Competitiveness,

Strategy, and
Productivity

2-1
Better quality, higher productivity, lower costs, and the
ability to respond quickly to customer needs are more
important than ever, and…
the bar is getting higher

LO 2.1 2-2
 This module focuses on three separate, but related
ideas that are vitally important to business
organizations
 Competitiveness
 Strategy
 Productivity

LO 2.1 2-3
 Competitiveness:
 How effectively an organization meets the wants and
needs of customers relative to others that offer similar
goods or services
 Organizations compete through some combination of
their marketing and operations functions
• What do customers want?
• How can these customer needs best be satisfied?

LO 2.1 2-4
 Identifying consumer wants and/or needs
 Pricing and quality
 Advertising and promotion

LO 2.1 2-5
ISO 9001:2015 Clause 4: Context of the Organization
4.2 Understanding the needs and expectations of
interested parties

The organization SHALL:

1. Determine the:
a. Interested parties that are
relevant to the QMS
b. Requirements of these
interested parties that are
relevant to the QMS
2. Monitor and review
information on these interested
parties and their requirements 2-6
ISO 9001:2015 Clause 4: Context of the Organization
4.2 Understanding the needs and expectations of
interested parties

STAKEHOLDER
• Interested party refers - A person or an
to stakeholders* organization
• Relevant interested that can affect,
parties provide significant be affected by,
or perceive
risk to organizational
itself to be
sustainability if their affected by a
needs and expectations decision or
are not met. activity.

2-7
ISO 9001:2015 Clause 4: Context of the Organization
4.2 Understanding the needs and expectations of
interested parties

Identify, monitor
BUSINESS
and review
PROCESS MODEL
information on
relevant
interested parties RIPs MATRIX
and relevant their
requirements
2-8
 CUSTOMERS
Citizens The Organization Competitors
Customers Media
Top Management Commentato
Shareholders
rs
Distributors Those accountable for policy
Trade Groups
and its implementation
Investors Neighbors
Owners Those who implement and Pressure
maintain the system Groups
Insurers Emergency
Those who maintain the Services

Government system and risk procedures Other Response

Agencies

Regulators Transport
Other Contractor
Recovery staff s
Service Dependents of
Suppliers Staff

2-9
SAMPLE NEEDS & EXPECTATIONS OF CUSTOMERS

Process/ Service Interested Parties Needs and Expectations

Feeding Program Undernourished Children Nutritional food

Livelihood Program Unemployed laborers Secured & sustainable job/

livelihood
Processing of Permits Tricycle operators & drivers Timely release of MTOP
permits
Recruitment & Applicants Fair selection of personnel
Selection of Personnel
Requesting Unit Qualified personnel
Timely selection of personnel
Conduct of internal Municipal Mayor/ SB Accurate audit report
audit

2-10
1. Product and service design
2. Cost
3. Location
4. Quality
5. Quick response
6. Flexibility
7. Inventory management
8. Supply chain management
9. Service
10. Managers and workers

LO 2.1 2-11
1. Neglecting operations strategy
2. Failing to take advantage of strengths and opportunities
and/or failing to recognize competitive threats
3. Too much emphasis on short-term financial performance
at the expense of R&D
4. Too much emphasis in 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
7. Failing to consider customer wants and needs

LO 2.2 2-12
 Mission

Goals

Organizational strategies

Functional strategies

Tactics
LO 2.3 2-13
 Mission
 The reason for an organization’s existence
 It answers the question “What business are we in?”
 Goals
 Provide detail and the scope of the mission
 Goals can be viewed as organizational destinations
 Strategy
 A plan for achieving organizational goals
 Serves as a roadmap for reaching the organizational destinations
 The organizational strategy guides the organization by providing
direction for, and alignment of, the goals and strategies of the
functional units
 The organizational strategy is a major success/failure factor

LO 2.3 2-14
 Mission
 The reason for an organization’s existence
 Mission statement
 States the purpose of the organization
 The mission statement should answer the question of
“What business are we in?”

LO 2.3 2-15
 FedEx Corporation will produce superior financial returns for its
shareowners by providing high value-added logistics, transportation
and related information services through focused operating
companies. Customer requirements will be met in the highest quality
manner appropriate to each market segment served. FedEx
Corporation will strive to develop mutually rewarding relationships
with its employees, partners and suppliers. Safety will be the first
consideration in all operations. Corporate activities will be conducted
to the highest ethical and professional standards.

LO 2.3 2-16
 The mission statement serves as the basis for
organizational goals
 Goals
 Provide detail and the scope of the mission
 Goals can be viewed as organizational destinations
 Goals serve as the basis for organizational strategies

LO 2.3 2-17
 Strategy
 A plan for achieving organizational goals
 Serves as a roadmap for reaching the organizational destinations
 Organizations have
 Organizational strategies
 Overall strategies that relate to the entire organization
 Support the achievement of organizational goals and mission
 Functional level strategies
 Strategies that relate to each of the functional areas and that support
achievement of the organizational strategy

LO 2.3 2-18
 Tactics
 The methods and actions taken to accomplish strategies
 The “how to” part of the process
 Operations
 The actual “doing” part of the process

LO 2.3 2-19
 Core competencies
The special attributes or abilities that give an
organization a competitive edge
 To be effective core competencies and strategies need to be
aligned

LO 2.3 2-20
 Organizational
Strategy Operations Strategy Examples of Companies or Services
Low Price Low cost U.S. first-class postage
Wal-Mart
Responsiveness Short processing times McDonald’s restaurants
On-time delivery FedEx
Differentiation: High performance design Sony TV
High Quality and/or high quality processing
Consistent quality Coca-Cola
Differentiation: Innovation 3M, Apple
Newness
Differentiation: Flexibility Burger King (Have it your way”)
Variety Volume McDonald’s (“Buses Welcome”)
Differentiation: Superior customer service Disneyland
Service IBM
Differentiation: Convenience Supermarkets; mall stores
Location

LO 2.4 2-21
 Effective strategy formulation requires taking into
account:
 Core competencies
 Environmental scanning
 SWOT
 Successful strategy formulation also requires taking
into account:
 Order qualifiers
 Order winners

LO 2.4 2-22
 Order qualifiers
 Characteristics that customers perceive as minimum
standards of acceptability for a product or service to be
considered as a potential for purchase
 Order winners
 Characteristics of an organization’s goods or services that
cause it to be perceived as better than the competition

LO 2.4 2-23
 Environmental scanning is necessary to identify
 Internal factors
 Strengths and weaknesses
 External factors
 Opportunities and threats

LO 2.4 2-24
ISO 9001:2015 Clause 4: Context of the Organization
4.1 Understanding the organization and its context

Organization and its Context

Organization’s context often

referred to by other terms such
as:
• Organizational environment
• Business environment
• Ecosystem of an
organization
…relative to its products,
services, investments, and
behavior towards its relevant
interested parties.
2-25
ISO 9001:2015 Clause 4: Context of the Organization
4.1 Understanding the organization and its context
▪ The organization SHALL determine
external and internal issues
relevant to the organization’s
purpose and strategic direction
affecting its ability to achieve the
QMS’ intended results

2-26
ISO 9001:2015 Clause 4: Context of the Organization
4.1 Understanding the organization and its context

Note Issues can include positive and negative factors or

1 conditions for consideration

Understanding the external context can be facilitated

Note by considering issues arising from legal, technological,
competitive, market, cultural, social and economic
2 environments, whether international, national, regional
or local

Understanding the internal context can be facilitated

Note
by considering issues related to values, culture,
3 knowledge and performance of the organization.
2-27
ISO 9001:2015 Clause 4: Context of the Organization
4.1 Understanding the organization and its context

SWOT ANALYSIS
The organization
SHALL monitor and PESTLE
review information ANALYSIS
on external and
internal issues ENVIRONMENTAL
through various SCANNING
tools and
techniques
2-28
Clause 4: Context of the Organization
4.1 Understanding the organization and its context

Sample Tools and Techniques

2-29
SAMPLE OF SWOT ANALYSIS
STRENGTHS WEAKNESSES
Advantages • Gaps in capabilities
• Accreditations Financials
• Qualifications • Cash flow, start-up cash drain
• Certifications • High cost structure
INTERNAL

• Location and geography Our vulnerabilities

• Innovative aspects • Timescales, deadlines and,
Resources, Assets, People pressures
• Processes, systems, IT, • Reliability of data
communications • Plan predictability
• Culture, attitudes, behaviours Processes and systems
• Experience, knowledge, data • Succession, morale, commitment,
• Patents leadership
OPPORTUNITIES THREATS

• Seasonal, weather effects

•
EXTERNAL

Partnerships
• Political effects
• Unfulfilled customer needs
• Legislative effects
• New technologies
• New technologies, IT developments
• Loosening of regulations
• Changing customer needs
• Industry
• New regulations

2-30
 Operations strategy
 The approach, consistent with organization strategy,
that is used to guide the operations function

LO 2.4 2-31
 Decision Area What the Decisions Affect
Product and service design Costs, quality, liability, and environmental issues
Capacity Cost, structure, flexibility
Process selection and Costs, flexibility, skill level needed, capacity
layout
Work design Quality of work life, employee safety, productivity
Location Costs, visibility
Quality Ability to meet or exceed customer expectations
Inventory Costs, shortages
Maintenance Costs, equipment reliability, productivity
Scheduling Flexibility, efficiency
Supply chains Costs, quality, agility, shortages, vendor relations
Projects Costs, new products, services, or operating systems

LO 2.4 2-32
 Quality-based strategy
 Strategy that focuses on quality in all phases of an
organization
 Pursuit of such a strategy is rooted in a number of factors:
 Trying to overcome a poor quality reputation
 Desire to maintain a quality image
 A desire to catch up with the competition
 A part of a cost reduction strategy

2-33
 Time-based strategies
 Strategies that focus on the reduction of time needed to
accomplish tasks
 It is believed that by reducing time, costs are lower, quality is
higher, productivity is higher, time-to-market is faster, and
customer service is improved

LO 2.5 2-34
 Areas where organizations have achieved time
reductions:
 Planning time
 Product/service design time
 Processing time
 Changeover time
 Delivery time
 Response time for complaints

LO 2.5 2-35
 Agile operations
 A strategic approach for competitive advantage that
emphasizes the use of flexibility to adapt and prosper in
an environment of change
 Involves the blending of several core competencies:
 Cost
 Quality
 Reliability
 Flexibility

2-36
 A top-down management system that organizations can use to
clarify their vision and strategy and transform them into action
 Develop objectives
 Develop metrics and targets for each objective
 Develop initiatives to achieve objectives
 Identify links among the various perspectives
 Finance
 Customer
 Internal business processes
 Learning and growth
 Monitor results

2-37
2-38
 ISO 9001:2015 PLANNING FRAMEWORK

MISSION-VISION
INTERNAL AND EXTERNAL ISSUES, NEEDS

PARTIES, AND RISKS & OPPORTUNITIES

AND EXPECTATIONS OF INTERESTED

QUALITY POLICY

QUALITY OBJECTIVES

KEY RESULT AREAS

KEY PERFORMANCE INDICATORS

PERFORMANCE TARGETS

RISK & OPPORTUNITY MANAGEMENT PLAN

STRATEGIC PLAN OPERATIONAL PLAN

2-39
Clause 6: Planning
6.1 Actions to address risks and opportunities

6.1.2 The organization SHALL plan:

• Actions to address these risks and
opportunities, and
• How to integrate and implement the actions
into QMS processes and to evaluate the
effectiveness of these actions.

Actions taken to address risks and opportunities shall be

proportionate to the potential impact on the conformity of
products and services
2-40
 ISO 9001:2015 PLANNING FRAMEWORK
INTERNAL AND EXTERNAL ISSUES, NEEDS AND
EXPECTATIONS OF INTERESTED PARTIES, AND

MISSION-VISION

QUALITY POLICY
RISKS & OPPORTUNITIES

QUALITY OBJECTIVES

KEY RESULT AREAS

KEY PERFORMANCE INDICATORS

PERFORMANCE TARGETS

RISK & OPPORTUNITY ACTION PLAN

STRATEGIC PLAN OPERATIONAL PLAN

2-41
 What to do?
Clause 4: Context of the Organization

1. Identify the risks and opportunities in your

organization – depending on context: RIPs, Issues
2. Analyze and prioritize the risks and opportunities in
your organization – what is acceptable/
unacceptable?
3. Plan actions to address the risks – how can I avoid
or eliminate the risk?/mitigate the risk?
4. Implement the plan – take action
5. Check the effectiveness of the actions – does it
work?
6. Learn from experience – continual improvement
2-42
• Developing understanding of the
risk
• Way of expressing impacts and
likelihood
• Criteria for occurrence
(likelihood),
• Impact (severity), and
• Detection (availability of
prevention and detection
controls) should be set.
• Risk into a numerical value
(expression)
2-43
• Comparing levels of risk found in
analysis with previously
established criteria
• Consider risk tolerances of parties
• In accordance with legal,
regulatory and other
requirements.

2-44
Rating Criteria Definition
Rare
1
(extremely improbable) Not occurred in the last 5 years

2 Low Likely Occurred in the last 1 – 3 years

Moderately Like
3 Occurred at least once a year
(Possible)

4 Highly Likely Can occur within a quarter

Almost Certain Happens once or more times per month

5
(Near Certainty)

2-45
Rating Criteria Definition Service/Operations Financial Media Regulatory

Significant effect; cause cessation of operations/services, many High impact, widespread

5 Catastrophic loss of citizen's trust, shutdown Very high, >20M Warrants closure
customers are lost/lost of trust of the citizens; public/regulatory attention

Major effect; cause prolonged stoppage of operations/services, Key objectives not met,
Can cause CDO issuance if
4 Major many customer/citizen complaints; effect on cost is about more Significant irrecoverable High, >10M </= 20M High media visibility/coverage
corrections not addressed
than one year’s budget financial loss and citizen's trust

Significant effect; cause of stoppage of operations/services, Some objectives not achieved, Can cause publication of
Media attention requiring
3 Significant dissatisfies many customers/citizens; effect on cost is about one Financial loss and citizen's trust Medium, >5M</=10M notification by regulatory
response
year’s budget recoverable in 5 years agency

Some impacts easily remedied,

Moderate effect; cause short disruption of operations/services;
2 Minor Financial loss and citizen's trust Low, >1M</=5M Media attention minimal Findings can be resolved
dissatisfies a few customers/citizens
recoverable w/in the year
Impact not visible, No significant
Almost no effect on operations/costs or customer/citizen No significant regulatory
1 Insignificant financial loss and effect to Minimal, </= 1M No media Attention
satisfaction findings
citizen's trust

Costs indicated -
2-46
sample only
2-47
 RISK APPETITE GRID CHART "HEAT MAP" (MATRIX)
Almost Certain
5 5 10 15 20 25

LIKEHOOD (PROBABILITY)
(Near Certain)

Highly Likely 4 4 8 12 16 20
Moderately Likely
(POSSBLE)
3 3 6 9 12 15

Low Likely 2 2 4 6 8 10
Extremely
Improbable 1 1 2 3 4 5
(RARE)
1 2 3 4 5
INSIGNIFICANT MINOR MODERATE MAJOR CATASTROPHIC

SEVERITY

SIGNIFICANT (S) OR
Risk Classification Risk Rating NOT SIGNIFICANT (NS)
High Risk
Not acceptable, need to address immediately; given priority programs/treatments/controls
(recommended to be reduced by way of controls within 3 months, so they become yellow 12 - 25 S
or green)
(SIGNIFICANT)
Medium Risk
Important; programs/treatments/controls must be established and implemented to
address immediately 4 - 10
(recommended to be reviewed every 6 moths and their controls also reviewed for S
effectiveness) (SIGNIFICANT)
Low Risk
Monitor if changes in severity and probability occur to warrant action
(recommended to be reviewed annually to ensure that they have not moved above the risk 1-3 NS
acceptance threshold) (NOT SIGNIFICANT)

NOTE: RED & YELLOW – SIGNIFICANT (S)

GREEN – NOT SIGNIFICANT (NS) 2-48
Detection Controls
• Helps in uncovering and
detecting the risk after its
occurence), some example:

• Reviews of operating
performances;
• Reconciliations;
• Verifications;
• Reviews of processes
and activities
2-49
• Consider when selecting
one or more options for
modifying risks
• Balancing cost vs. benefits
• Compliance to regulations
• Social responsibility and
organizational values
• Accompanying risks of
treatments

• Select, create and implement

Risk Treatment Plans

2-50
• Options
• Treat
• Accept to pursue opportunity
• Changing likelihood
• Changing consequences
• Transfer
• Sharing risk with other
parties
• Terminate
• Avoidance
• Remove risk source
• Take no action
• Retain risk by informed
decision
• Provide mitigation action
2-51
Action Plan/ Preventive Controls
• helps in preventing the risk before its
occurrence), some examples:
• Authorization and approval
procedures;
• Supervision (assigning,
reviewing/approving, guidance,
training);
• Segregation of duties (authorizing,
processing, recording, reviewing);
• Controls over access to resources
and records
2-52
 Developing Risk & Opportunity Action Plan
Issues Risk Risk Analysis & Evaluation Risk Treatment & Monitoring Risk Review
Identification
Negative Issue Risk Likelihoo Severit Risk Mitigation Preventive Responsible Target Date Action s Likelihood Severity Risk
d y Priority Action Action Plan Person/ Unit of Taken & Priority
Number Plan/ Implement Implement Number
& Correction ation ation Date &
Classifica Classificat
tion ion

Non- Mistrust of 5 2 10 (M) Post Conduct Re- HR January Conduct 3 1 3 (L)

transparency in stakeholders succeeding Orientation on 2022 Re-
governance reports in Transparency Orientation
website Issues on
Transparen
cy Issues

Positive Issue Opportunity Action Plan Responsible Target Date

Identification Person/ Unit of
Implement
ation
Established Use of LMS in Offer online KM Dept April 2022
LMS Knowledge course on
Management Knowledge
Management

2-53
 ISO 9001:2015 PLANNING FRAMEWORK
INTERNAL AND EXTERNAL ISSUES, NEEDS AND
EXPECTATIONS OF INTERESTED PARTIES, AND

MISSION-VISION

QUALITY POLICY
RISKS & OPPORTUNITIES

QUALITY OBJECTIVES

KEY RESULT AREAS

KEY PERFORMANCE INDICATORS

PERFORMANCE TARGETS

RISK & OPPORTUNITY ACTION PLAN

STRATEGIC PLAN OPERATIONAL PLAN

2-54
Clause 6: Planning
6.2 Quality objectives and planning to achieve them

6.2.2 When planning how to achieve quality objectives

the organization SHALL determine:

What
What will be Who will be
resources will
done responsible
be required

How the results

When it will
will be
be completed
evaluated

2-55
 DEVELOPING STRATEGIC PLAN
STRATEGIC PLAN 2025
Department/Division: Human Resource Department
QUALITY OBJECTIVE: Consistent with the Quality Policy of ABC, the Human Resource Department aims to provide effective
personnel services and innovative systems in accordance with legal and international requirements toward the development
and satisfaction of our employees.
Process Needs & Key 2021 2025 Issue/ Risk Strategie Respons Resou Year of Monito
or service Expectati Performa Curre Target Negative s/ Action ible Unit/ rces Imple ring
ons of nce nt Measu Event Plans Person Neede mentat Revie
Intereste Indicator Meas re d ion w
d (KPI) ure Proces
Parties/ s
Key
Result
Area
(KRA)
Recruitme Effective Percenta 75% 95% Limited Ineffectiv Utilize HR Digital 2023 Annual
nt of Recruitm ge of Job e Online Job Perfor
Personnel ent Filled-up Search Recruitm Job Ads mance
Positions ent Search /
e.g. Manag
Jobstreet ement
etc. Revie
w

Hiring 90 30 Develop HR Syste 2025

Time days days HRIS m
progra
m
2-56
 Productivity
 A measure of the effective use of resources, usually
expressed as the ratio of output to input
 Productivity measures are useful for
 Tracking an operating unit’s performance over time
 Judging the performance of an entire industry or
country

LO 2.6 2-57
 inputs outputs
transformations Customers
Land Goods
people SYSTEM and
capital services
facilities
equipment
tools O
energy I
materials
information productivity
2-58
 High productivity is linked to higher standards of living
 As an economy replaces manufacturing jobs with lower productivity
service jobs, it is more difficult to maintain high standards of living
 Higher productivity relative to the competition leads to
competitive advantage in the marketplace
 Pricing and profit effects
 For an industry, high relative productivity makes it less
likely it will be supplanted by foreign industry

LO 2.6 2-59
 Output
Productivity =
Input

Output Ouput Output

Partial Measures ; ;
Single Input Labor Capital
Output Ouput Output
Multifactor Measures ; ;
Multiple Inputs Labor +Machine Labor +Capital +Energy

Goods or services produced

Total Measure
All inputs used to produce them

LO 2.6 2-60
Productivity Improvement (PI) is the result of
managing and intervening in transformation
or work processes.
PI will occur if:

O O O O O
I I I I I 2-61
 Static: P=O/I in a given period of time (t).
Useful for benchmarking purposes.
 Dynamic: p(1)=O(1)/I(1); p(2)=O(2)/I(2);
then p(2)/p(1) yields a dimensionless
index that reflects change in productivity
between periods. ((p(2)-p(1))/p(1))*100
yields the percentage change between
periods.
2-62
 Partial-Factor: Uses a single “I” factor;
e.g., output/labor-hour, sales/employee
 Multi-Factor: Uses more than one “I”
factor; e.g. output/direct costs (labor,
materials, and overhead).
 Total-Factor: Uses all “I” factors.
(Note: Total-Factor captures “trade-offs”
between input factors.)
2-63
Determine the productivity for this case:
 Four workers installed 720 square yards of
carpeting in eight hours.

2-64
Determine the productivity for these cases:
a. Four workers installed 720 square yards of
carpeting in eight hours.

Productivity = Yards of carpet installed/Labor

hours worked
= 720 square yards/(4 workers x 8 hours/worker
= 720 yards/32 hours
= 22.5 yards/hour

2-65
Units produced: 5,000
Standard price: $30/unit
Labor input: 500 hours
Cost of labor: $25/hour
Cost of materials: $5,000
Cost of overhead: 2x labor cost

What is the
multifactor
productivity?

LO 2.6 2-66
 Output
Multifactor Productivity =
Labor +Material +Overhead
5,000 units  $30/unit
=
(500 hours  $25/hour) + $5,000 + (2(500 hours  $25/hour))

$150,000
=
$42,500
= 3.5294

LO 2.6 2-67
 Current productivity - Previous productivity
Productivity Growth = 100%
Previous productivity

Example: Labor productivity on the ABC assembly line was 25 units per hour in
2014. In 2015, labor productivity was 23 units per hour. What was the
productivity growth from 2014 to 2015?

23 - 25
Productivity Growth = 100% = −8%
25


LO 2.6 2-68
 Labor productivity
 Units of output per labor hour
 Units of output per shift
 Value-added per labor hour
 Dollar value of output per labor hour
 Machine productivity
 Units of output per machine hour
 Dollar value of output per machine hour
 Capital productivity
 Units of output per dollar input
 Dollar value of output per dollar input
 Energy productivity
 Units of output per kilowatt-hour
 Dollar value of output per kilowatt-hour

2-69
 Service sector productivity is difficult to measure and
manage because
 It involves intellectual activities
 It has a high degree of variability
 A useful measure related to productivity is process yield
 Where products are involved
 Ratio of output of good product to the quantity of raw material
input
 Where services are involved, process yield measurement is
often dependent on the particular process:
 Ratio of cars rented to cars available for a given day
 Ratio of student acceptances to the total number of students
approved for admission

LO 2.6 2-70
 Methods

Capital Quality

Technology Management

LO 2.7 2-71
1. Develop productivity measures for all operations
2. Determine critical (bottleneck) operations
3. Develop methods for productivity improvements
4. Establish reasonable goals
5. Make it clear that management supports and encourages productivity
improvement
6. Measure and publicize improvements
7. Don’t confuse productivity with efficiency

LO 2.7 2-72