Chapter 2

Order winners

Perceived as better than competition by customers, allow product to be purchased

Order qualifiers

Perceived as minimum standard of acceptability by customers, allow product to be considered

Competitive priorities

Cost: is the unit production cost of a good or performance of a service to the organization. Organizations that compete based on cost (example: price from a customer's perspective) emphasize lowering their operating cost. Quality: from an organization's perspective means determining customers' quality requirements, translating these into specifications for goods or services, and consistently producing goods or performing services to these specifications. Producing products free of defect (unacceptable to customer) is the goal of all organizations. Flexibility: refers to being able to produce a variety of good or services. This also includes customization, which is modifying goods or services to meet the requirements of individual customers. It may also refer to being able to easily increase or decrease the production quantity of goods or services (quantity flexibility). Flexibility is usually achieved by having general-purpose equipment, excess and/or inventory, and multi skilled workers, resulting in easy changeover between products. Delivery reliability and speed: refer to being able to consistently and promptly meet promised due dates by producing/delivering goods or performing services on time and quickly. Delivery reliability and speed is achieved by using faster and more reliable resources/processes.

Strategies

Plans that determine the direction for achieving organizational goals. A strategy comprises the long-term plans that will determine the direction an organization will take to become (or remain) competitive. A strategy is determined during the strategic planning process. Long-term planning are often called functional strategies (example: financial strategy, marketing strategy, operations strategy).

Firms compete on the following characteristics:

Price, variety, quality, and timeliness.

Examples of competitiveness

Price: is the amount a customer must pay for the good or service. If all other factors are equal, customers will choose the good or service that has the lowest price. Quality: refers to characteristics of a good or service determined by its design, material, workmanship, performance, and consistency. Most customers desire high-quality goods and services, but are willing to settle for goods or services that serve their intended purpose (specification) as long as the quality is consistent. Variety: refers to the choices of models and options available to customers. The more variety, the wider the range of potential customers. Timeliness: refers to the availability of goods or services when they are needed by the customer. This means being delivered on time (as just-in-time purchasing) or quickly. Other factors: include customer service (example: easy and fast returns, warranty repairs, response to requests, etc.) and convenient location.

Goals and objectives

Provide detail and scope of mission. Provides a general direction for an organization and should lead to organizational goals, which provide substance to the overall mission/vision. For example, one goal of an organization may be to capture more market share for a product: another goal may be to achieve profitability. An objective is a specific goal containing numerical values. For example, an objective of a company may be a 25 percent reduction in operating costs.

Values

Shared beliefs of the organization's stakeholders that should drive everything else such as culture, mission/vision, and strategy.

Where does strategic planning start?

Starts with top management soliciting the performance of current strategy from stakeholders (department managers and employees, shareholders, customers, suppliers, and society) and commissioning a market research study of the industry and where it is headed in the next five years. Then, the management team may form/adjust the organization's and vision, based on organization's values, determine a set of goals, and brainstorm and evaluate alternative ways (strategies) too achieve them. Finally, the chose strategy is implemented by determining a set of action plans at the department level.

Purchasing criteria

Such as price, on-time delivery, delivery speed, and quality can be order qualifiers or order winners. For example, for business air travellers, comfort/convenience (customer service) and being on time are most important (order qualifiers) whereas for economy air travellers, price is more important (order qualifier). Also, for new products such as an iPad, innovative features (variety) is most important but not for mature products - price, quality, and availability/on-time delivery are.

Competitiveness

The ability and performance of an organization in the marketplace compared to other organizations that offer similar goods or services.

Strategy

The long-term plans that determine the direction an organization takes to become (or remain) competitive.

Strategic planning

The managerial process that determines a strategy for the organization and productivity is a measure of how efficiently the resources are being used. The process of determining a strategy, example: a long-term plan that will set a new direction for an organization, and implementing it through allocation of resources and action plans.

Tactics and action plans

The specific methods and actions taken to accomplish strategy. Tactics: are medium-term plans used as components of a strategy. They are more specific in nature than a strategy, and they provide guidance for determining policies and carrying out action plans. Action plans: is a medium or short-term project to accomplish a specific objective, assigned to an individual, with a deadline and the resources needed.

Vision

Where the organization desires to be in the future.

Mission

Where the organization is going now, its products, and its markets.