CHAPTER 2

COMPETITIVENESS, STRATEGY AND PRODUCTIVITY

Chapter Objectives:

After this chapter, the student can be able to:

(1) Define competitiveness, strategy and productivity of the organization;

(2) Demonstrate awareness about the company mission and vision and its importance to
business organization;
(3) Differentiate strategy and tactics;
(4) Discuss the importance of strategy in business

Introduction

In this chapter you will gain different ways how companies compete and why some
organizations are good in competing in the fast changing world of business. You will also learn what
are the different strategies can be used in order to lead the firm in a competitive advantage. It also
tackles why productivity is important and how the companies can improve it.

COMPETITIVENESS

In any industry, companies must be competitive to promote, sell their goods and services in
the market. Competitiveness, being one of the factors of identifying how the company works, in a
way of recognizing the prosperity, hardly competing with other company, or even why they fail. In a
simple way Competitiveness is how effectively the organization encounters the needs and wants of
the customers relating to other organization that is offering the same good or services.

Business Organization tends to compete through the combination of their operation and marketing
function. Marketing influences the way the firm competing with other firms such as identifying the
customer needs and wants, pricing strategy, advertising and promotional tactics, as well as the
location or place of distribution.

1. Identifying customer needs and wants is mainly the major input on the decision making
process of the company, and the central or core of competitiveness. The thought is to match
what is the customer demands and the good or services that the firm will be offering in
order to meet the needs and wants of the customer.

2. Pricing Strategy and output quality are the main factors in customer buying-decisions. It is
significant to understand by the firm the trade-off of prices of goods and services and the
quality of the output on the customer buying-decisions.

3. Advertising and promotional tactics are ways of the businesses to inform their customer
that such goods and services are present in the market in such a way they channel the
features of their products and services to potential customers.

4. Place of distribution is also one factor for customer buying-decision as it entails where can
they buy the products or use such services in order to meet their needs and wants. It is also
important in terms of cost and convenience of the customers.

Operations play a major contribution to the competitiveness of ones’ organization. It includes

product and service design, cost, quality, response time, flexibility, inventory, and supply chain
management, and service as well. Several of these factions are interrelated to each other.

1. Product and service design should be in complement on different areas such as financial
resources, operations, supply chain capabilities, and the consumers’ needs and wants. The
 feature of the products and services are one of the main factors in consumer buying
decisions. Other important factors are innovation, and time-to-market for some products
and services.

2. Cost of the firms output is an important aspects of pricing as well as profit. Firms’ efforts to
reduce cost are supposedly ongoing and continuous. Productivity being one of the main
drivers of cost, the higher productivity that the firms has as compare to its competitor can
gain competitive advantage. Some of the firms outsourced part of the operation to gain
lower cost, higher quality, and better productivity.

3. Quality refers to the supplies, proficiency, scheme and service. It is also entails of some
standards as well as excellence execution of something. Consumer judgments tend to look at
quality if specific product and services meet its intended purpose. Consumer will be willing
to pay more if products and services will give them the perceived value they are looking at.

4. Quick response is one of the important factors on competitiveness. It can be in the form of
delivering the product and services to the market as soon as the orders for it will be placed.
Further, it also in terms of how firms will deliver an improved product and services to the
market.

5. Flexibility means the ability of ones’ firm to rapid changes. Changes can be in terms of
modification of certain feature of the product or services, or in terms of the demanded
volume of the consumer. High flexibility means high reliability of the company as well as the
high response to fast changing environment.

6. Inventory management can be one of the ingredients of competitive advantage by

managing the supplies, raw materials as well as the output itself in the demanded quantity
of the consumer or market. Efficient inventory management helps the firm to minimize the
cost, as well as the possibility of damages or over stocking of supplies.

7. Supply chain management includes the efficient coordination with internal and external
forces such as supplier and buyer, and within the organizations’ unit in order to achieved
cost-efficient and timely delivery throughout its value-chain.

8. Service might be involved in after-sale activities to consumer such as warranties, delivery,

set-up as well as technical maintenance. Service quality may be used as differentiator from
competitors because; the reliable of your service and how firm workers connect with
consumers can give a high regards and ratings, and high profitability.

9. Managers and workers is one of the most important factors of operation to be competitive.
People are the soul and heart of the business, if they are committed and highly motivated,
they will handle your customer more efficiently. The development of the skills of your
personnel might be considered in order for them to create idealistic and creative handling of
any situation.

Why Some Organization Fail

There are various reasons why firms fail or performing below its mission. Firms must be aware of
these reasons for them to handle it effectively. It also helps managers to avoid any similar instances.

1. Ignoring operational strategy

2. Failing to take the advantages of strength and opportunities within and outside the
organization.
3. Fail to consider the weaknesses and threats of the organization.
4. Focusing too much on short-term financial planning and performance, and tend to neglect
research and development.
5. Focusing on existing products and services features and innovation, but neglecting the
process design and developments.
 6. Fail to consider investment to human capital
7. Neglecting in establishing good communication and processes amongst internal functional
areas of the organization such as in marketing, finance, operation and human resources.
8. Failing to meet consumer wants and needs.

In order to successfully compete with other organization is to consider two issues and must be
addressed properly: 1. what are the customers want? 2. How or what is the best way in meeting this
demands and wants?

Example of Organization that fails

Kodak is a technology company that dominated the photographic film market during most of
the 20th century. The company blew its chance to lead the digital photography revolution as they
were in denial for too long. Steve Sasson, the Kodak engineer, actually invented the first digital
camera back in 1975. “But it was filmless photography, so management’s reaction was, ‘that’s cute
—but don’t tell anyone about it,” says Sasson. The leaders of Kodak failed to see digital photography
as a disruptive technology. A former vice-president of Kodak  Don Strickland  says: “We developed the
world’s first consumer digital camera but we could not get approval to launch or sell it because of
fear of the effects on the film market.” The management was so focused on the film success that
they missed the digital revolution after starting it. Kodak filed for bankruptcy in 2012.  The Kodak
failure surprised many.
Source: www.valuer.ai 50 examples of corporations that failed to innovate and missed their chance

Organization’s Mission and Strategies

An organization’s mission is mainly the reason of its existence. It is stated on a mission

statement wherein it reflects the purpose why the organizations’ is operating. For the organization,
the mission must answer “What business are we in to?” Mission statement will vary organization to
organization depending on what industry they belong or what are the goals they are in to
consideration. These goals provide the details and scope of the organization’s mission.
Organizations’ goals tend to signal on how the company would look like to its employee, market, and
other stakeholders.

Organizations’ strategy is important because it is how the firm will be guided as well as to
how the firm will take action in a competitive environment. According to Michael Porter, there are
generic competitive strategies that ones’ firm can follow. These are overall cost leadership,
differentiation, and focus

Figure 2.1 Generic Competitive Strategies

Overall Cost Leadership

One of the strategies, which are commonly used in the late 1970s, is the reduction of cost
through the set of functional policies that aimed at the basic objective. Cost leadership is a vigorous
reduction of cost in some areas, construction of efficient-scale facilities, and cost control for
overhead, expenses in Research and Development, as well as advertising.
Differentiation

Second strategy is differentiation; it entails the strategy of differentiating the products and
services offered by the firm, or creating something that perceived throughout the industry or being
unique in some ways. There are many forms of differentiation within the company such as in the
area of technology, design and brand image, networks, or other dimensions of the operations.

Focus

The third strategy is focus; Focusing on development of a particular such as buyer group or
segments, product line, or market entails by this strategy. Focus also can either mean lowering cost
position, or high differentiation or having both as strategy.

Table 2.1: Some Mission Statement of Organization in the Philippines

Cebu Pacific Cebu Pacific brings people together through

safe, affordable, reliable, and fun-filled air
travel.

International Container ICTSI aims to provide excellent growth

Terminal Services, Inc. opportunities for our employees; build
successful and mutually rewarding businesses
with our corporate partners; deliver equitable
shareholder returns; and provide superior
services marked by efficiency, reliability,
professionalism, and profitability.  It is by
fulfilling these goals on a daily basis that we
are ultimately able to meet and surpass our
contractual obligations and honor our
commitments to our employees, government
partners, and stakeholders.

We will partner with our host communities to

SM Investments Corp. provide a consistently high standard of service
to our customers, look after the welfare of our
employees and deliver sustainable returns to
our shareholders, at all times upholding the
highest standards of corporate governance in
all our businesses.

Strategies and Tactics

Being the goals are tend to compare as destination, strategies are the roadmaps in order to
attain its destination. Strategy is mainly comes from the Greek word “strategia” which means the
office of the general or territory. Strategy provides focus on organizations’ decision making process.
Whereas, the overall or general strategy of the firm called as Organization Strategy on the other
hand, they also have Functional Strategies that is related to the area of finance, marketing,
operation as well as human resources.

Tactics are methods and actions that the organizations needs to undergo in order to fulfill the
strategy of the firm. In a simplest term tactics are more detailed that strategies, it provides control
as well as direction for carrying the actual operation of the organization. It needs more detailed and
specific plans as well as decision making in an organization.
 It can simply put to a hierarchical illustration (see Figure 2) to see the perspective of
planning and decision making in the organization. Hence it is important to know what should be the
first thing to do or the process that the organization needs to undertake.

Example

Casey is a high school student in Rizal National High School. She would like to land a career
in business, have a good job, and earn money to live a comfortable life. The possible situation in
achieving Casey’s goals maybe summarized as follows:
Mission: To live a comfortable Life
Goal: Successful Career in business and to have a good income.
Strategy: Obtain a College Degree in any Business related course
Tactics: Select a university/college and decide of a major or course: decide on how to finance the
education
Operations: Register, buy books, takes courses, study

Mission

Organizations
Goal

Organizational
Strategies

Functional
Goals

Human
Finance Marketing Operation
Resource
Strategy Strategy Strategy
Strategy

Tactics Tactics Tactics Tactics

Operating Operating Operating Operating

Procedure Procedure Procedure Procedure

Figure 2.2: Hierarchy of Planning and Decision Making in an Organization

There are different strategies an organization can undertake and choose from:

1. Low cost – outsourcing of operation to third party or countries that have low labor costs.
2. Scale-based strategies – use of capital-intensive approaches to realize high output volume at
lower cost.
3. Specialization – focus on narrow product line or limited services to attain higher quality
output.
4. Newness – focusing on creating new or innovative products or services.
5. Flexible operations – focusing on response time and customization.
6. High Quality – focusing on high quality than other competitors in the industry.
7. Service – focus on several aspects of service such as reliability, accuracy, timeliness, validity,
completeness, and efficiency.
8. Sustainability – focusing on environmental efforts and operation, and energy efficient
operation.

There are instances that company is using two or more of these methodologies depending on
their strategies. In particular, strategy formulation takes into consideration when organization is
competing so as to the assessment of their strengths and weaknesses in order for them to take into
account the core competencies of the firm. Core competencies entail various special qualities and
abilities that the organization has that eventually will give them competitive advantage from other
competing firms. These core competencies are normally align with customers wants and needs as
well as the intensity of the competition. In order to compete successfully, the need for alignment of
strategies and core competencies is a must for organization.

Strategy Formulation

Strategy formulation is a critical part of organization competitiveness advantage. It is

important key for the decision making of senior managers in order for them to succeed. One highly
notable failure known to the world is the fall of mobile giant in late 1990s and early 2000s Nokia.
With the arrival of the internet, other companies started thoughtful of looking how data was use for
future communication. Nokia didn’t grasp by the concept of software development and kept on
focusing with the hardware of its products because management feared to isolate current users if
they changed the system too much. It is a mistake to Nokia that they didn’t follow or understand the
new way on how customer experience by changing a bit of their strategy. This leads to a mess for
Nokia when they have develop operating system which gives the customer bad experience and
didn’t fit with the market. The company overestimated its brand strength and they eventually
arrived late in the game of smartphone and didn’t succeed. In 2007 when Steve Jobs launch a
smartphone known to us as IPhone without keypads, which is actually revolutionary way back that
time. Eventually, Nokia decided to compete with Android, but unfortunately it was too late from
them since their products weren’t competitive enough with other smartphones.

There are key steps in formulating strategy for a competitive environment. These are:

1. Link your strategy directly to the vision and mission of statement of the organization.
2. There’s a need for the assessment for internal (strength and weaknesses) and external
(opportunities and threats) environment of the business.
3. Identifying imperative winners and frontrunners.
4. Selection of one or combinations of strategies to focus on.

Supply Chain Strategy

Supply chain is the sequences of processes involved in the production and distribution of a
certain commodities and/or products. In supply chain strategy, it specifies how the supply chain
should function in order to meet the supply chain goals. It should be aligning with the business
strategy wherein if this will be executed well, it will bring or create great value to the organization. It
institutes how the firm will be working with suppliers and also the policies relating to customer
sustainability and relationships.

Sustainability Strategy

It is important for people to maintain change in a balanced environment. Many in our

society today focus on the notion of company sustainability which is in the form of governance;
products and services goal setting, processes as well as the exploitation of resources, and even the
entire supply chain processes. It can be achieved by setting strategy for sustainability.

Global Strategy

As the emergence of globalization has been felt several years ago, many companies are into
looking for global strategy. Globalization gives the business an opportunity to expand its horizon in
doing business operation, penetrating much larger market and even outsourcing of low price raw
materials. Despite of different advantages of globalization, there are also threats that the
organization must take into consideration such as but not limited to political and social disturbance.
Hence, it is important for the organization to take into consideration global strategy.

Operations Strategy
 In any business, organization strategy gives a general scope on how will the firm be directed.
It is broader in terms of scope, and usually covering the whole organization. Operations strategy is
more specific and narrow in nature. Basically, it covers the operation of the organization. Operations
strategy is related to products and services, methods and processes, operating resources, quality,
cost, time table, as well as scheduling.

In order for operations strategy to be effective, it should be linked to organizational strategy;

however it should be expressed separately. Relatively, organizational strategy should take the
realities of the firms’ strength and weaknesses. Take advantage of the strength and dealing with
weaknesses. Likewise, operations strategy should deal with the functional operations of the business
by formulating strategies that will support, rather than having conflicting strategies as to
organizational strategies. In general, operations strategies greatly affect the competitiveness of an
organization. If this will be designed correctly and executed well, it will give the organization the
chance to succeed. On the other hand, if this will not well-executed it may lead to failure for the
organization.

Strategic Operations Management Decision Areas

Operations Management people perform a strategic role in many strategic decisions in a

business organization. There are different decision areas that need to consider in the organization
which majority of these areas has its implication to cost.

Table 2.2 Decision Areas in Strategic Operations Management

Decision Areas Implication of the Decision

1. Production and Design Cost, quality, environmental and
liability issues
2. Process selection and Layout Cost, skill level needed, flexibility,
capacity
3. Capacity Cost structure and flexibility
4. Location Cost and visibility
5. Work design Quality of work life, safety of
employees and productivity
6. Inventory Cost and shortages
7. Quality Ability to meet or exceed customer
expectations
8. Maintenance Equipment reliability, productivity
and cost
9. Supply Chains Agility, cost, quality, shortages and
vendor relationships
10. Scheduling Flexibility and efficiency
11. Projects Cost, new products and services,
and/or operating systems

This strategic operations management decision has its two factors that tend to drive
operational strategies. The important of quality and time must take into consideration.

Quality and Time Strategies

Most of the organization traditionally focusing on cost minimization and product differentiation;
however, today most of the businesses tend to look after quality and time strategies. Quality-based
strategies focuses on maintaining and/or improving the quality of output of the organization
whether products or services. Quality-based strategies tend to be one of the main reasons in order
to attract customer or retain them. There are variety of reasons why some company used this kind
of strategies, for instance to cope up with low-quality production, to meet or to balance the quality
amongst competitors or it can be to retain the image of a high quality output of the company.
Further, some of the organizations tend to have combination reasons in using this kind of strategies.

On the other hand, Time-based strategies focuses on decreasing the time required to finish
various activities. By doing these kind of strategies, organizations tend to have competitive
advantage than other competitor by means of improving the service to customer by minimizing the
time for them to delivery such services. Time-based strategies focus on reducing the time of a
certain activities within the functional areas, organizations have the ability to minimized cost with
high productivity, tend to have high quality delivery of products and services, the visibility of the
products can be soon be seen and experienced by customers. Organization can improved their time
in different activities such as:

1. Planning Time – the time is needed in order for the organization to react on certain threats,
to develop strategies and selection of tactics. It also improves proposed changes in facilities
as well as processes, able to adopt in technology-based environment, and many more.

2. Product/Service design time – the time that the organization to design output or redesign
the products and services in the market.
3. Processing time – this involves the productions of goods or providing services to customer. It
can be in the form of scheduling, equipment repairs, inventories, methodologies, training,
quality, and the like.

4. Changeover time – this pertains to the time that the organization needed to change the
production of one type of product or services to another. These involves changing of
equipment, different methods and processes as well as scheduling and material planning.

5. Response time to complaints – there is no perfect operations; hence the need for the
flexibility and response time for customer complaints must take into consideration. This
pertains to timing of delivery, quality of output, as well as incorrect shipment for customer.
This also can be in connections with employees working conditions, quality problems and
equipment problems.

It is important for the marketing and operations team to have collaborative efforts in
formulating strategies to address and meeting the needs and wants as well as expectations of
customers whether in what segment they belong. Agile Operation is also one of strategic approach
used for competitive advantage of by adapting flexibility in a fast changing environment. This type of
operation tend to combine different variables in the quality management or quality service such as
reliability, cost efficiency, quality as well as flexibility, accuracy, and validity of services. It is
important to blend these variables in information technology. A successful agile operation means a
careful development of a system that includes flexibility, information technology, as well as its
people. It also involved the time management needed in performing works in the organization by
improving the key metric in operation which is productivity.

Implication of Organization Strategy for Operation Management

There are major impacts of organization strategy in operation management as well as supply
chain management. For instance, if an organization is using over-all cost leadership with high volume
strategy, it limits the amount of variation offered to customers. It gives a result of easier operations
in supply chain. On the other hand, a strategy that gives a customer a wide variety of products and
services creates substantial operational and supply chain activities, which give more challenging
ways of doing these activities.

Table 2.3 Implication of Different Strategies to Operations Management

Organization Implications to Operations Management

Strategy
 Low price Entails low variations on products and services and a high-
volume of goods which results in maximizing the
resources through organizations’ system.
High quality Involves higher initial cost for product and service design,
and ensuring high quality from suppliers.
Quick Response Involves high flexibility, higher level of inventories, and
extra capacity.

Newness/ Requires large investment in research and development of

Innovation the product and services in order to produced new or
innovative one. It also requires new processes in
operations as well as in supply chain in order to produce
such innovative product and services.
Product or Requires high variation of product and services through its
Service Variety design. Higher cost which is also difficult to estimate,
higher workers skills need, higher complexity in terms of
inventory monitoring, more quality assurance
involvement, and complex in matching the demand and
supply.
Sustainability It affects location planning, design for product and
services as well as processes, outsourcing decisions, waste
management and return policies.

Transforming Strategy into Action: Balanced Scorecard

Balanced Scorecard is a management system. It is a way of looking at your business that

concentrates on the bigger picture of organizations’ strategic goals. It also helps the management to
see and choose the right things to focus on in order for them to reach their goals. In tradition,
company’s often used financial measurement on how much money they have, hence, financial
measures are indeed important for the company; however it can give you just a little bit of what is
the operation is all about. Balanced scorecard gives you an idea of different strategic measurement
such as internal business processes, customer and learning and growth. Balanced scorecard give
you’re the outlook of four (4) business areas as mentioned above. Learning and growth gives you
the viewpoint of the overall corporate culture in terms of the know-how of the employees on the
current trends in market, ability to collaborate with others in terms of their skills and knowledge, as
well as access to training and continuing professional development. Investment in technology brings
a big role in learning and development. Since the emergence of technology-based tools in corporate
is inevitable.
 Financial

Vision
Customer
and Internal
Business
Strateg Processes

Learning
and
Growth

Figure 2.3 Balanced Scorecard

Internal Business Processes perspective looks on how the organizations’ do smoothly their
operations. Being efficient is important factor for this. It means that processes should speed-up,
minimizing waste, and doing more in less time possible. It also entails on how the organization
adopts with the changing environment and how the firm executes it new ideas. Customer outlook
focuses on the people who essentially buy the product and pay for the service rendered. It is how
you win new segments in the market and maintaining them. It also entails the benchmarking with
other competitors. Satisfaction of the customer is a great indicator of success, but the real challenge
is to provide them the perceived value they wanted to receive and also how the organization will
likely to maintain customer satisfaction and loyalty.
Financial as traditional way of measuring the health of the business, financial measures are
not to be ignored. It is the major focus on the balanced scorecard. Do the organization making
money? Are shareholders happy? Money keeps the organization alive and financial measures mainly
focusing on this. Putting it together, the organization may focus on the following:

Table 2.4 Balanced Scorecard Perspective

Financial Reduce Cost, Increase Profit, and
Increase Revenue in Targeted
Market.
Customer Improved Customized Customer
Experience and Increase awareness
as Industry Leaders.

Internal Business Processes Improve internal efficiency, Increase

Acquisition, Increase Consulting
Knowledge Sharing, and Improve
Product / Services Offerings

Learning and Growth Increase Employee Experience,

Optimize Technology, Optimize
Human Capital, Improve Thought
Leadership
 In summary the Balanced Scorecard may be confusing at it may seems, but they are really
not too complicated. A balanced scorecard is divided into four perspectives. Each perspectives has a
several strategic objective, it is a chart showing the relationship between strategic objectives is
called strategic map, and each strategic objective has one or two measures.

Productivity

One of the primary objectives of a manager is to ensure that organizations’ resources are
use productively. Productivity can used to describe this, which means a measurement of effective
use of resources, usually express in a ratio of an output and input. Outputs pertains to the products
and services, on the other hand inputs are related to labor, material, energy, and other company
resources.

Output
________
Productivity =
_
Input

In productivity, the organization should also have a strategy in a form of low-cost as the
higher the productivity the lower the cost of the output. It is then can be seen in productivity ratio.
Productivity ratio is the fraction of the amount produced by a person, machine, business or industry
(output) over the process and system put into it (input). It can be used to compute the operation of
a division, department or the organization as a whole. In business, it was used for planning the work-
force requirements, scheduling, and analysis of financial, and other significant tasks that the
organization must do.

It is important in any industry to know the productivity level of its operation. For instance, in
a non-profit organization, the higher the productivity, the lower the cost, on the other hand, in profit
organization, the higher the productivity, the more the organization is competitive. Moreover, it is
also important to know the productivity growth in any organization. Productivity Growth implies the
increase of productivity overtime. Thus it can be interpreted in a formula below:

Cp - Pp
PG = X 100
Pp
PG = Productivity Growth
Cp = Current productivity
Pp = Previous productivity

For example, if the productivity rate increases from 100 to 110, the growth rate would be

110-
PG = 100 X 100
100

PG = 10%

Productivity growth gives an important factor in determining the standard of living of its people also
for country’s rate of inflation. Hence, Productivity raises the value of economy while we are looking
the rate of inflation.

There are different ways in measuring the productivity, in terms of single operation (partial
productivity), one or more inputs (multifactor productivity), or on all inputs of the organization (total
productivity). These different ways of measuring the productivity depends on the purpose of
measurement.

Partial Measures
 Output Output Output Output
Machin
Labor e Capital Energy

Multifactor Measures
Output Output
Labor + Labor + Capital +
Machine Energy

Total Measures
Goods or Service Produced
All Inputs used to produce them

Table 2.5 Some Examples of Partial Measurement of Productivity

Labor Productivity Units of Output per labor hour

Value-added per labor hour
Units of Output per shift
Peso value of output per labor hour
Machine Productivity Peso value of output per machine hour
Units of output per machine hour

Capital Productivity Peso value of output per peso input

Unit of output per peso input
Energy Productivity Peso value of output per kilowatt-hour
Unit of output per kilowatt-hour

The unit of output used in productivity measurement depends on the job that has been done.

Example

1. Determining the number of hotel rooms cleaned by hotel worker.

Number of Hotel rooms cleaned Number of Hotel

= rooms cleared per
Number of Workers workers

Number of rooms = 25
Hotel workers = 5

25 rooms
= 5 rooms per workers
5 workers

2. Determining the number of yard of curtains installed by workers per labor hour

Given: four workers installed 720 yards of curtains in eight hours

Yard of curtains installed Yards of curtains

= installed per labor
Labor hours hour

720 yards
4 workers x 8
hours/worker

720 yards = 22.5

 32 hours yards/hour

Example of Multifactor measurement of productivity

Calculation of multifactor productivity measure the output and input using the same unit of
measurement, for instance the cost of input.

Quantity of Output
Labor cost + Material cost + Overhead

Using the value given, here is the computation of multifactor measurement of productivity

Output = 10,000 units

Labor = PHP 1,900
Material = PHP 600
Overhead = PHP 2,500

10,000
Multifactor 2 units per
= 1,900 + 600 + =
Productivity peso input
2,500

Productivity in a Service Sector

Productivity in service sector is more complex than manufacturing; hence, it is more difficult to
measure, therefore it is also difficult to manage. Being service sector is giving at least 60 percent of
the economy in terms of GPD; productivity in service sector must be apportioned with. Relatively to
service productivity, process yield can be used for measuring the productivity level in the service
sector normally, this involves with products. Process yield is the ratio of the output of product
produced to the quantity of raw material input. For example, the ratio of the students in the
academe accepted in admission to the total number of students approved for admission.

Factors Affecting Productivity

There are numerous factors affecting the productivity of the organization such as:

1. Methods;
2. Capital;
3. Quality;
4. Technology; and
5. Management

There are common mistakes that workers are only the factor or the determinant of productivity.
However, in the recent year’s technology plays a big role in productivity measurement. It can
improve the process through automation and innovation of products and services.

Improving Productivity

1. Cultivate productivity measure in all level of operation. Measurement is the first to manage,
and then control the operation.
2. Look at the organizations’ system as a whole, and then identify the most critical operations
of the firm.
3. The needs for development of methods are needed. It can be done through consultation
with workers who are actually working in different areas of operations.
4. Create a rational goals for improvement
5. Mark it as important and clear for the management that they upkeep and inspires
improvements in productivity.
6. Quantify the improvement and made an announcement about it.