Module 1 Section C Flashcards
Order Qualifiers
-minimum customer expectations for quality, lead times, costs and related price, etc.
-competitive characteristics that an org must exhibit to be a viable competitor in marketplace
Order Winners
-competitive characteristics that cause org’s customer to choose that org’s good and services over those of its competitors
-usually focus on 1 of the following strategic initiatives: price/cost, quality, delivery speed, delivery reliability, product design, flexibility, after-market service, image
-over time as competitors update their offerings and new innovations enter market, order winners tend to become order qualifers and new order winners need to be devised
Order Winners & Push/Puller Frontier
2 strongest determinants of type of manufacturing (or service) environment
1. order winners and qualifiers
2. location of push/pull frontier
Push/pull fronter = point in supply chain where foreacting and planning are taken over by actual customer orders
*Example: *shipbuilder’s order winners will be related to meeting exact customer specs. so it will use ETO and push/pull frontier will be far back with the suppliers
page 1-92
Product Profiling
-graphical device used to ascertain level of fit between manufacturing process and order-winning criteria of its products
-can be used at process or company level to compare manufacturing capabilities with the market requirements to determine areas of mismatch and identify steps needed for realignment
Relationship to Product Life Cycle
1. Introduction - order qualifiers include quality (win loyalty) and flexibility / order winner will be related to degree to which customer’s product/service specs are actually met
2. Growth - order qualifiers include cost and flexibility / order winners tend to relate to dependability of supply, esp. after competitors join the market
**3. Maturity **- because # of competitiors likely exist at this oint, order qualifiers tend to include quality and flexibility (range of products) / order winners could be based on cost (price & quality relative to competitors), dependability, or after-markert service
**4. Decline **- order qualifiers will be based on dependability; order winners may be based on cost such as in a discounting situation
page 1-93
Five Generic Competitive Strategies
1. Cost leadership or low-cost provider - competing with rivals by offering equal value but at lower price (broad focus)
**2. Differentiation ** - competing by providing more value to customers by offering distinctive features or capabilities (broad focus)
3. Focus - applied in 2 ways - org. narrows its market and focuses on particular segment (niche); then applies low-cost or differentiation focus to competing in that segment (broad)
4. Best-cost provider - giving customers exactly the value they want; value created by delivering the functionality at the lowest possible price
exhibit 1-39; page 1-95
Low-Cost Provider Strategy
-offer value based on lower or lowest price compared to competitors
-this works when market’s customer segments are price-sensitive for this product/service
-competitive advantage can be created by:
1. striving for largest market share by offering lowest price and focusing on profit gained through volume
2. offer lower price relative to the market and accept smaller market share but have larger profit margin than lowest-price competitors
-org commits to analyzing cost drivers (things that influence quantity or work and activity costs) and how costs interact
Question: can increasing costs in 1 area (e.g. tech) be more than offset by cost savings in another driver (e.g.labor)? involves total costs
RISKS:
1. profit margin not high
2. easily imitated
3. sudden shift in customer preferences esp. with customers not as price-sensitive who go to a competitor putting out a more expensive/attractive product
Differentiation
-seeks to create and communicate to customers distinctive features/benefits that competitors don’t offer
-enables org to charge a premium and receivie profit margin that will sustain future differentiation
-creates brand identity that spurs additional sales with less marketing investment
-basis of competition is more sustainable as long as cost of creating the differential can be included in price people are willing to pay
Conditions Favoring Differentiation + Risks
Conditions Favoring:
1. buyers have diverse needs and preferences
2. product or service can be differentiated in meaningful ways
3. technology in industry frequently changes
4. few competitors are trying this approach - less direct competition
RISKS:
1. sudden change in customers needs can negate the value of significant investment in research and development (e.g. inexpensive tax prep. software drawing attention away from walk-in offices)
2. market does not agree that value of differentation merits premium price
Value-Driven Enterprise
-designed and managed to add utility from the viewpoint on the customer
-differentiation strategies work by focusing on specific market audience interests or needs (called value drivers)
**example: **org could use its superior customer service competencies /culture to create service differentiation by appealing to custmers who need extra or prompt support for costly or complex products
Focus Strategies
-apply generic low-cost provider and differentiation strategies in niche area of market/industry
-customers have narrowly defined needs
-org is competing only against rivals in that customer segment
Conditions that favor focus strategy:
* when market niche exists that is large enough to generate sufficient sales and profit
* when large competitors have decided not to compete in this segment
* if difficulty or expnse of imitating org’s advantae discourages future entrants
Risks:
* customers’ tastes may change or may become satisfied with entirely diff. solution
* competitors may enter uncrowded segment if small market becomes even smaller
* imitation esp. if competitor has extensive resources
Best-Cost Provider Strategy
-aims at providing desirable features at a cost that customers view as attractive
-“relatively” low-cost solution - relative to cost of less-acceptable solutions offered by competitors
-requires that org have the competencies to create a stronger product/service but more efficiently –> org can compete at lower price and still have acceptable profit level
Conditions that favor this strategy:
-appels to value-minded customers
-periods of economic recession
Risks:
competitive attacks from both directions, from:
1. low-cost providers - may add some features to try and diminish incremental value best-cost providers offer
2. differentiators - may cut prices or add features without increasing prices, which decreases competitive distance between themselves and best-cost provider
Executing Strategy
-requires alignment of org’s structure (horizontal and vertical), policies, processes, and managements of physical & human assets
page 1-106
Kotter’s Accelerate: Dual Operating System
-retains currental organizational structure, but deliberately adds second organizational structure that operates in concert with existin one –> network organizational structure
-requires change management to succeed
Principles:
1. broad internal team base - people from all org levels are recruited to drive big changes rather than rely on traditional personnel choices for strategic planning (only internal staff used)
2. “get to” rather than “have to” volunteering - existing staff given opportunity to volunteer with main rewards being experience and privilege of involvement as change agent
3. heart plus head - members are recruited and change ideas are sold by appealing to emotional motivations, like being part of a bigger cause
4. leadership is key - leadership key to capitalizing on big opportunities
5. inseparable left and right brains - hierarchical and network systems are not separated since the share individuals; new system does not increase payroll; 2 way continuous flow of ideas and info between existing and network structure
page 1-112
Kotter’s 8 Accelerators
1. big opportunity (BO) and urgency - determine a big opportunity and create sense of urgency around it (e.g. safety at a plant), get buy in from as many people as possible
2. guiding coalition as change agents - big opportunity helps form core of network
3. vision and inspiration - network forms a vision for BO and develops related strategic initiatives
**4. legion of volunteers **- Kotter’s research indicates network made up of 5-10% of total workforce is sufficient to make a well-functioning network; volunteers need to be vetted for both necessary level of commitment and ability to help (.e.g relevant knowledge, strong relationship building skills)
5. obstacle and duplication avoidance - members remove obstacles to ensure rapid progress on the BO + pay attention to initiatives on hierarchical side to avoid duplications of effort
6. credibility through wins - networks proves its worth by creating quick wins and bigger wins that have strategic relevance; helps win over managers who did not support dual network concept or did not volunteer
7. self-sustaining network - network sustains itself by recognizing and supporting numerous sub-initatives; continue to look for next big BO and recruit new members based on needs
**8. institutionalize **- successful initiatives are incorported into org’s hierarchical organizational structure so they can be sustained and institutionalized includes integration into org’s policies/procedures, metrics and enforcement, and eventually culture (which support change as necessary element to trhive in rapidly changing world)
