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Unit 1: Introduction to Operations Management
Notes
Table 1.2: Overview of Main Productivity Measures
Productivity is also used at the national level. Productivity typically is measured as the rupee
value of output per unit of labour. This measure depends on the quality of the products and
services generated in a nation and on the efficiency with which they are produced. Productivity
data is available from different sources for national productivity, for sector-wise as well as
industry-wise performance. In improving the standard of living of a nation, productivity is
more important than money because productivity determines the output while money just
measures the value of the output.
However, the measures that are of relevance here from the point of view of the operations
manager are labour productivity, multiple factor productivity and total factor productivity.
Productivity is linked to the competitive strategy of the organisation. Corporate strategy and
objectives have a major impact in determining the different operational parameters at the
corporate level. There are many other factors and the list may differ from one organization to
the next and between different time periods for an organization as well. The principle impact on
these parameters comes from competitive strategies.
Corporate strategies and competitive strategies form a hierarchy of strategies. Corporate
strategies are concerned with the type of business the organization is in, its overall competitive
position and how the resources of the organization have to be deployed. The business strategies
are basically competitive strategies. The objectives of these strategies are about how to compete
successfully in particular markets, and how can the business units acquire competitive advantage.
Sun-Tzu, a Chinese strategist and general, made an observation in Art of War: "The more
opportunities that I seize, the more opportunities that multiply before me." This phenomenon is
at the heart of strategy. Organizations compete successfully by seizing opportunities. At the
business unit level, the strategic decision that the organization needs to take is 'how will it place
its products in the marketplace'? What will be the basis for it to gain competitive advantage?
Organizations achieve competitive advantage by providing their customers with what they
want, or need, better or more effectively than competitors and in ways the competitors find
difficult to imitate. The strategy for each organization is unique reflecting the particular
circumstances it faces.
There are two schools of thought on developing competitive strategies. On the one hand, the
concept of Generic Strategies is promoted by strategic thinkers like Michael Porter. On the other
hand, Prahalad and Hamel promote the "Resource based Approach". However, we will lay
greater emphasis on Generic Strategies as these are industry focused and reflect more closely the
requirements of the OM Strategy. In order to succeed in this, organizations have found many
offensive and defensive actions to defend their position in the industry and cope with competitive
forces.
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