Product Development, Manufacturing Expansion and Community Prosperity Dr. Fred Zimmerman University of St. Thomas. Manufacturing Growth Occurs When. Market needs exist. Distribution systems are accommodating. Manufacturing companies are low-cost. Products are differentiated.
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How profitability changes as revenue changes is wholly dependent upon the behavior of variable cost and the presence or absence of upside and downside efficiency. The typical dilemma of the inefficient firm is that when revenue increases, costs increase by nearly as much, thus limiting the effectiveness of the revenue expansion strategy. Correspondingly, when revenue falls, expenses are not proportionately reduced. For profitability to be improved, efficiency moves must precede strategic moves.
Ford Motor Company’s philosophy:
70 % of cost reductions are achieved through design.
30% through manufacturing efficiencies.
Successful firms produce reliable new products. New products from unsuccessful firms are often poorly tested and unreliable.
Successful chief executives are supportive of development staffs. Unsuccessful CEOs interfere with limited information and too much ego.
Both successful and unsuccessful companies spend ample money on product development, but successful companies accomplish much more for the money.
Both successful and unsuccessful companies believe their products to be of high quality, but credibility varies. Successful companies constantly
check to ensure that products meet or exceed customer requirements.
Unsuccessful companies presume that quality is high but do not check.
Successful companies quickly take action on quality problems.
Unsuccessful companies gather more evidence.
Discipline in operations is prevalent among successful companies. Quality is maintained because precision is expected at every link in the value chain, and when quality is not forthcoming, changes are made. Unsuccessful companies lack discipline.
Successful companies improve the product even when it is better than competing products. Unsuccessful companies become satisfied when quality is about the same as that of weaker competitors.
In-process quality is the major emphasis at successful companies. At unsuccessful companies, more emphasis is on end product quality.
Top managers at successful companies are emotional about quality and other issues. Top managers at unsuccessful companies display less emotion and are hard for people to read.
Top managers at successful companies instill pride in company and product by clearly articulating, through words and actions, what is
important and by supplementing these articulations with outstanding
technical knowledge. The combination of pride, technical competence,
fairness, and experience helps organization members to believe that they
are part of a class act.
Successful companies nurture, protect, and develop products for historical markets before moving into new markets. Unsuccessful companies often leave historical markets unprotected.
Successful companies actively preserve product identifiers, such as names, product colors, advertising, or product attributes, that retain continuity with historical markets. Unsuccessful companies frequently change product identifiers.
Successful companies assume that markets are captured on the basis of merit arising from better products and service. Unsuccessful companies overestimate the importance of the strategic selection of markets.
Successful companies are able to more accurately gauge the rate of change in markets and provide products that are in phase with changes. Unsuccessful companies are frequently out of phase.
In order to preserve investment and field a wide variety of products to cover different circumstances, successful companies are less inclined to totally discard products. Instead, they adroitly stash products and features that they believe will be useful at other times or extend product lines in
other ways. Unsuccessful companies time product announcements poorly.
Strategic positioning for survival. Survival is most likely
when a company is a low-cost provider of differentiated products or services.
Survival is least likely when undifferentiated products are expensively produced.
A firm’s survival position is enhanced if either product differentiation or low-cost operation is present, but both attributes are necessary to ensure success.
Successful operations often first achieve low-cost operation and then enhance product differentiation in a two-step process. Charles Nash had the clearest perception: become highly efficient at manufacturing and then use some of the savings to differentiate the product by adding quality and
Unsuccessful firms are seldom able to exhibit a favorable strategic profile involving low-cost operation and product differentiation. Costs remain high while productquality, features, and benefits remain poor.
Under these conditions, failure is an almost universal outcome.
Successful companies make small, incremental improvements to produce differentiated products. Unsuccessful firms often fail to incrementally improve existing products even when product shortcomings are widely perceived.
Unsuccessful companies often make significant and abrupt changes in the positioning of their products in the market. Successful firms avoid abrupt changes in market position.
Successful firms put greater emphasis on product quality. Unsuccessful firms often neglect quality issues.
Successful firms more accurately gauge their ability to implement fully their
strategic plans. Unsuccessful firms often have strategic plans that are either
internally inconsistent or inconsistent with the company's resource base.
Successful firms concentrate on internal operational issues such as product quality, organizational productivity, product differentiation, and day-to-day sales.
Unsuccessful firms often focus on external expansion, acquisitions, or financial restructuring or some obscure view of business strategy.
The managers at successful firms often have extensive industrial
experience in the particular industry being served or in a closely related industry. Top managers at unsuccessful firms often have less experience in the industry being served.
Outsourcing is the gradual process of educating future partners or future competitors.