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It involves to make the choices of acquisition, management and exploitation of product and process technologies that are consistent with firm’s business strategies and can ultimately drive its business competitiveness.
1. To make technological choices2. To set criteria by which strategies
are embodied into new products and processes
3. Organizational practices and managerial processes for deployment of technological resources
It’s a “good” project!It’s a “good” project! Good managers can meet stretch Good managers can meet stretch
goalsgoals (and I’m a good manager)(and I’m a good manager) Making difficult decisions takes time Making difficult decisions takes time
& energy& energy
It’s very hard to kill projects without It’s very hard to kill projects without a strategya strategy
1.1. Maintaining existing technological Maintaining existing technological capabilities through incremental capabilities through incremental improvementsimprovements
2.2. Expanding existing markets or exploring Expanding existing markets or exploring new one for new businesses or new one for new businesses or products/serviceproducts/service
3.3. Securing distinctive technological Securing distinctive technological capabilities from external sources.capabilities from external sources.
The Industry Life Cycle as an S curveThe Industry Life Cycle as an S curve
Performance
Takeoff
Maturity
Ferment
Time
Discontinuity
Too much emphasis on short-term financial performance
Failing to take advantage of strengths and opportunities
Neglecting operations strategy Failing to recognize competitive threats
2-8
Too much emphasis in product and service design and not enough on improvement
Neglecting investments in capital and human resources
Failing to establish good internal communications
Failing to consider customer wants and needs
Mission◦ The reason for existence for an organization
Mission Statement◦ States the purpose of an organization
Goals◦ Provide detail and scope of mission
Strategies◦Plans for achieving organizational goals
Tactics◦ The methods and actions taken to accomplish strategies
Maria is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably
Mission: Live a good life Goal: Successful career, good income Strategy: Obtain a college education Tactics: Select a college and a major Operations: Register, buy books, take
courses, study, graduate, get job
Example 1
◦ Any factors that allow an organization to differentiate its product or service from those of its competitors to increase market share.
◦ Superior technology is an important source of competitive advantage
1. Where are we now?
2. Where do we want to go?• Business(es) to be in and market positions to
try and achieve?• Buyer needs and groups to serve?• Outcomes to achieve?
3. How do we get there?
1. Growth (a. concentration; b. diversification)
2. Retrenchment
3. Stability (status quo)
4. Combination (multiple strategies)
1a. Growth through concentration – concentrating on your existing specialization
i. market penetration – aggressively targeting current markets with existing product
specialties
ii. market development/geographic expansion - expanding into new markets
iii. market segmentation – dividing existing markets
iv. product development – modify existing
products, or develop new but related products
1b. Growth through diversification – branching out into new areas
i. Horizontal integration – expanding across the general industry by acquiring infrastructures, assets and companies of the same industry or in the same level of production (e.g. Coke acquires Minute Maid fruit juice company).
ii. Vertical integration – expanding into industries populated by suppliers/buyers (e.g. Ford buys steel plant).
iii. Conglomerate diversification – expanding into unrelated industries (e.g. GM buys Hershey’s candy).
iv. Joint venture – expanding together with another company in order to diversity efficiently.
i. Turnaround – downsizing existing company/divisions
ii. Divestiture – selling off existing divisions/subdivisions
iii. Liquidation – bankruptcy
3. Stability - maintain status quo (e.g. continuous improvement)
4. Combination – multiple use of strategies
A competitive strategy consists of moves to ◦ Attract customers◦ Withstand competitive pressures◦ Strengthen an organization’s market position
The objective of a competitive strategy is to generate a competitive advantage, increase the loyalty of customers and beat competitors
A competitive strategy is narrower in scope than corporate strategy
Five competitive strategies are◦ Overall low-cost leadership strategy◦ Broad differentiation strategy◦ Best cost provider strategy ◦ Focused low-cost strategy◦ Focused differentiation strategy
Environmental Scan – Both internal and external factors need to be considered:
1. Internal factors – characteristics in the firm (management, mission, resources, systems process, and structure) that can be
considered strengths or strong points and weaknesses or weak points.
2. External factors - characteristics in the environment that are “outside” the firm (customers, competitors, suppliers, labor force,
shareholders, society, technology, the economy, and governments) that represent opportunities to tap or threats to flank.
Internal Factors
Strengths Weaknesses
E Fx a Opportunitiest ce tr on r a s Threatsl
Strive to be the overall low-cost provider in an industry How to achieve overall low-cost leadership
◦ Scrutinize each cost activity◦ Manage each cost lower year after year◦ Reengineer cost activities to reduce overall costs◦ Cut some cost activities out of the value chain
Competitive strengths of an overall low-cost strategy◦ Organization in a better position to compete offensively on price◦ Organization is better able to negotiate with large customers◦ Organization is able to use price as a defense against substitutes◦ Low cost is a significant barrier to entry◦ Organization is more insulated from the power of suppliers
Striving to build customer loyalty by differentiating an organization’s products from competitors’ products
Keys to success include◦ Finding ways to differentiate to create value for customers
that are not easily copied◦ Not spending more to differentiate than the price premium
that can be charged
A successful differential strategy allows an organization to◦ Set a premium price◦ Increase unit sales◦ Build brand loyalty
Where to look for differentiation opportunities◦ Supply chain◦ Research and development◦ Production activities◦ Marketing, sales and service activities
Strengths of a Differentiation Strategy◦ Customers develop loyalty to the brand◦ Brand loyalty acts as an entry barrier◦ Organization is better able to fend off threats of
substitute products because of brand loyalty◦ Reduces bargaining power of large customers since other
brands are less attractive◦ Seller may be in a better position to resist efforts of
suppliers to raise prices
Trying to differentiate on an unimportant product feature that doesn’t result in providing more value to the customer
Over differentiating the product such that the product features exceed the customers’ needs
Charging a price premium that buyers perceive as too high
Ignoring need to signal value Not identifying what customers consider valuable
Striving to give customers more value for the money by combining an emphasis on low cost with an emphasis on upscale differentiation◦ Combines low-cost and differentiation
The objective is to create superior value by meeting or beating customer expectation on product attributes and beating their price expectations
Keys to success◦ Match close competitors on key product attributes and
beat them on cost◦ Expertise at incorporating upscale product attributes at a
lower cost than competitors◦ Contain costs by providing customers a better product
Competitive advantage comes from matching close competitors on key product attributes and beating them on price
Most successful best-cost providers have skills to simultaneously manage costs down and product quality up
Best-cost provider can often beat an overall low-cost strategy and a broad differentiation strategy where◦ Customer diversity makes product differentiation the norm ◦ Many customers are price and value sensitive
Focus strategy based on low-cost◦ Concentrate on a narrow customer segment beating the
competition on lower cost Focus strategy based on differentiation
◦ Offering niche customers a product customized to their needs
Overall objective of both focus strategies is to do a better job of serving a niche target market than competitors
Keys to success◦ Choose a niche were customers have a distinctive preference,
unique needs or special requirements◦ Develop a unique ability to serve the needs of a niche target
market
Strengths◦ Competitors don’t have the motivation to meet specialized
needs of the niche◦ Organization’s competitive advantage could be seen as a
barrier to entry◦ Organization’s competitive advantage provides an obstacle for
substitutes◦ Organization’s ability to meet the needs of customers in the
niche can reduce the bargaining power of large niche buyers
Risks◦ Broad differentiated competitors may find effective ways to
enter the niche◦ Niche customers’ preferences may move toward the product
attributes desired by a larger market segment◦ Profitability may be limited if too many competitors enter the
niche
The actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas
FinanceHR
Other
– Identify the basic courses of action that each department will pursue in order to help the business attain its competitive goals.
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