Transcript Chapter 3: International Competitiveness, Productivity and Quality

Chapter 3: International Competitiveness, Productivity
and Quality
3.1 ESTABLISHING A GLOBAL PRESENCE
• A country with global presence is recognized
internationally for its reliability, fairness,
integrity and the standards of its companies’
products.
• Countries with a negative global presence may
have non-democratic governments, unsafe
and unfair working environments, lack of
environmental protection, and political
upheaval.
• Canada’s global presence is important because
other countries are aware of our products,
standards and reliability
gives us access to worldwide capital and markets.
• A company expanding internationally needs to develop
a strong presence.
• International companies operate in a few countries
only
• Global companies operate in several countries.
“Going international” may make or break an organization.
• Many companies set up distribution arrangements,
offices and possibly manufacturing plants, as well as
hiring local staff.
To build global presence that minimizes risks
and maximizes profits, a company should
develop a plan:
 Which product will lead the way as the
company “rolls out?”
 Which markets should be entered first?
 What is the best way to enter these
markets?
 How rapidly should the company expand
internationally?
Competitive Advantage
• To reach the ultimate goal of increased sales and profits,
there must be a competitive advantage.
• The company must outperform their global competitors.
Access to markets and distribution channels are important.
• Canada was 8th among 80 countries in competitive growth
from the 2002 World Economic Forum Report.
• Canada leads all G7 countries in ease of doing
business, according to the 2009 IMD World
Competitiveness Yearbook. Also, the Economic
Intelligence Unit forecasts Canada as the #1 place
to do business in the G7 for the next five years.
According to Consensus Economics, Canada has
been a top performer among the G7 in GDP growth
over the 2006-09 period and is expected to remain
so through 2010-11
Real GDP Growth and Projections (%)
4.0
3.1
2.9
3.0
2.4
1.9
1.8
2.0
%
1.5
1.0
0.8
1.1
0.6
0.5
0.5
0.1
0.0
Germ
any
Italy
Fran
ce
U.K.
U.S.
ada
Ca n
Japa
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-0.6
-0.6
-1.0
• A higher GDP means that Canada is being more productive and is in a
better position to compete internationally. (note the text has outdated info)
• Canada’s manufacturing sector has lagged here is a lack of research &
development (R&D). Canada has been slower to adopt new technologies and
has been more dependent on services rather than manufacturing.
• Competitiveness is linked to R&D by governments and companies.
Innovation must be encouraged by productive management strategies. The
National Research Council conducts R&D for the government.
• Governments also support private R&D; for example, MD Robotics’
Canadarm for NASA has given Canada stature and competitive advantage in
space technology.
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• Governments usually insist on high quality and performance standards on
their purchases and this stimulates companies to update their performance and
environmental standards.
3.2 ACHIEVING COMPETITIVE ADVANTAGE
• Companies that achieve a competitive advantage
manufacture products or provide services that have greater
economic utility, or usefulness, than products or services
supplied by their competitors.
• Economic utility is a product’s ability to satisfy the needs and
wants of the customer. Form utility is created when raw materials
are converted into a finished product. Place utility means that a
product, such as ice cream has most value when it is in a
freezer.
Factors Affecting Canada’s
Competitiveness
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Quality and Quantity of natural resources
Strength of country’s currency and its exchange rate
Infrastructure in the country
Research and development
Workforce Characteristics
Entrepreneurship
Government involvement
Opportunity Cost, and Absolute and Comparative
Advantage
Opportunity Cost
• Is the cost and potential benefit of an
opportunity that is deferred or sacrificed in
order to act on another opportunity.
• Whenever one opportunity is chosen or
pursued by a company or an organization,
other is sacrificed.
• Opportunity cost calculates, in financial
terms, the benefits of the value of the next
best opportunity that was foregone or not
taken.
Comparative Advantage
• an advantage usually created when a company or
country becomes more efficient, has better technology,
and has easier access to resources its competitors.
• When one country has a lower cost in producing a
product at a lower opportunity cost than another country,
it is said to have a comparative advantage.
• Once there is a comparative advantage, it can specialize
in what it does well and at a reasonable cost. It can then
trade with other countries or exports its products to them.
Absolute advantage
• If a country can produce a good at a lower
cost or with a higher rate of productivity
Canadian Fish heads
Chinese Toys
3.3 THE MEANING OF
PRODUCTIVITY
• Productivity refers to the amount of work that is
accomplished in a unit of time using the factors of
production.
The factors of production are
• land,
• labour,
• capital,
• technology and entrepreneurship.
Business Purpose and Goals
• KEY GOAL = PROFIT
• AIM – in Mission Statement
• example of a mission statement –
• “to…empower our people to help customers become
more successful by providing them with the
indispensable information, insight, and solutions”.
Productivity
• For a company, productivity measures the
relationship between “inputs” and “outputs”
• how well a company uses the resources it
has (meaning people, machines, production
lines, parts, supplies, or raw materials) to
perform more profitable or more
competitively.
• Such measures can be adapted to any
kind of organization.
Factors Influencing a Country’s
Productivity
 Efficient use of human and physical resources
 Costs associated with labour (for example, wages
and salaries, benefits, workers’ safety and insurance
costs, payroll administrator)
 Accessibility and quantity of a country’s usable
nature resources
 Quality and availability of a nation’s technology
 Quality of education and of government services
 Quality of business leadership and strategy
 General work ethic and healthy lifestyle
 Efficiency of plants and of organizational structures
 Size of both domestic and international markets for
a country’s products and services
• Amount of support given to research and
development
3.4 CANADA’S GLOBAL
CHALLENGE
• In Canada, about one-third of our domestic
product and about 40% of our jobs depend on
international trade.
• Another challenge that Canada faces is
maintaining our standard of living.
• The main economic indicators of standard of living
include average family income and expenditures,
household ownership of durable goods (such as
the number of telephones and personal
computers), number of physicians per 1000
people, and the literacy rate of the country.
• Canada has scored high on standard of
living assessments. By maintaining a good
standard of living, it will help retain and
attract talented people who will help
Canada increase productivity.
• Canada mostly wants people who work in
what is called the “knowledge economy”.
The Knowledge Economy
• knowledge economy refers to the increased
reliance of business, labor, and government on
knowledge, information, and ideas-and information
technology to put them to practical use.
• Adheres to the saying “brain over brawn”.
• Improvements and changes are welcomed
in most industries. The greatest changes
taking place in industries today is in the
technology industry
Categories of Industries
1. High-knowledge: more than 40 % of these
industries’ employees are knowledge workers.
Examples include: information technology,
education, government, microelectronics,
biotechnology, telecommunications and
computers.
2. Moderate-knowledge industries: between
twenty percent and forty percent of these
industries’ employees are knowledge
workers.
• Examples include: job-training services
and real-estate sales, customer service,
sales representatives and finical services.
3. Low-knowledge services:
• Less than 20%of these industries’
employees are knowledge workers.
• Examples include: retail sales, meat
processing, truck driving, and any type of
manual labor.
Intellectual Capital
• Intellectual capital is the sum of knowledge,
information, intellectual property, talent, and
experience within a country or an
organization.
• Intellectual capital includes ideas, is part of a
company’s human capital, and is a factor in
company’s or country’s competitiveness and
its ability to create wealth.
• Some people believe that intellectual capital
is more important then human resources
when it comes to a source of wealth.
Thriving in the Knowledge
Economy
• Not all ideas happen on purpose, 3M Corporation’s discovery of
Post-it notes was, “the result of a scientist creating a glue that didn’t
stick well.” You have to be able to see beyond your mistakes and
see something else that may work in the economy.
• Knowledge is the prime source of competitive advantage in the
global economy.
• Managers must learn to develop, share, use, and measure
knowledge to create more value for customers, employees, and
shareholders.
• One key idea in the knowledge economy is that knowledge is
developed when people work with one another. Knowledge must be
connected to existing information.
Innovation and Quality
• Innovation forces competitors to struggle to catch up. A
good example is the computer software market. Microsoft
Windows programs are constantly changing and improving
to help users become more efficient and adapt to an everchanging hardware market.
• Innovation is the key to finding new ways of increasing
productivity and goes beyond investment in research.
Since there are always ways to improve, innovation
requires constant change and improvement
Taxation and Innovation
• Taxation is the method used to generate the
finances required to run the country. The
money collected by municipal, provincial, and
federal governments from individuals and
businesses is spent on a variety or programs
and projects, both domestically and
internationally.
• Canada’s corporate tax rate is higher than
many of its global competitors. As a result
Canada may have difficulty attracting foreign
investment compared to other countries.
Rationalization
• This is the process used by organization
or company to change its organizational
structure, its product line, or its production
process to become more efficient,
productive and competitive.
• This can cause large changes such as
new factories, developing new technology
but also may close factories or cause
disregarding of outdated technology.
Causes and Effects of
Rationalization
• Companies may have to rationalize parts
of their business due to changes in
consumer demand for its products.
• Some companies will merge with other
companies to bring in more profits for the
parent company. It also can contribute to
economies of scale.
Privatization
• a type of rationalization
• Some people argue that privatizing electrical
power, prisons, health care, or highways will
bring about more productive systems. Those
who support privatization believe that the
private sector is more efficient and effective
than the public sector at running an
organization. They believe that government is
wasteful or inefficient, and that taxpayers do
not like to see their taxes spend on poorly run
services.
Developed Nations and
Economies
• Canada is referred to as a developed or industrialized
nation. Developed nations tend to have a high standard
of living and produce a sophisticated range of products
such as computers and automobiles. Developed nations,
also called newly industrialized economies (NIE’s), such
as Vietnam and China, have made the transition to more
sophisticated manufacturing. They have moved away
from an economy based largely on textiles, shoes and
clothing, and agricultural products.
•
• There are also countries that are known as lessdeveloped nations. These largely agricultural-based
countries have a tendency to experience political and
military instability more often.
Total quality management (TQM)
• This is a method of managing
organizations with a commitment to
continuously improve the products,
processes, and the work habits of
employees; management also is
determined to consistently meet customer
needs.
Market-driven organizations
• those that respond to market needs by
providing customers with high quality goods
and services that are low cost and available
when required.
• To successfully compete globally and
improve their competitive advantage,
Canadian companies must be market
driven.
The International Organization
for Standardization (ISO)
• The ISO’s job is to promote development of voluntary standards and related world
activities, facilitate the international exchange of goods and services, and to develop
cooperation in intellectual, scientific, technological, and economical activities.
• ISO is non-government and was established in 1947. They are now a worldwide
federation of national standards organizations for 140 countries. They have published
12000 standards including the ISO 9000 series on quality management and assurance.
• The ISO 9000 are the requirements a business needs to meet to have its Quality
Management System (QMS) verified and registered. Verified businesses advertise the
QMS on their facilities. There are 400 000 verified businesses worldwide.
• Many large company and government buyers now require businesses to meet certain
ISO standards.
3.5 QUALITY CONTROL AND
CONTINUAL IMPROVEMENT
• Quality Control
• Deming’s “14 points for management”
 Always continuously improve the product or
service to stay competitive and create jobs
 Encourage education of the workforce, both on
and off the job
 Allow workers to take responsibility for and pride in
their work
 Remove communication barriers between
management and the factory floor
 Encourage teamwork between departments to
improve product quality and to create common
goals