms
in both the domestic and international markets. Many of them have grown up using products produced by
foreign firms on an everyday basis and they have developed a great deal of respect for the quality of their
products. Students are probably as familiar with names like Minolta, Honda, Toyota, Sony, BP Oil, Nestlé
& BIC as they are with Ford, GM, GE, IBM, Texaco, Hershey, and Parker.
I think students will relate to the fact that companies must be productive to be competitive and that to be
competitive they must have some well thought out approach, plan, or strategy on how to achieve this
position. In other words, students will be able to understand why it is important to learn what productivity
really is, how we measure it, what factors affect it, and how firms can improve their productivity.
Students will become aware that business firms compete with each other in a variety of ways and will
study the key competitive factors, which are of primary concern in today’s global business environment.
Finally, the students will focus on operations strategy with special attention being given to some of the
newer strategies based on quality, time, and lean production systems.
Reading: Why Productivity Matters
1. Higher productivity relative to competitors is very important for a nation because it provides the
nation with a competitive advantage in the marketplace. Productivity increases add value to the
economy while controlling inflation. In addition, higher productivity provides the basis for a
sustainable long-term growth in the economy. It allows companies to undercut competitors’
prices to improve their market share or to realize higher profit margin at the same price level.
Relative higher productivity also makes it more difficult for foreign companies to compete.
2. In general, service jobs have lower productivity than their manufacturing counterparts do because
service productivity is very difficult to measure and, consequently, difficult to improve. In many
cases, service jobs include intellectual activities and a high degree of variability, which makes
productivity improvements difficult to achieve. Manufacturing jobs, on the other hand, lend
themselves to productivity improvements mainly because they are able to utilize computer-based
technology such as robotics to increase worker productivity.
3. Higher productivity allows companies to undercut competitors’ prices to improve their market
share, or to realize higher profit margin at the same price level. Relative higher productivity also
makes it more difficult for foreign companies to enter a new market because it is difficult for
them to compete against companies that have relatively higher productivity.
Reading: Dutch Tomato Growers Productivity Advantage
1. The factors that enable Dutch tomato growers to achieve much higher productivity than Italian
and Greek growers include the following:
Computerized, climate controlled greenhouses and soil spun from basalt and chalk that allow for
precise control of humidity and nutrition and enable growers to produce their crops year round.
2-1
, Chapter 02 - Competitiveness, Strategy, and Productivity
2. The Dutch growers’ supply chain is an important factor because a Dutch trading company works
closely with supermarket chains in Europe so that farmers are able to sell their output in high
volume, which enables Dutch farmers to match supply and demand closely.
Answers to Discussion and Review Questions
1. They would be helpful in the sense that they would give U.S. manufacturers time to step up the
use of industrial robots and other measures, which would make them better able to compete in
domestic and world markets. The higher profits possible from reduced competition or higher
prices on foreign cars could be used for research and development costs. Possible pitfalls include
higher prices and less choice, which U.S. consumers would have to endure, and the possibility
that U.S. companies would not use this as an opportunity to improve, but merely as a crutch.
From the Japanese standpoint, they would be penalized for doing what many would see as a good
job.
2. Business organizations compete with one another in a variety of ways. Key among these ways are
price, quality, product differentiation, flexibility, and delivery time.
3. Characteristics such as price, quality, delivery speed, delivery reliability all can be order
qualifiers or order winners. It is important to determine the set of order qualifier and order winner
characteristics so that companies can emphasize or de-emphasize a given characteristic based on
its classification of importance. Marketing must play a major role in determining order qualifiers
and order winners. In classifying order winners and order qualifiers, marketing and operations
must work together to match the market needs with the operational capability of the firm.
4. One store that many of us shop at is Wal-Mart. In the last decade, Wal-Mart has been growing
steadily and gaining market share. There are numerous reasons why Wal-Mart has been
successful in a very competitive market. Wal-Mart’s ability to provide a very wide variety of
goods with reasonable prices gives the company a competitive edge. Another reason involves the
firm’s ability to integrate various aspects of its operations with suppliers. In other words,
successful supply chain management provides Wal-Mart with another competitive advantage.
Many of us travel around the country and the world and stay at various hotels/motels. One of the
hotel chains that has been successful is Super 8. The company is able to compete successfully
because it is able to offer a safe, clean overnight stay at very reasonable prices in small markets.
The specific tactics followed by the company are consistent with the basic niche that the company
has carved out for itself.
5. The B alanced Scorecard is a top-down management system that helps managers focus attention
on strategic issues related to finance, internal processes, customers, and learning and growth.
6. Strategy is the basic approach used by an organization to achieve its goal. Tactics are the methods
and actions that are taken to accomplish strategies and carry out operations.
7. Organization strategy provides the overall direction for the organization and is broad in scope,
e.g., low cost, scale-based strategies, specialization, newness, flexible operations, high quality,
service, or sustainability. Operations strategy is narrower in scope, dealing primarily with the
operations aspect of the organization. Operations strategy must be consistent with organization
strategy and deals with products, processes, methods, operating resources, quality, costs, lead
times, and scheduling.
2-2
