Chapter 4- Competitive Advantage Through Functional-Level Strategies

Question 1

Functional-Level Strategies

Answer 1

Actions that managers take to improve the efficiency and effectiveness of one or more value creation activities.

Question 2

Economies of Scale

Answer 2

Reductions in unit costs attributed to larger output.

Question 3

Fixed Costs

Answer 3

Costs that must be incurred to produce a product regardless of level of output.

Question 4

Diseconomies of Scale

Answer 4

Unit cost increases associated with a large scale of output.

Question 5

Learning Effects

Answer 5

Cost savings that come from learning by doing.

Question 6

Experience Curve

Answer 6

The systematic lowering of the cost structure and consequent unit cost reductions that have been observed to occur over the life of a product.

Question 7

Flexible Production Technology

Answer 7

A range of technologies designed to reduce setup times for complex equipment, increase the use of machinery through better scheduling, and improve quality control at all stages of the manufacturing process.

Question 8

Mass Customization

Answer 8

The use of flexible manufacturing technology to reconcile two goals that were once though to be incompatible: low cost and differentiation through product customization.

Question 9

Marketing Strategy

Answer 9

The position that a company takes with regard to pricing, promotion, advertising, product design, and distribution.

Question 10

Customer Defection

Answer 10

The percentage of a company’s customers who defect every year to competitors.

Question 11

Just-In-Time (JIT) Inventory System

Answer 11

System of economizing on inventory holding costs by scheduling components to arrive just in time to enter the production process or only as stock is depleted.

Question 12

Supply Chain Management

Answer 12

The task of managing the flow of inputs and components from suppliers into the company’s production processes to minimize inventory holding and maximize inventory turnover.

Question 13

Self-Managing Teams

Answer 13

Teams where members coordinate their own activities and make their own hiring, training, work, and reward decisions.

Question 14

Total Quality Management

Answer 14

Increasing product reliability so that it consistently performs as it was designed to and rarely breaks down.

Question 15

Positioning Strategy

Answer 15

The specific set of options a company adopts for a product based upon four main dimensions of marketing: price, distribution, promotion and advertising, and product features.

Question 16

What is the effect of learning effects on the scale economies curve?

Answer 16

The realization of this effect implies a downward shift of the entire curve as both labor and management become more efficient over time at performing their tasks at every level of output.

Question 17

Accumulated Output

Answer 17

The total output of a product since its introduction.

Question 18

Empowerment

Answer 18

The process of giving lower-level employees decision-making power.

Question 19

Corporate Intranets

Answer 19

Internal corporate computer networks based on Internet standards.

Question 20

What two advantages does superior quality provide for a company?

Answer 20

1) Allows a company to differentiate its products form those offered by rivals, thereby creating more value in the eyes of customers and giving the company the option of charging a premium price for its products.
2) Eliminating defects or errors from the production process reduces waste, increases efficiency, lowers the cost structure of the company, and increases its profitability.

Question 21

What five factors underlie TQM?

Answer 21

1) Improved quality means that costs decrease because of less rework, fewer mistakes, fewer delays, and better use of time and materials.
2) As a result, productivity improves.
3) Better quality leads to higher market share and allows the company to raise prices.
4) Higher prices increase the company’s profitability and allow it to stay in business.
5) Thus, the company creates more jobs.

Question 22

Product Attributes Include:

Answer 22

Form, features, performance, durability, reliability, and style.

Question 23

Service Attributes Include:

Answer 23

Ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair.

Question 24

Associated Personnel Attributes Include:

Answer 24

Competence, courtesy, credibility, reliability, responsiveness, and communication.

Question 25

What are the five reasons why so many new products fail to generate an economic return?

Answer 25

1) The demand for innovation is inherently uncertain.
2) The technology is poorly commercialized.
3) Poor positioning strategy.
4) Companies make the mistake of marketing a technology for which there is not enough demand.
5) Products are slowly marketed. (The more time that elapses between initial development and final marketing- the slower the “cycle time”- the more likely it is that a competitor will beat the company to market and gain a first-mover advantage.

Question 26

What is one of the most important things a manager can do to reduce the high failure rate associated with innovation?

Answer 26

Managers can make sure that there is tight integration between R&D, production, and marketing.

Question 27

What are two of the prerequisites for developing superior responsiveness to customers?

Answer 27

1) The company must develop a competency in listening to its customers, focusing on its customers, and investigating and identifying their needs.
2) The company must constantly seek better ways to satisfy those needs.

Question 28

Customization

Answer 28

Involves varying the features of a good or service to tailor it to the unique needs or tastes of a group of customers, or- in the extreme case- individual customers.

Question 29

In general, reducing response time requires:

Answer 29

1) A marketing function that can quickly communicate customer requests to production
2) Production and materials-management functions that can quickly adjust production schedules in response to unanticipated customer demands and
3) Information systems that can help production and marketing in this process.