Objectives. Introduce the concept of generic business strategies: Cost leadership. Differentiation. Focus. Describe the organizational resources and capabilities associated with these strategies.
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STAGE 1. IDENTIFY THE PRINCIPAL ACTIVITIES
STAGE 2. ALLOCATE TOTAL COSTS
--Plant scale for each -- Level of quality targets -- No. of dealers component -- Frequency of defects -- Sales / dealer -- Process technology -- Level of dealer -- Plant location support -- Run length -- Frequency of defects -- Capaciity utilization under warranty
Prices paid depends -- Size of commitment -- Plant scale -- Cyclicality / predictability of sales
on: -- Productivity of R&D/design -- No. of models per -- Flexibility of production
-- Order size -- No. & frequency of new plant -- Customers’ willingness to wait
-- Purchases per models -- Degree of
supplier -- Sales / model automation
-- Bargaining power -- Wage levels
-- Supplier location -- Capacity utilization
STAGE 4. IDENTIFY LINKAGES
PRCHSNG PARTS R&D COMPONENT ASSMBY TESTING GOODS SALES DSTRBTN DLR
INVNTRS DESIGN MFR QUALITY INV MKTG CTMR
Designing different models around
common components and platforms
reduces manufacturing costs
Consolidation of orders to increase
discounts, increase inventories
Higher quality parts and materials
reduces costs of defects
at later stages
Higher quality in manufacturing
reduces warranty costs
STAGE 5. RECOMMENDATIONS FOR COST REDUCTION
ECONOMIES OF SCALE
ECONOMIES OF LEARNING
MIS that supports fast response capabilities
Training to support customer service excellence
Unique product features. Fast new product development
HUMAN RESOURCE MANAGEMENT
INBOUND OPERATIONS OUTBOUND MARKETING SERVICE
LOGISTICS LOGISTICS & SALES
Customer technical support. Consumer credit. Availability of spares
Quality of components & materials
Defect free products. Wide variety
Fast delivery. Efficient order processing
Building brand reputation
Service & technical support
Supplies of steel
1. Distinctive can design can assist canners’ marketing activities.
2. High manufacturing tolerances can avoid breakdowns in customer’s canning lines.
3. Frequent, reliable delivery can permit canner to adopt JIT can supply.
4. Efficient order processing system can reduce customers’ ordering costs.
5. Competent technical support can increase canner’s efficiency of plant utilization.
DEFINITION: Providing something unique that is valuable to the
buyer beyond simply offering a low price. (M. Porter)
THE KEY IS CREATING VALUE FOR THE CUSTOMER
Unobservable and subjective
characteristics relating to image,
status, exclusivity, identity
TOTAL CUSTOMER RESPONSIVENESS
differentiation not just about the product, it embraces the whole relationship
between the supplier and the customer.
DIFFERENTIATION: is concerned with how a firm competes within
SEGMENTATION: is concerned with where a firm competes
within a market.
Does differentiation imply segmentation?
Not necessarily, depends upon the differentiation strategy:
BROAD SCOPE DIFFERENTIATION: Appealing to what is in common between different customers (McDonalds hamburgers, Honda cars, Sears)
FOCUSED DIFFERENTIATION: Appealing to what distinguishes different customer groups (BMW, Doc Marten footwear)
What needs does it satisfy?
What are key attributes?
Relate patterns of customer preferences to product attributes
By what criteria do they choose?
What price premiums do product attributes command?
What motivates them?
What are demographic, sociological, psychological correlates of customer behavior?