Business Strategies

Value Chain Analysis – As global markets widen, businesses have to pay closer attention to
where their raw materials come form, how they are produced, how finished products are
stored and transported, and what their end products users are really asking for.
Value Chain – is a general term that refers to a sequence of interlinked undertaking that an
organization operating in a specific industry engages in.
Supply Chain Management – is a broad continuum of specific activities employed by a
company.

 Purchasing or supply management

 Production
 Logistics
 Marketing and Sales

Supply Chain Management

Supply Management
- Sourcing
- Ordering
- Inventory
Management

Logistics
Production/
- Warehousing
Operations
- Manufacturing
Organization - Scheduling
- Transportation
- Assembly
- Delivery

Maketing & Sales

- Promotion
-Selling

Supply Management – term used for purchasing which was formerly termed as
procurement
1. Identifying material and service need
2. Locating and selecting suppliers; negotiating and closing contracts
3. Acquiring the needed materials, services, and equipment
4. Monitoring Inventory Stock keeping units
5. Tracking supplier performance
 Goal of Supply management is to obtain the right materials by meeting quality
requirements in the right quantity and at the right price.
Sourcing and Ordering – value is generated when supplier relationships are created and
managed in delivering quality products, delivering on time, delivering at competitive prices,
providing good service back – up when needed, and keeping promises
Inventory Management – to buffer uncertainty

 Work in Process (WIP) – company’s partially finished goods waiting for completion
and eventual sale or the value of these items.
 Maintenance, repair, and operating supplies (MRO) – Include the materials and
supplies used when producing the products but are not parts of the products.
Inventory Methods
Carrying Cost – the cost of holding an item in inventory
Ordering Cost – the cost of replenishing inventory
Shortage Cost – temporary or permanent loss of sales when demand cannot be met
Inventory model answers two questions:
1. How much to order? – Economic Order Quantity (EOQ)
2. When to order? – Reorder point
EOQ – presupposes that the following are known and constant:

 Demand
 Order lead time
 Price
 Carrying cost
 Ordering cost

 Replenishment is instantaneous and stockouts are not allowed.

Lead time – refers to the span of time (in days) it takes for a stock to be delivered from.
JIT – Operational Strategy whereby the company estimates its demand for raw materials
and makes sure that they are delivered on time.

Production and Operations – are processes that transform operational input into output to
satisfy consumer needs and requirements.

Transformational
Input Process Output

Manufacturing – is the process of producing goods using people or machine resources.

Assembly – is the process of putting together raw materials into a desired output.

The Logistics Circle

Warehousing

Delivery Scheduling

Transportation Dispatching

1. Warehousing – is the function of physically packing finished goods or merchandises

in a building, room, or any space for temporary storage.
2. Scheduling – act of organizing these inventory units and booking them for delivery.
3. Dispatching – products are for transfer; this may include posting, mailing, shipping
out, transmitting, forwarding, or releasing commodities.
4. Transportation – scheduling and other logistics are necessary to make dispatching
cost efficient.
5. Delivery – specified site is undertaken. It closes the entire logistics circle.
Marketing and Sales – products and services are rendered for ultimate release to customers.

Growth Strategies – use and studied by organizations for the following reasons:

 They want to survive the hypercompetitive environment and not perish

 They want to increase their earnings or income
 Want to create their advantage among competitors
 May want to increase their market leadership in a given industry
Growth Strategy – is a mode adopted by an organization to achieve its main objectives of
increasing in volume and turnover.
Internal Growth Strategies - occurs when firms grow from within. They use their own
resources or acquire them from outside to increase their size, scale of operations, resources
(financial and non-financial).
Table 4.1 Product/Market Mix Internal Growth Strategy

Current Products New Products

Current Markets Market Penetration Product Development
New Markets Market Development Diversification

Market penetration suggest that for an organization to increase its growth, market
penetration can be actualized by selling more of its current products/services to its current
customers or buyers
Market Development is the process where a company can sell more of its current products
by seeking and tapping new markets
Product Development is an internal growth strategy where the company sells “new”
products to an existing market
Diversification is a product/market mix growth strategy that involves creating differentiated
products for new customers
Competitive Strategies – are essentially long – term action plans prepared with the end goal
of directing how an organization will survive or compete.
4.2 Competitive Strategies (Porter 2008)
Competitive Strategies Cost Leadership Differentiation Market Niche
Cost Leadership Low – cost leadership Best – cost provider Focused/Market –
strategy strategy niche lower cost
strategy
Differentiation Best – cost provider Broad differentiation Focused/market –
strategy strategy niche differentiation
strategy
Low – cost Leadership Strategy – The objective is to offer products and services at the
lowest cost possible in the industry. (i.e, Cebu Pacific Airlines Offering airfares at low prices)
Broad Differentiation Strategy – The objective is to provide a variety of products /service
features that competitors do not offer or are not able to offer to consumers. (i.e Mobile phone
with Face Recognition)
Best – cost Provider Strategy – When organization gives its customers more value for
money by emphasizing both low-cost products and services with unique features. (i.e,
Baclaran increases customer base by selling varied, wide ranged numbers, and low – cost
products in large quantities)
Focused/market – niche Lower Cost Strategy – When organization concentrates on a limited
market segment and creates market niche based on lower cost.
Focused/market-niche Differentiation Strategy – When organization concentrates on a
limited market segment and creates a market niche based on differentiated features like
design, utility, and practicality. (i.e ROLEX)
Other Competitive Strategies
Innovation Strategy – strictest sense of the word, is anything that is new and original, this
strategy is difficult to implement.
Operational Effectiveness Strategy – Some organizations operate with high degree of
inefficiencies in their internal business process like wastes, downtime, longer cycle times,
complaints, rejects, loses, absences, and others.
Economies of Scale – a proportionate in costs gained by an increased level production.
Technology Strategy – Technology can be applied system-wise through digital integration.

Enterprise Resource Planning – is a modular software system designed to integrate the

main functional areas of an organization’s business processes into a unified system.
Finance and Accounting, Human Resource, Production and Materials management,
customer relationship management (CRM) and supply chain management. Organizations
choose which core modules to use based on which are most important to their particular
business.

Life Cycle Strategies – any product/service refers to the lifespan that commodity/service
undergoes from its introduction stage to its growth, maturity and decline stages.
Figure 4.4 Product Life Cycle (Vernon & Wells)
Introduction Stage – the period of launching the product/service for acceptance. In this
phase, the product/service is new; hence, there is a need to create awareness.
Growth Stage – this phase where the product/service gains acceptance by the consumers.
In this phase, sales and profit slowly increase and emphasis is now on continuous market
development and improvement. Competition becomes challenging.
Where organization can focus on

 Branding
 Building customer loyalty
 Promoting repeat business through customer patronage
Maturity Stage – is the period where the product has reached its penultimate level

 Product differentiation is recommended for this, as well as efficient operation and

formulation of creative marketing strategies
Decline Stage – is the period where the product/service begins to reach or is reaching the
lower point

 Product/service reinventions and aggressive marketing can be helpful

 Organization Exit
Stability Strategies – For organizations that are doing better in their existing businesses, they
may choose not to implement any growth strategy. They may not want to apply competitive
strategy and hence, decide to keep the status quo.

 Successful monopolies in their own right with no new entrants. They continue to
enjoy their profits. On the other hand, there are organizations that have not decided
to expand.
Retrenchment Strategies – When a company’s survival is threatened or when it is not
competing effectively, it usually takes time to sit down and review its current situation.
1. Liquidation – is the most radical action a company takes when company is losing
money and thus, is further compounded by a disinterest on the part of the
stockholders to do anything more to save it. In such cases, the business may be
terminated and its assets sold.
2. Divestment – is implemented when a company consistently fails to reach the set
objectives or when the company does not fit well in the organization. Thus, the
stockholders would preferably sell it or set is as a separate corporation.
 Eliminating a portion of a business
3. Turnaround strategy – when the organization has reached a significant level of non-
performance, non-productivity, demoralization, and unprofitability, and therefore, has
to implement restorative strategies

Finances

Production &
Infrastructure
Operations
Turnaround
Strategy

Climate & Product &

Culture Services

a. Climate and Culture – Generally, new chief executive officer comes in and takes
over the critical organization.
b. Products and Services – review of the products offered and services rendered is
needed; ask questions like what product/services are marketable in the industry,
which of these products and services need some improvement and major
redesign
c. Production and Operations –
d. Infrastructure -
e. Finance -