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Session 4 - Building Competitve Strategy Through Functional Level Strategy
Session 4 - Building Competitve Strategy Through Functional Level Strategy
Functional-Level Strategies
Functional-level strategies are strategies aimed at improving the effectiveness of a companys operations. Functional-level strategies aim to give a firm superior:
Efficiency Quality Innovation Customer responsiveness
This leads to a competitive advantage and superior profitability and profit growth.
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Diseconomies of scale
Unit cost increases associated with a large scale of output Increased bureaucracy associated with large-scale enterprises Resulting managerial inefficiencies
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Learning Effects
Learning Effects are cost savings that come from learning by doing. Labor productivity
Learn by repetition how to best carry out the task
Management efficiency
Learn over time how to best run the operation
Realization of learning effects implies a downward shift of the entire unit cost curve
As labor and management become more efficient over time at every level of output
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Strategic significance of the experience curve: Increasing a companys product volume and market share will lower its cost structure relative to its rivals.
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Reduces setup times for complex equipment Improves scheduling to increase use of individual machines Improves quality control at all stages of the manufacturing process Increases efficiency and lowers unit costs
Mass Customization
Ability to use flexible manufacturing technology to reconcile two goals that were once thought incompatible:
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Marketing
Marketing strategy refers to the position that a company takes regarding:
Pricing Promotion Advertising Product Design Distribution
Marketing strategy can reduce costs by lowering customer defection rates and increasing loyalty
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The longer a company holds on to a customer the greater the volume of customer-generated unit sales that offset fixed marketing costs and lowers the average cost of each sale.
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Supply Chain Management is the task of managing the flow of inputs to a companys processes to minimize inventory holding and maximize inventory turnover
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R&D Strategy
Research and Development (R&D)
Roles of R&D in helping a company achieve greater efficiency and lower cost structure: 1. Boost efficiency by designing products that are easy to manufacture
Reduce the number of parts that make up a product reduces assembly time Design for manufacturing requires close coordination with production and R&D
Employee training
Upgrades employee skills to perform tasks faster and more accurately
Self-managing teams
Members coordinate their own activities and make their own hiring, training, work, and reward decisions
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Information Systems
Information systems impact on productivity is wide-ranging:
Web-based information systems can automate many activities Automates interactions between Company and customers Company and suppliers
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Infrastructure
A companys structure, culture, style of strategic leadership, and control system:
Determines the context within which all other value creation activities take place Is especially important in building a companywide commitment to efficiency Articulates a vision for all functions and coordinate across functions
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2. Quality as excellence
Perceived by customers to have superior attributes
A strong reputation for quality allows a company to differentiate its products. Eliminating defects or errors reduces waste, increases efficiency, and lowers the cost structure increasing profitability.
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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 market share and allows increased prices. 4. This increases a companys profitability. 5. Thus the company creates more jobs.
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Uncertainty
Poor commercialization
Quantum innovation radical departure with higher risk Incremental innovation extension of existing technology Definite demand for product Product not well adapted to customer needs Good product but poorly positioned in the marketplace Technological wizardry vs. meeting market requirements
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1. Building skills in basic and applied research 2. Project selection and management
Using the product development funnel Idea generation Project refinement Project execution
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