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Introduction to Business

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Introduction to Business ­MGT 211
VU
Lesson 35
THE PRODUCTIVITY
Productivity is a measure of economic performance. It compares how much is produced with
the resources used to produce it. Quality is a product's fitness for use. However, an emphasis
solely on productivity or solely on quality is not enough. Profitable competition in today's
business world demands high levels of both productivity and quality.
Although the United States is the most productive country in the world, by the early 1970s
other nations had begun catching up with U.S. productivity. In particular, the U.S. growth rate
of productivity slowed from about 1979 into the early 1990s. Moreover, even though U.S.
manufacturing productivity is increasing, the service sector is bringing down overall
productivity growth. Because services now account for 60 percent of national income,
productivity in this area must improve. Finally, certain industries and companies remain less
productive than others.
On the other hand, in the years just before 1994, U.S. firms began regaining significant market
share in such industries as airplanes, computers, construction equipment, and transistors.
Abandoning a long-standing focus on lower wage rates in other countries, U.S. companies
focused instead of revitalizing productivity by becoming more customers oriented. In addition,
quality improvement practices were widely implemented. Recover has results from recognition
of the connection among customers, quality, productivity, and profits.
Total quality management (TQM) is the planning, organizing, directing, and controlling of all
the activities needed to get high-quality goods and services into the marketplace. Managers
must set goals for and implement the processes needed to achieve high quality and reliability
levels. Value added analysis evaluates all work activities, materials flows, and paperwork to
determine what value they add for customers. Statistical process control methods, such as
process variation studies and control charts, can help keep quality consistently high.
Quality/cost studies, which identify potential savings, can help firms improve quality. Quality
improvement teams also can improve operations by more fully involving employees in decision
making. Benchmarking -- studying the firm's own performance and the best practices of other
companies to gather information for improving a company's own goods and services -- has
become an increasingly common TQM tool. Finally, getting closer to the customer provides a
better understanding of what customers want so that firms can satisfy them more efficiently.
Recent trends include ISO 9000, a certification program (originating in Europe) attesting that
an organization has met certain international quality management standards. Business
process reengineering involves the fundamental redesign of business operations in the
interest of gaining improvements in quality, cost, and service. The reengineering process
consists of six steps, starting with the company's vision statement and ending with the
implementation of the reengineered process.
Productivity and quality can be competitive tools only if firms attend to all aspects of their
operations. To increase quality and productivity, businesses must invest in innovation and
technology. They must also adopt a long-run perspective for continuous improvement. In
addition, they should realize that placing greater emphasis on the quality of work life can also
help firms compete. Satisfied, motivated employees are especially important in increasing
productivity in the fast-growing service sector.
The Productivity-Quality Connection
Productivity -- a measure of economic performance, comparing how much we produce with
the resources we use to produce it.
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Introduction to Business ­MGT 211
VU
Quality -- A product's fitness for use; its success in offering features that consumers want
Responding to the Productivity Challenge
Productivity has both international and domestic ramifications.
i.
A Reality Check for International Business Survival. After declines in
productivity in the 1980s, around 1994 U.S. businesses began to
refocus on understanding the true meaning of productivity and to devise
ways of measuring it. As quality-improvement practices were gradually
implemented, more firms began to realize the payoffs that came from
highlighting four factors: customers, quality, productivity, and profits.
1. Measuring Productivity--Labor productivity Partial productivity
ratio calculated by dividing total output by total labor inputs
2. Productivity among Global Competitors--Differences in
productivity  among  nations  arise  from  differences  in
technologies, human skills, economic policies, natural resources,
and traditions and culture. For example, in the time it takes a
U.S. worker to produce $100 worth of goods, Japanese workers
produce about $68 worth and Belgians about $107 worth.
ii.
Domestic Productivity --- Nations must care about domestic
productivity regardless of their global standing. Additional wealth from
higher productivity can be shared among workers, investors, and
customers.
1. The United States remains one of the most productive nations in
the world. Output per worker hour rose steadily throughout most
of the 1980s and 1990s.
2. Growth Rate of Productivity--annual increase in a nation's
output over the previous year.
3. Uneven Growth in the Manufacturing and Service Sectors.
Throughout most of the 1970s, productivity in manufacturing
trailed behind the service sector, but services averaged zero
improvement from 1978 to 1990, and by 1993 manufacturing
productivity in the United States had grown to more than double
that of services, a margin sustained through 2001. With services
now accounting for about 60 percent of U.S. national income,
productivity must increase more rapidly in this sector for the
United States to maintain its competitive edge in world markets.
4. Industry wide Productivity--various industries differ vastly in
terms of productivity.  Some have seen productivity gains
(men's/boy's  furnishings)  and  other  have  fell  (plywood
manufacturing).
5. Companywide  Productivity--high  productivity  gives  a
company a competitive edge because its costs are lower than
those of other companies. Increased productivity allows the firm
to pay higher wages without raising prices.
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Table of Contents:
  1. INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE
  2. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT
  3. BUSINESS ORGANIZATION:Sole Proprietorship, Joint Stock Company, Combination
  4. SOLE PROPRIETORSHIP AND ITS CHARACTERISTICS:ADVANTAGES OF SOLE PROPRIETORSHIP
  5. PARTNERSHIP AND ITS CHARACTERISTICS:ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP
  6. PARTNERSHIP (Continued):KINDS OF PARTNERS, PARTNERSHIP AT WILL
  7. PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS
  8. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:ETHICS IN THE WORKPLACE, SOCIAL RESPONSIBILITY
  9. JOINT STOCK COMPANY:PRIVATE COMPANY, PROMOTION STAGE, INCORPORATION STAGE
  10. LEGAL DOCUMENTS ISSUED BY A COMPANY:MEMORANDUM OF ASSOCIATION, CONTENTS OF ARTICLES
  11. WINDING UP OF COMPANY:VOLUNTARY WIDNIGN UP, KINDS OF SHARE CAPITAL
  12. COOPERATIVE SOCIETY:ADVANTAGES OF COOPERATIVE SOCIETY
  13. WHO ARE MANAGERS?:THE MANAGEMENT PROCESS, BASIC MANAGEMENT SKILLS
  14. HUMAN RESOURCE MANAGEMENT:Human Resource Planning
  15. STAFFING:STAFFING THE ORGANIZATION
  16. STAFF TRAINING & DEVELOPMENT:Typical Topics of Employee Training, Training Methods
  17. BUSINESS MANAGERíS RESPONSIBILITY PROFILE:Accountability, Specific responsibilities
  18. COMPENSATION AND BENEFITS:THE LEGAL CONTEXT OF HR MANAGEMENT, DEALING WITH ORGANIZED LABOR
  19. COMPENSATION AND BENEFITS (Continued):MOTIVATION IN THE WORKPLACE
  20. STRATEGIES FOR ENHANCING JOB SATISFACTION AND MORALE
  21. MANAGERIAL STYLES AND LEADERSHIP:Changing Patterns of Leadership
  22. MARKETING:What Is Marketing?, Marketing: Providing Value and Satisfaction
  23. THE MARKETING ENVIRONMENT:THE MARKETING MIX, Product differentiation
  24. MARKET RESEARCH:Market information, Market Segmentation, Market Trends
  25. MARKET RESEARCH PROCESS:Select the research design, Collecting and analyzing data
  26. MARKETING RESEARCH:Data Warehousing and Data Mining
  27. LEARNING EXPERIENCES OF STUDENTS EARNING LOWER LEVEL CREDIT:Discussion Topics, Market Segmentation
  28. UNDERSTANDING CONSUMER BEHAVIOR:The Consumer Buying Process
  29. THE DISTRIBUTION MIX:Intermediaries and Distribution Channels, Distribution of Business Products
  30. PHYSICAL DISTRIBUTION:Transportation Operations, Distribution as a Marketing Strategy
  31. PROMOTION:Information and Exchange Values, Promotional Strategies
  32. ADVERTISING PROMOTION:Advertising Strategies, Advertising Media
  33. PERSONAL SELLING:Personal Selling Situations, The Personal Selling Process
  34. SALES PROMOTIONS:Publicity and Public Relations, Promotional Practices in Small Business
  35. THE PRODUCTIVITY:Responding to the Productivity Challenge, Domestic Productivity
  36. THE PLANNING PROCESS:Strengths, Weaknesses, Threats
  37. TOTAL QUALITY MANAGEMENT:Planning for Quality, Controlling for Quality
  38. TOTAL QUALITY MANAGEMENT (continued):Tools for Total Quality Management
  39. TOTAL QUALITY MANAGEMENT (continued):Process Re-engineering, Emphasizing Quality of Work Life
  40. BUSINESS IN DIGITAL AGE:Types of Information Systems, Telecommunications and Networks
  41. NON-VERBAL COMMUNICATION MODES:Body Movement, Facial Expressions
  42. BUSINESS ORGANIZATIONS:Organization as a System
  43. ACCOUNTING:Accounting Information System, Financial versus Managerial Accounting
  44. TOOLS OF THE ACCOUNTING TRADE:Double-Entry Accounting, Assets
  45. FINANCIAL MANAGEMENT:The Role of the Financial Manager, Short-Term (Operating) Expenditures