Upload
kamini-sharma
View
227
Download
0
Embed Size (px)
Citation preview
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
1/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 1
Functional-Level Strategies
Functional-level strategies are strategies aimedat improving the effectiveness of a companysoperations.
Functional-level strategies aim to give a firmsuperior:
Efficiency
Quality
Innovation
Customer responsiveness
This leads to a competitive advantageand superior profitability and profit growth.
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
2/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 2
Achieving Superior Efficiency
Economies of scaleUnit costreductionsassociated with a large scale of output
Ability to spread fixed costs over a large productionvolume
Ability of companies producing in large volumes toachieve a greater division of labor and specialization
Specialization has favorable impact on productivity byenabling employees to become very skilled at performinga particular task
Diseconomies of scaleUnit costincreasesassociated with a large scale of output Increased bureaucracy associated with large-scale
enterprises
Resulting managerial inefficiencies
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
3/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 3
Economies and Diseconomiesof Scale
Figure 4.2
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
4/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 4
Learning Effects
Learning Effects are cost savings that comefrom learning by doing.
Labor productivityLearn by repetition how to best carry out the task
Management efficiencyLearn over time how to best run the operation
Realization of learning effects implies adownward shift of the entire unit cost
curveAs labor and management become more efficientover time at every level of output
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
5/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 5
The Impact of Learning andScale Economies on Unit Costs
Figure 4.3
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
6/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 6
The Experience Curve
The Experience Curve is the systematic loweringof the cost structure and consequent unit costreductions that occur over the life of a product
Strategic significance of the experience curve:Increasing a companys product volume and
market share will lower its cost structure
relative to its rivals.
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
7/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 7
The Experience Curve
Figure 4.4
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
8/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 8
Flexible Manufacturingand Mass Customization
Flexible Manufacturing TechnologyLean Production technology that:
Reduces setup times for complexequipment
Improves scheduling to increaseuse of individual machines Improves quality control at all
stages of the manufacturing process Increases efficiency and lowers unit costs
Mass CustomizationAbility to use flexible manufacturing technology toreconcile two goals that were once thought incompatible:
Low cost and
Differentiation through product customization
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
9/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 9
Tradeoff Between Costsand Product Variety
Figure 4.5
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
10/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 10
Marketing
Marketing strategy refers to the position that acompany takes regarding: Pricing
Promotion
Advertising
Product Design
Distribution
Marketing strategy can reduce costs by loweringcustomer defection rates and increasing loyalty
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
11/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 11
The Relationship Between CustomerLoyalty and Profit per Customer
The longer a company holds on to a customer the greaterthe volume of customer-generated unit sales that offset fixed
marketing costs and lowers the average cost of each sale.
Figure 4.6
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
12/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 12
Materials Management encompasses the activitiesnecessary to get inputs and components to a productionfacility, through the production process, and through thedistribution system to the end-user Many sources of cost in this process
Significant opportunities for cost reduction through moreefficient materials management
Just-in-Time (JIT) Inventory System to economize holding costs:
Have components arrive to manufacturing just prior to need inproduction process
Have finished goods arrive at retail just prior to stock out Supply Chain Management is the task of managing the
flow of inputs to a companys processes to minimizeinventory holding and maximize inventory turnover
Materials Management andSupply Chain
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
13/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 13
Research and Development (R&D)Roles of R&D in helping a company achieve greaterefficiency and lower cost structure:
1. Boost efficiency by designing products that
are easy to manufacture Reduce the number of parts that make up a productreduces assembly time
Design for manufacturingrequires close coordinationwith production and R&D
2. Help a company have a lower cost structure bypioneering process innovations Reduce process setup times
Flexible manufacturing
An important source of competitive advantage
R&D Strategy
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
14/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 14
Human Resource Strategy
Hiring strategyAssures that the people a company hires have the attributesthat match the strategic objectives of the company
Employee trainingUpgrades employee skills to perform tasks faster and moreaccurately
Self-managing teams
Members coordinate their own activities and make their ownhiring, training, work, and reward decisions
Pay for performanceLinking pay to individual and team performance can help toincrease employee productivity
Goal: to improve employee productivity.
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
15/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 15
Information Systems
Information systemsimpact on productivity iswide-ranging:
Web-based informationsystems can automate manyactivities
Automates interactions
between Company and customers
Company and suppliers
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
16/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 16
A companys structure, culture, style ofstrategic leadership, and control system: Determines the context within which all other value
creation activities take place
Is especially important in building a companywidecommitment to efficiency
Articulates a vision for all functions and coordinateacross functions
Achieving superior performance requires anorganization-wide commitment.
Top management plays a major role in this process.
Infrastructure
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
17/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 17
Achieving Superior Quality
1. Quality as reliabilityThey do the jobs they were designed for and do it well
2. Quality as excellencePerceived by customers to have superior attributes
A strong reputation for quality allows acompany to differentiateits products.
Eliminating defects or errors reduces waste,increases efficiency, and lowers the coststructure increasing profitability.
Quality can be thought of in terms of twodimensions:
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
18/27Copyright Houghton Mifflin Company. All rights reserved. 4 | 18
Improving Quality as Reliability
TQM is based on the following five-step chain
reaction:1. Improved quality means that costs
decrease.2. As a result, productivity also improves.
3. Better quality leads to higher marketshare and allows increased prices.4. This increases a companys profitability.5. Thus the company creates more jobs.
Six Sigma methodology: the principal toolnow used to increase reliability, which is a directdescendant of Total Quality Management (TQM)
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
19/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 19
Implementing Reliability ImprovementMethodologies
Build organizational commitment to quality
Create quality leaders
Focus on the customer Identify processes and the source of defects
Find ways to measure quality
Set goals and create incentives
Solicit input from employees Build long-term relationships with suppliers
Design for ease of manufacture
Break down barriers among functions
Imperatives that stand outamong companies that havesuccessfully adopted quality improvement methods:
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
20/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 20
Improving Quality as Excellence
Developing Superior Attributes:
Learn which attributes are most important tocustomers
Design products and associate services toembody the important attributes
Decide which attributes to promote and howbest to position them in consumers minds
Continual improvement in attributes and
development of new-product attributes
A product is a bundle of attributes and can bedifferentiated by attributes that collectively defineproduct excellence.
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
21/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 21
Attributes Associated with aProduct Offering
Table 4.3
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
22/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 22
Achieving Superior Innovation
Innovation can: Result in new products that better satisfy
customer needs
Improve the quality of existing products
Reduce costs
Innovation can be imitated - So it must be continuous
Building distinctive competencies that result ininnovation is the most important source ofcompetitive advantage.
Successful new product launches aremajor drivers of superior profitability.
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
23/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 23
The High Failure Rateof Innovation
Most common explanations for failure:Uncertainty
Quantum innovation radical departure with higher risk Incremental innovation extension of existing technology
Poor commercialization Definite demand for product Product not well adapted to customer needs
Poor positioning strategy Good product but poorly positioned in the marketplace
Technological myopia Technological wizardry vs. meeting market requirements
Being slow to market
Failure rate of innovative new products is highwithevidence suggesting that only 10 to 20% of major R&Dprojects give rise to a commercially viable product.
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
24/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 24
Building Competencies inInnovation
1. Building skills in basic and applied research
2. Project selection and management
Using the product development funnelIdea generation Project refinement Project execution
3. Achieving cross-functional integration1. Driven by customer needs 2. Design for manufacturing
3. Track development costs 4. Minimize time-to-market5. Close integration between R&D and marketing
4. Using product development teams5. Partly-parallel development process
To compress development time & time-to-market
Companies can take a number of steps to buildcompetencies in innovation and reduce failures:
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
25/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 25
The Development Funnel
Figure 4.7
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
26/27
Copyright Houghton Mifflin Company. All rights reserved. 4 | 26
Sequential and Partly ParallelDevelopment Processes
Figure 4.8
Reduceddevelopment time& time-to-market
8/3/2019 Building Competitve Strategy Through Functional Level Strategy-revised (1)
27/27
Achieving SuperiorResponsiveness to Customers
Focusing on the customer Satisfying customer needs Customization (Tailor to
unique needs of groups
of customers) Response time (increasedspeed; premium pricing)
Customer responsiveness:giving customers whatthey want, when they want it, and at a price they are willingto pay -as long as the companys long-term profitability isnot compromised.