Chapter 4 Flashcards
Why are functional level strategies important
They are actions that managers take to improve efficiency and effectiveness of one or more value creation activities
How do we measure efficiency
The quantity of inputs that it takes to produce a given output
How does a more effiencient company look like
Has fewer inputs to produce the output leading to a lower cost structure
What are the functional strategies?
- Efficiency
- Quality
- Innovation
- Customer Responsiveness
What is innovation?
The most important source of competitive advantage because it brings new products that better statisfy consumer needs, improve the quality and reduce costs `
What happens when innovation becomes successful
Success new product launches are major drivers of superior
What are the reasons for failure?
- Demand of innovations is inherently uncertain
- The technology is poorly commercialized
- Poor positioning strategy
- Marketing a technology for which there is not enough demand
- When products are slowly marketed
Why is tight integration between R&D, production and marketing important
- Product development projects driven by customer needs
- New products are designed for ease of manufacture
- Development costs are not allowed to spiral out of control
- The time it takes to develop a product and bring it to market is minimized
- Close integration between R&D and marketing is achieved to ensure that development projects are driven by customer needs
What are the 2 advantages that superior quality provide
- Strong reputation for quality
- Different from rivals
- Create more value in the eyes of customers
- Provide options of charging at a premium prince
- Eliminates errors from the production process
- Reduces wastes
- Increases efficiency
- Lower the cost structure
- Increases its profitability
What is the principal tool that most managers use to increase the reliability of their products
Six sigma quality improvement methods
What is the total quality management
Philosophy that was widely adopted during the 1980s and early 1990s
How do managers implement a reliability improvement program
- Managers must be committed to the program
- Individuals must identified to lead the program
- The need to identify defects, trace them to their source, find out what caused the defect and make necessary corrections
- Create a metric that can be used to measure quality
- Set a challenging quality goal and create incentives to reach it
- Shop-floor employees must participate in the program
- Must work with suppliers to improve parts they supply
- Design products with fewer parts to prevent further mistakes
- Implementation requires company wide commitment and cooperation
How can be products be differentiated
By attributes that define product excellence
What are some key attributes
- The form
- The features
- Performance
- Durability
- Styling
How do managers improve the quality and see their products as superior to that of their rivals
- Managers must collect marketing intelligence to indicate the attributes that are important to customers
- Company needs to design products in a way where these attributes are embodied in the product
- The company must decide which attributes to promote and how best to position them in the minds of the customers
- Competition is not stationary, a company must continue to produce improvement in product attributes
How do managers achieve superior responsiveness
They must give customers what they want, when they want it and a price they are willing to pay
What does superior responsiveness mean
Giving customers value for money
How do you build superior responsiveness
Motivate the entire company to focus on the customer
How do managers motivate the entire company to focus on the customer
- Demonstrate leadership
- Shaping employee attitudes
- Using mechanisms for making sure that the needs of the customers are well known within the company
How can a company provide a higher level of satisfaction
- Customizing them to the requirements of individual customers
- Reducing the time it takes to respond to or satisfy customer needs
What does customization mean
Customize products to a greater extent to satisfy customers
How can managers satisfy customer demands for rapid response
- Building brand loyalty
- Differentiating its products
- Charging high prices for its products
What does achieving superior efficiency look like
- The fewer the inputs required to product an output and has a lower cost structure
- The higher its productivity, the lower its costs in contrast to its rivals
What is economies of scale
- Unit cost reduction associated with a large scale of output
- Companies benefit by keeping prices down and increasing volume
What does achieving a greater division of labour and specialization mean
Enables employees to become very skilled at performing a particular task
What does learning effects mean
Cost savings that come from learning by doing
What are the results of learning effects
Labour productivity increases over time and unit costs decrease as employees learn the more efficient way to perform a task
What is the experience curve
Refers to the systematic lowering of the cost structure and consequent unit cost reductions that have been observed to occur over the life of a product
What are the clear implications of the experience curve
Increasing a company’s product volume and market share will lower its cost structure relative to its rivals
Why are flexible product technology designed?
- Reduces set up times for complex equipment
- Increase the use of individual machines through better scheduling
- Improve quality control at all stages of manufacturing process
What can mass customization achieve
Low cost and differentiation through product customization
What is marketing strategy
Position that a company takes with their market segmentation, pricing, promotion, advertising, product design and distribution
What are churn rates
Percentage of a company’s customers who defect every year to competitiors
What are defection rates
Determined by customer loyalty which turn into a function of the ability of a company to satisfy customers
What are one time fixed costs purpose
Acquire new customers
What are examples of one-time fixed costs
Administrative, advertising and promotion
Why is it important for a company to retain a customer
Leads to the greater volume of customer generated unit sales that can be set against fixed costs
What are materials management
Encompasses the activities necessary to get inputs and components to a production facility, through the production process and out through a distribution system to the end user
What can companies achieve to adopt a just in time inventory system
Major cost savings from increasing inventory turnover to reduce inventory holding costs and the company’s need for working capital
How can R&D lower the cost structure
- Boost efficiency by designing products that are easy to manufacture and decrease the required assembly time
- Pioneer process innovations to achieve a lower cost structure and improve efficiency which is a major source of competitive advantage
What is employee productivity
Key determinant of a company’s efficiency, cost structure and profitability
How can HR increase employee productivity
- Hiring strategy
- Employee training and development
- Self managing teams
- Pay for performanc
What is the function of information systems
Move to the centre stage in the quest for operating efficiencies and lower cost structures
What are examples of how information systems increase productivity
- Putting ordering and customer service functions online
- Using web based programs to automate customer and supplier interactions
- Replacing a physical store with an online virtual store
- Automating ordering and checkout process
What is included in a company’s infrastructure
Structure, culture, style of strategic leadership and control system
What is the leaderships task
Recognizes the need for all functions of a company to focus on improving efficiency
What are fixed costs
Costs that must be incurred to produce a product regardless of the level of output
What are diseconomies of scale
Where unit cost increases associated with a large scale of output
What are flexible production technology
A range of technologies designed to reduce set up times for complex equipment, increase use of machinery through better scheduling and improve quality control at all stages of manufacturing processes
