Case Study 2
resource quality
*the efficiency and effectiveness with which a company performs this transformation process depends critically upon the quality of its resources
pockets
*there may be pockets of demand in an industry in which demand is declining more slowly than in the industry as a whole or where demand is not declining at all
process knowlege
- knowledge of the internal rules, routines, and procedures of an organization that managers can leverage to achieve organizational objectives -human skills -accumulated over time and through experiences -socially complex -has an important tacit component
Pressures for Local Responsiveness
-Differences in Customer tastes and preferences -Differences in Infrastructure and Traditional Practices -delegate manufacturing and production functions to foreign subsidiaries -Differences in Distribution Channels -Host Government Demands
material management and efficiency
-JIT system -supply chain coordination
Rise of Regionalism
-ability to standardize a product offering within a region allows for the attainment of greater scale economies and hence lower costs than if each nation required its own offering
responsiveness
-achieving superior quality and innovation is integral to achieving superior responsiveness to customers -need to customize goods and services to unique demands or individuals or groups
marketing and efficiency
-adopt aggressive marketing to ride down the experience curve -limit customer defection rates by building brand loyalty
organizational archietechure
-adopting might require wholesale organization change which is risky and difficult to do given internal inertia
S shaped market development and customer groups
-adoption is initially slow when an unfamiliar technology is introduced to the market -adoption increases as the technology becomes better understood and utilized
segmentation is more important to differentiators
-as a low cost strategy, you want to have the average customer -as a differentiator, you want to have a piece of each segment and a competitive advantage in each
resources
-assets of a company; factors of production that a company uses to transform inputs into outputs that it can sell in the marketplace
information systems and efficiency
-automate processes -reduce costs of coordination
RD Streategy
-boost efficacy by designing products -pioneering process innovation
differentiated
-brand loyalty is an entry barrier -less exposed to pricing pressure from powerful buyers -easily absorbed price increases from powerful suppliers and pass them on downstream -brand loyalty protects against substitutes
rare
-cannot be a commodity, it must be uncommon
horizantal mergers (cons)
-companies pay too much for the companies they acquire -bought a lemon -clash between cultures
Acheiving Superior Customer Responsives
-company must develop a competency in listening to its customers and must constantly seek better ways to satisfy their needs
infrastructure and efficiencies
-companywide commitment to efficiency -cooperation among functions
strategies in delcining industries
-completion great in industries in which decline is rapid -competition intensifies and profits fall
learning effects
-cost savings that come from learning by doing -more significant in an assembly process that has more complex steps -most important during the start-up period of a new process and become trivial after 2-3 years
customization can drive up costs because
-customization can drive up costs because: 1. harder to achieve economies of scale 2. higher income end of the market may require more functions and features
preempt
-deter other firms from entering the market because the preemptor usually can move down the experience curve, reduce costs, and reduce price -credible company with enough resources to withstand a poosible advertising/price war
-Firm strategy, structure, and rivalry
-different nations are characterized by different management ideologies (ex: German - engineering and US- finance) -strong association between vigorous domestic rivalry and the creation and persistence of competitive advantage in an industry -domestic rivalry creates pressures to innovate, improve quality, reduce costs, and invest in upgrading advanced factors
Chooising a capacity control strategy
-each company must try to preempt is rivals and seize the initiative or -companies must collectively find indirect means of coordinating with each other so that they are all aware of the mutual effects of their actions
production
-efficacy helps lower the cost structure
Improving Quality as excellency
-form, features, performance, durability, styling, service attribute, associated personal attributes
innovators (embryonic)
-gadget geeks -first to purchase and experiment with a product based on a new technology even if it is expensive and imperfect -less risk averse -greater resources to spare
Using the framwork
-help managers identify where their most significant global competitors are likely to originate -decide where they might want to locate certain productive activities -asses how tough it might be to enter certain national markets
HR strategy and efficiency
-hiring strategy that matches the organization's strategic objectives -self managing team -pay for performance
implications of value chain analysis
-identify the company's strengths and weaknesses -analyze how efficiently and effectively each activity is being performed
Marketing and Sales
-increase the value that customer perceive to be contained in a company's products -discovering customer needs and communicating them back the RD function
Customer service
-increase utility
Globalization of production and markets has several implications for competition within an industry:
-industry boundaries do not stop at national borders -companies around the globe are finding their home markets under attack from foreign competitors -intensified competitive rivalry drive down profitability and make it more critical for companies to maximize their competitive advantage -enormous opportunities for companies based in those formerly protected national markets
laggards
-inherently conservative and unappreciative of the uses of new technology -refuse to adopt new products unless forced to do so
product development strategies
-innovators': increasing the performance of a product -mass market: reliable and easy to use
reasons for fragementtion
-lack of scale economies -customer needs are so specialized -brand loyalty may be primarily local -low entry barriers
cons of franchising
-less control than can be achieved through a charining strategy -franchisee capture some of the economic profit from a successful operation -higher cost of capital wich raises system costs and lowers protiability
-competencies can be created anywhere within a multinational global network of operations
-leveraging the valuable resources created within subsidiaries and applying tem to other operations within the firms global network may create value
localization straegies...
-limits the ability of the company to capture the cost reductions associated with mass-producing a standardized product for global consumption -supports higher pricing -leads to substantially greater local demand and attainment of scale economies in the local market -still need to be efficient and capture scale economies
Pressures for cost reductions
-lower the costs of value creation -commodity type products -industries where major competitors are based in low cost locations, persistent excess capacity, consumers are powerful and face low switching costs
To leverage the competencies of global subsidiaries managers must.....
-managers must have humility to recognize that valuable recourses can arise anywhere within the firms global network, not just at the corporate center -must establish an incentive system that encourages local employees to acquire and build new resources and competencies -managers must have a process for identifying when valuable new resources and competencies have been created in a subsidiary -act as facilitators
late majority
-many of their peers already have done so and its obvious the technology has great utility and is here to stay -somewhat older and more conservative
coordinate
-market signaling -share info about production levels and forecast of demand
implementing business level strategy
-must be alignment or fit between business level, function, and organization
product proliferation
-new segment, new product
early majority
-practical and generally understand the value of new technology -weight the benefits of adopting new products against the costs -30% of the market penetrated, then the next group enters
Information Systems
-primarily the digital systems for managing inventory, tracking sales, pricing products, selling products, dealing with customer services and so on
focus strategy - low income
-produce a basic offering that is relatively inexpensive to produce and deliver
low cost
-protect against entry barrier -ability to charge low prices protects against substitutes goods or services -respond to demand for deep price discount -survive price rivalry
Global standardization straegy
-pursue a low-cost strategy on a global scale -production, marketing, and RD activities are concentrated in a few favorable locations -strong pressures for cost reductions and demand for local responsive is minimal -industrial-good industries
prodction and efficency
-pursue economies of scale and learning economies -implement flexible manufacturing systems
pros of franchsing
-puts up some or all of the capital to establish his or her operation -franchisee has strong inventive to make sure that their operations are run as efficiently and effectively as possible -incentive to improve the efficiency and effectiveness oft their operations by developing new offerings and processes
realizing cost economies from global volume
-realize cost savings from economies of scale -spread fixed costs and low average unit costs -utilize production facilities more intensively, leading to higher productivity, lower cost, greater profitability, higher capacity productivity and a higher return on invested capital -bargaining power with suppliers increases, bargain down the cost of inputs and boost profitability -increased learning effects
economies of scale
-reductions in unit costs attributed to larger output -ability to spread fixed costs over a large production volume -specialization is said to have a favorable impact on productivity, because it enables employees to become very skilled at performing a particular task
-intensity is greater in declining industries in which exist barriers are high
-results in excess capacity and increased probability of fierce price competition
Local demand conditions
-shaping the attributes of domestically made products and creating pressures for innovation and quality
Lowering cost through functional strategy and organization
-superior efficiency and superior product reliability -flat organizational structure with few level in management, clear lines, management and control system focused on costs and productivity, frugal culture
Differentiaiton through functional level strategy and organization
-superior quality, reliability and excellence, product innovation, customer responsiveness
related supported industries
-the benefits of investments in advanced factors of production by related and supporting industries can spill over into an industry thereby helping it achieve a strong competitive position internationally -successful industries within a country tend to be grouped into clusters of related industries
rare resources
-the firm owns its process knowledge and organizational architecture
Porter's National Competitive Advantage Framework
-the nation-state within which a company is based may have an important bearing on the competitive position of that company in the global market place Factor Endowments Local demand conditions Related and supporting indsutreis Firm strategy, structure, and rivalry
consolidating a fragemented industry through value innovation
-the value innovator defines value differently than do the established companies
materials management
-transmission of physical materials through the value chain, from procurement through production, into distribution -efficiency can lower costs and generate profits
early adopters (embryonic)
-understand that the technology may have important future application and are willing to experiment with it to see if they can pioneer new uses for the technology
Caveats to Porter's theory
-value innovation -being both the differentiated player and having a low cost position -differentiated companies can not waver in its focus on efficiency and low cost companies cannot ignore produce differentiation
Steps companies can take at the functional level to increase efficiency and lower cost structure:
1) Economies of scale 2) Learning effects 3) Experience curve
customer demand for the products of an embryonic industry is initially limited for a variety of reason including the
1) limited performance and poor quality 2) customer unfamiliarity 3) poorly developed distribution channels to get the product to customers 4)lack of complementary products that might increase the value of the product for customers 5) high production costs because of small volumes of production
Managers shouldn't be complacent about efficiency based cost advantages
1- neither learning effects nor economies of scale are sustained forever and the experience curve will bottom out at some point 2- cost advantages gained from the experience effects can be rendered obsolete by development of new technologies s
3 approaches to market segmentation
1- not tailor different offerings to different segments and instead produce and sell a standardized product that is targeted at the average customers 2- recognize differences between segments and create different product offerings for each segment 3- target only a limited number of market segments
steps
1. Collect marketing intelligence indicating which attributes are most important to customers 2. design products and the associated services in such a way that those attributes are embodies in the products -coordination between marketing, r+D, and hR 3. decide which significant attribute to promote and how best to position them in the minds of consumers 4. Competition is not stationary
implement reliability improvment methodolgies
1. Communicate importance to the organization 2. Individuals must be identified to lead the program 3. Preach the need to identify defects that arise from processes, trace them to their source, find out what caused the defects, and make corrections so that they do not recur Trace defects by: -reduce lot sizes -JIT inventory systems 4. Create a metric that can be used to measure quality 5. Set a challenging quality goal and create incentives for reaching it 6. Incorporate shop floor employees into the quality improvement program 7. Work with suppliers to improve the quality of the parts they supply 8. Design products with fewer pars 9. Organizational commencement and cooperation among functions
Firms that operate internationally are able to :
1. Expand the market for the domestic product offering by selling those products in international markets 2. Realize locations economies by dispersing individual value creation activities to those locations around the globe where they can be performed most efficiently and effectively 3. Realize greater cost economies form experience effects by serving an expanded global market from a central location, thereby reducing cost of value creation 4. Earn greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within the firms global network of operations
steps
1. Focus on the customer 2. demonstrate leadership 3. shape employee attitude 4. know the customer needs 4. satisfy the needs through customization and response time
failure of innovations
1. demand is uncertain 2. technology is poorly commercialized - product is not well adapted to customer needs because of factors such as poor design and poor quality 3. Positioning strategy: 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 feature 4. not enough demand 5. slowly marketed
carve out unique market space through value innovation
1. eliminate factors that can be eliminated to reduce costs 2. reduce features to lower costs 3. raise features above the industry standard to increase value 4. create factors that rivals don't offer to increase value
reducing response time
1. 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 3. information systems that can help production and marketing in this process
reduin innovation failures
1. product development projects are driven by customer needs 2. new products are designed for ease of manufacture 3. development costs are not allowed to spiral out of control 4. the time it takes to develop a product and bring it to market is minimized 5. close integrations between rd and marketing
cross functional product development teams
1. project managers 2. members from the key functions 3. members work in proximity to one another 4. team should have a clear plan and clear goals 5. process of communication
generic business level strategy
: a strategy that gives a company a specific form of competitive position and advantage vis a vis its rivals, resulting in above-average profitability
organizational architectur
: the combination of the organizational structure of a company, its control systems, its incentive systems, its organizational culture, and its human capital strategy
customer defection
: the percentage of a company's customers who defect every year to competitors
customer resposne time
: time that it takes for a good to be delivered or a service to be prepared
diinvestment strategy
: when a company exits an industry by selling its business assets to another -few strengths and competition going to be intense -depends on the ability of the company to spot industry decline before it becomes detrimental
absorpitve capacity
Ability of an enterprise to identify, value, assimilate, and use new knowledge
focus strategy - high income
Add features and functions -hard to attain scale economies -charge significantly higher prices
to increase ROS
COGS/Sales SGA/Sales RD/Sales
the icarus pardox
Companies become very specialized and myopic Lose sight of market realities
inertia
Companies find it difficult to adapt to changing competitive conditions Power struggles and hierarchical resistance make change difficult
strategic commitment
Company's commitment to a particular way of doing business
v-p
Consumer surplus
technological knowhow
Easy to imitate as patents do not provide complete protection
marketing and technical know how
Easy to imitate owing to movement of skilled personnel between companies and visibility of strategies to competitors
Building Costs of Competitive Advantage
Efficiency Quality Innovation Responsiveness
What building block of competitive advantage are learning effects associated with?
Efficiency -allow you to lower costs at any output level Quality as reliability - produce more consistent output without defects Process innovation -keeping the process the same so people can get better
prior strategic commitments
Limit a company's ability to imitate rivals Cause competitive disadvantage
barriers to imitation
Make it difficult for a competitor to copy a company's distinctive competencies
Capability of competitiors to dulipcate what you do is determined by
Nature of the competitors' prior strategic commitments Absorptive capacity
factors that cause excess capcity
New technologies that produce more than the old ones New entrants in an industry Economic recession that causes global overcapacity High growth of and demand in an industry that triggers rapid expansion
p-c
Profit margin
major sources of a lower cost strucutre
Reducing customer defection rates and building customer loyalty
transnational stratey
a business model that simultaneously achieves low costs, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company's global network of operations -must focus on leveraging subsidiary skills -conflicting demands on the company
business level strategy
a business's overall competitive theme; the way it positions itself in the marketplace to gain a competitive advantage and the different positioning strategies that it can use in different industry settings
tacit
a characteristic of knowledge or skills such that they cannot be documented or codified but may be understood through experience or intuition
multinational company
a company that does business in two or more national markets -based upon their goods and services and their distinctive competitiveness -global expansion is a way of generating higher returns from valuable, rare, and inimitable resources
VRIO framework
a framework managers use to determine the quality of a company's resources
flexible production technology
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
chaining
a strategy designed to obtain the advantages of cost leadership by establishing a network of linked merchandising outlets interconnected by information technology that functions as one large company
localization strategy
a strategy focused on increasing profitability by customizing a company's goods or services so that they provide a favorable match to tastes and preferences in different national markets
franchising
a strategy in which the franchisor grants to its franchisees the right to use the franchisors name, reputation, and business model in return for a franchise fee and often a percentage of the profits
functional level strategies
actions that managers take to improve the efficiency and effectiveness of one or more value creation activities
support activities
activities of the value chain that provide inputs that allow the primary activities to take place
low cost
allow a company to undercut rivals on price, gain market share, and maintain or even increase profitability
fragemented industry
an industry composed of a large number of small and medium sized companies
international strategy may not be viable in the long term and
and to survive companies that are able to pursue it need to shift toward a global standardization strategy , or perhaps a transnational strategy
distintive competencies
are firm specific strengths that allow a company to differentiate its products and or achieve substantially lower costs to achieve a competitive advantage -can be rooted in a company's resources
dynamic industreis
are those with a very high rate of product innovation Where product life cycles and competitive advantages are short-lived
process knowlege
barriers to imitation are high because they are often 1) partly tacit 2) hidden from view within the frim and 3) socially complex
result of having foreign supplier build specific parts
better product and higher profitability
standarized and segementation strategies both target a
broad marke
segmentation allows the company to capture incremental revenues
by customizing its offerings to the needs of different groups of consumers and thus selling more in total
limit price
charging a price that is lower than that required to maximize profits in the short run to signal to new entrants that that incumbent has a low-cost structure that the entrant likely cannot match
-in manufacturing companies, the most potent way to lower the cost structure is to
combine self-managing teams with flexible manufacturing cells
complxtibity
complex products diffuse more slowly
value chain
concept that a company consists of a chain of activities that transforms inputs into outputs
quality as reliability
consistently performs the function it was designed for, performs it well, and rarely breaks down
Factor Endowments
cost and quality of factors of production -basic: land, labor, capital, and raw materials -advanced: technological knowhow, managerial sophistication, and physical infrastructure
product development
creation of new or improved products to replace existing products -new product, existing segment
relative advantage
degree to which a new product is perceived as being better at satisfying customer needs than the product in supersedes
copmatabiliy
degree to which a new product is perceived as being consistent with the current needs or existing values of potential adopters
primary activities
design, creation, delivery of the product, its marketing, and its support and after sales service
process innovation
development of a new process for producing and delivering products to customer
product innovaton
development of products that are new to the world or have superior attributes to existing products
imitating capabilities is
difficult They are not visible to outsiders No one individual has access to all the internal operating routes and procedures of a company
sustained competitive advantage for the innovating company
due to relative inertia of rivals and their inability to respond in a timely manner without breaking prior strategic commitments
firm specific and value tangible resources are the x to imitate
easiest
movement along the curve
economies of scale
value
enable the enterprise to exploit opportunities and counter threats in the external environment -enable a company to create a strong demand for its products or lower the costs of producing those products to gain a competitive advantage
market penetration
existing segment, existing product -long term strategy, create a brand name reputation
barriers to imitation
factors or characteristics that make it difficult for another individual or company to replicate something -IP -process knolwdge -organizational architecure
product proliferation
filling the niches or catering to the needs of customers in all market segments to deter entry by competition
what strategy works best for fragemented industry
focus
long term customer loyalty
free advertising that customer provides for the company The longer a customer stays with the company, the more the fixed costs of acquiring that customer can be distributed over repeat purchases, boosting the profit per customer
-different markets develop at different rates
growth rate is affected by the rate at which a customer in that market purchase the industry product
inimitable
hard to copy
-greater competition in declining industries with
high fixed costs product is perceived as a commodity which exist barriers are high decline is rapid
diminishing return
imply that when an enterprise already has significant differentiation built into its product offering, increasing differentiation by a relatively small amount requires significant additional costs
quality as excellence
important attributes are products design and styling
Deming 5 factors
improved quality means that costs decrease because of less rework, fewer mistakes, fewer delays, and better use of time and materials productivity improves better quality leaders to higher market share and allows the copany to raise prices higher prices increase profitability copany creates more jobs
R+D
increase the functionality of products -may result in efficient production processes
total quality management
increasing product reliability so that is consistently performs as it was designed to and rarely breaks down
technology upgrading
incumbent company deterring entry by investing in costly technology upgrades that potential entrants have trouble matching
ressons for company failures
inertia prior strategic commitment The Icarus paradox
crossing the chasm
innovators and early adopters have very different customer needs from the early majority -new strategies are required to strengthen a company's business model and a market develops over time
pricing strategies
innovators: focus model, small quantities and high price mass market: high quality product at low price
marketing and sales strategies:
innovators: specialized distribution channels and word of mouth mass market: mass market distribution channels and mass media advertising campaigns
strategies tend to be come less viable,
international and localization strategies
strategic commitments
investments that signal an incumbent's long term commitment to a market or a segment from that market -investing in excess capacity -invest in research, development, advertising beyond necessary to maintain a competitive advantage -history of price cutting
custimization
involves varying the features of a good or service to tailor it to the unie needs or tastes of a group of customers or individual customers
intellectural property
knowledge, research, and information that is owned by an individual or organization
shift of entire curve
learning effects imply a downward shift of the entire curve because labor and management become more efficient over time at performing their tasks at every level of output
international strategy
low cost pressures and low pressures for local responsiveness -serve universal needs -do not face direct competitors -centralize product development functions like RD at home -manufacturing and marketing functions in each major country or geographic region in which they do business -office retains tight control over marketing and product strategy
standardization has x costs than segemntation
lower
organized
managed in a way that enables it to exploit its rare, valuable, and inimitable resources and capture the value they produce
TQM steps
managemetn should embrace the philosophy that mistakes, defects, and poor-quality materials are not acceptable and should be elimintated quality of supervision should be improved by allowing more time for supervisors to work with employees and training employees in appropriate skills for the job management should create an evironment in which employees will not fear reporting problems or reccommending improvements work standards should not only be defined as number or quotas but should also include some notion of quality to promote the prouction of defect-free output managememnt is responsible for training employees in new skills to keep paces changes in the workplace achieve beer quality requires the commitments of everyone to the copany
to cross the chasm
manager must identify the needs of the first wave of early majority users and adjust business models by developing new strategies
strategy canvas
map out how value innovators differ from rivals
benchmarking
measuring how well a company is doing by comparing it to another company or to itself over time
according to Porter, differentiation by its very nature
nature raises costs and make it impossible to attain the low cost position in an industry
ROIC
net profits/invested capital
mass markets have
number of companies decreases
embryonc markets have
numerous small companies
mass market
one in which large numbers of customer enter the market 1) ongoing technological progress makes a product easier to use and increases value 2) complementary products are developed that also increased its value 3) companies in the industry work to find ways to reduce the costs of producing the new products so they can lower their prices and stimulate high demand
2 advantages of differentiation
premium price and growing overall demand allowing company to capture market shares from rivals
capacity control
price competition does occur when excess capacity exists in an industry caused by: shortfall in demand companies withan an industry simultaneously responding to favorable conditions
innovation
product process
gloabalization
production markets
globalization of production
production has been increasing as companies take advantage of lower barriers to international trade and investment to disperse important parts of their production processes around the globe
efficiency fronteir
production possibility frontier; shows all of the different positions that a company can adopt with regard to differentiation and low cost assuming that its internal functions and organizational arrangements are configured efficiently to support a particular position
intangible resources are
prohibited to imitate by law brand names, patents, trademarks
efficiency
quantity of inputs required to produce a given output efficiency = outputs/inputs
blue ocean strategy
redefining their product offering through value innovation and creating a new market space
accelerating customer demand
relative advantage complexity compabatility trialability observability
getting to the efficiency fronteir
requires excellence in strategy implementation through function and organization + business level, functional level and organizational arrangements must be all aligned
segmentation strategy
requires the company to customize its product offering to different segments
basic factors or production
resources such as land, labor, management, plants, and equipment
advvanced factors of production
resources such as process knowledge, organizational architecture, and intellectual property hat contribute to a company's competitive advantage
capital turnover
sales/invested capital -how effectively the company employs its invested capital to generate revenues -To increase capital turnover: -Working capital/sales -Plant/Property/Equipment / Sales
HR
skilled people to perform its value create activities effectively -employee productivity rises
socially complex
something that is characterized by or is the outcome of the interaction of multiple individuals
value
something the customer receives from a product
the efficiency frontier is not
static
the tradeoff
strategy is all about achieving the right balance between differentiation and low costs
Most important source of competitive advantage
superior innovation Differentiate its products and charge a premium price (product innovaton quality as excellence) Lower its cost structure below that of its rivals (process innnovation quality as reliability)
just in time inventory system
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 reduce the need for working capital and fixed capital, boosts ROIC
Return on sales
t profit/ sales -measures how effectively the company converts revenues into profits
self managing teams
teams where members coordinate their own activities and make their own hiring, training, work and reward decisions
factors causing excess capacity
technological developments -competitive factors within an industry -age of a company's physical assets
triabiliy
the degree to which potential customers can experiment with a new product during a hands on trial basis
observability
the degree to which the results of suing and enjoying a new product can be seen and appreciated by other people
highest market demand and industry profits arise when
the early and late majority groups enter the market
location economies
the economc benefits that arise from performing a value creation activity in an optimal location -lower the costs of value creation -enable a company to differentiate its product offering -should be able to differentiate its product offering and lower its cost structure more than a single location competitor -transportation costs and trade barriers need to be considered
the more dynamic an industry
the harder it is to protect the competitive advantage
emmployee productivity
the output produced per employees
marketing strategy
the position that a company takes with regard to promotion, advertising, product design, and distribution
price signaling
the process by which companies increase or decrease product prices to convey their intentions to other companies and influence the price of an industry's products -used to improve industry profitability -can c communicate that the company will respond vigorously to competitive moves -tit for tat strategy- exactly mimics rivals
capital productivity
the sales produced by a dollar of capital invested in the business
experience curve
the systematic lowering of the cost structure and consequent unit cost reduction that have been observed to occur over the life of a product The longer the product life cycle, the more economies of scale and learning effects per-unit production costs for a product typically decline by some characteristic amount each time accumulated output of the product in doubled
supply chain management
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
mass custimization
the use of flexible manufacturing technology to reconcile two goals that were once thought to be incompatible: low costs and differentiation through product customization
non-price competition
the use of product differentiation strategies to deter potential entrant and manage rivalry within an industry
utility
the value customers place on a product
market segementaion
the way a company decides to group customers, based on important differences in their needs, in order to gain a competitive advantage
accumulated output
total output of a product since it was introduced
reservation price
unique assessment of the value
diseconomies of scale
unit cost increases associated with a large scale of output due to: -increase bureaucracy associated with larger enterprises -manger inefficiencies
v-c
value creation by the company
standardization strategy
when a company decides to ignore different segments and produces a standardized product for the average consumer
focus strategy
when a company decides to serve a limited number of segments, or just one segment
segementation strategy
when a company decides to serve many segments, or even the entire market, producing different offerings for different segments
leadership strategy
when a company develops strategies to become the dominant player in a declining industry -distinctive strengths that allow it to gain market share and the speed of decline is moderate -aggressive pricing and marketing, acquire established companies, raising the stakes for other competitors by making new investments in productive capacity
broad different strategy
when a company differentiates its product in some way, such as by recognizing different segments or offering different products to each segment
niche strategy
when a company focuses on pockets of demand that are declining more slowly than the industry as a whole to maintain profitability -distinctive strengths relative to the niches
broad low cost strategy
when a company lowers costs so that is can lower prices and still make a profit
harvest strategy
when a company reduces to a minimum the assets it employs in a business to reduce its cost structure and extract milk maximum profits from its investment foresees a steep decline and intense future competitor or when it lacks strengths relative to reaming pockets of demand in the industry -halt all new investment in capital equipment, advertising, r and d -company will lose market share but initially positive cash flow will increase -cash flow will start to decline and then liquidate the business
market development
when a company searches for new market segments for its existing products in order to increase sales new segments, existing products
focus differentiation
when a company targets a certain segment or niche and customizes its offering to the needs of that particular segments through the addition of features and functions
focus low cost strategy
when a company targets a certain segment or niche and tries to be the low cost player in that nice
industry moves from embryonic to growth
when a mass market starts to develop for its product
embryonic industries emerge when
when a technological innovation creates a new product opportunity
superior quality
when customers perceive that is attributes provide them with higher utility than the attributes of products sold by rivals
value innovation
when innovations push out the efficiency frontier in an industry, allowing for greater value to be offered through superior differentiation at a lower cost than was previously thought possible
sustained competitive advantage
when it is able to maintain above average profitability over a number of years
price leadership
when one company's assumes the responsibility for determine the pricing strategy that maximizes industry profitability
competitive advantage
when profitability is greater than the average profitability of all companies in its industry
causal ambiguity
when the way that one thing, A, leads to outcome or cause B is not clearly understood -requires changing the way the imitating company currently operates
differentiation
• distinguish your company from its rivals by offering something that they find hard to match -better design, superior functions and features, better point of sale service, better after sales service and support, better branding
