Question

1. Leonard Chang runs a barbershop in Fredericton, NB. Due to his excellent marketing skills, the sales have increased by 25% in the last quarter. The barbershop does 1200 haircuts per month. The labor productivity is about 2 haircuts per labor-hour. Each barber works 150 hours per month. How many barbers should Leonard add? The hourly pay will be $10 for barbers. Leonard is considering redesign the barbershop to increase the customer flows. The redesign entails a significant increase in the investment. The additional investment incurs a monthly cost of $240, which also leads to an increase in output to 1500 haircuts. What is the change in labor productivity in haircuts per dollar? What is the new investment productivity in haircuts per dollar? What are the percentage productivity changes for labor and investment?

2. Walmart Canada debuted a new checkout system called "fast lane" that lets customers avoid cashiers and registers. Here's how it works: My Walmart users scan items with their phones as they shop. Once a user is finished shopping, they click "checkout" to receive a barcode. Next, the customer scans the order barcode at one of four scanning stations in the fast lane. This action charges the credit card the My Walmart user has on file. Finally, just before exiting the store, customers present their mobile receipts to a worker tending the fast lane. The system has debuted in a newly opened store in Toronto that Walmart says will serve as a prototype for future store renovations. Assume the new fast lane setup will replace 2 old cashier lanes that were staffed by a cashier and bagger on each lane. One worker mans all 4 scanning stations (answering questions, checking for un-scanned items, taking coupons, etc). Checkout on the new lanes takes 2 minutes (customers bag their own orders) while checkout with the old lanes took only 45 seconds. In addition, the electricity costs for both setups are $0.05 per checkout while bagging (material) costs are $0.10 per checkout with the old system and $0.15 for the new system. The new lanes also require $100/shift in capital costs. Assume that the lanes are always in use for 8 hours per day (1 shift) and that a worker makes $10/hour.

(a) How many checkouts did the old system provide in a shift?

(b) How many checkouts does the new system provide?

(c) What is the multifactor productivity for each system?

3. A car wash facility operates in Vancouver Island. With traditional equipment, the facility typically washed 300 cars per month. They utilized 15 gallons of solvent, and two employees worked 22 days per month, 8 hours a day. The facility decided to switch to an advanced car washing machine. Last month, they washed 200 cars in only 15 days. They have used 20 gallons of solvent, and the two employees worked 8 hours a day.

(a) What was their solvent and labor productivity with the traditional equipment?

(b) What is their solvent and labor productivity with the advanced car washing machine?

(c) What is the change in each productivity measure?

4. The text provides three primary ways – strategic approaches (differentiation, cost and response) – for achieving competitive advantage. Provide an example of each not given in the text. Support your choices. (Hint Note the examples provided in the text).

Answer 1