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24 Cards in this Set
- Front
- Back
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Customer responsiveness:
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To achieve customer responsiveness, a company must to a better job than competitors of identifying and satisfying its customers’ needs. Resulting in customers will then attribute more value to its products, creating, a differentiation based on competitive advantage. Achieving superior quality and innovation is integral to achieving superior responsiveness to customers. Another factor to consider with customer responsiveness is the need to customize goods and services to the unique demands of individual customers or customer groups. Customizing to the demands and needs of the customer base.
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Value chain sources of scale
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A strategy that a manager in a production function of a company might use to increase productivity of capital of labor is the economics of scale by driving down unit costs by mass producing output. A major source of economies of scale is the ability to spread fixed costs over a large production volume. Fixed costs are costs that must be incurred to produce a product, whatever level the output. Another source of scale economies is the ability of companies producing in large volumes to achieve a greater division of labor and specialization. Specialization is said to have a favorably impact on productivity, mainly because it enables employees to become very skilled at performing a particular tasks. See book for examples
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Value chain sources of learning effects
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Are cost savings that come from learning by doing. Labor, for example, learns by repetition how best to carry out a task. Therefore, labor productivity increases over time, and unit costs fall as individuals learn the most efficient way to perform a particular task. Equally important, management in a new manufacturing facilities typically learns over time how best to run the new operation. Hance, production costs decline because of increasing labor productivity and management efficiency. Also equally is important in the service industry as well.
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value chain activities from
organizational areas such as Materials Management: |
The material managements ( or logistics) function controls the transmission of physical material through the value chain, from procurement through production and into distribution. The efficiency with which this carried out can significantly lower cost, thereby creating more value.
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Intangible resources:
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Are non physical entities that are the creation of managers and other employees, such as brand names, the reputation of the company, the knowledge the employees have gained through experience, and the intellectual property of the company, including the protected through patents, copyrights, and trademarks.
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Capabilities:
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Refer to a company’s skills at coordinating its resources and putting them to productive use. These skills reside in an organizations rules, routines, and procedures—that is, the style or manner through which a company makes deceions and manages internal process to achieve organizational objectives. More generally a companies capabilities are the product of its organization structure, processes, and control systems. They specify how and where decesions are made within a company, the kind of behaviors the company rewards, and the companies cultural norms and values. Capabilites are intangible
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Barriers to imitation:
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Are factors that make it difficult for a competitor to copy a company’s distinctive competences (skill) ; the greater the barriers to imitation, the more sustainable s a companys competitive advantage Barriers to imitation differ depending on whether a competitor is trying to imitate resources or capabilities.
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Product differentiation:
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: Is the process of creating a competitive advantage by designing products- goods or services – to satisfy customer needs. All companies most differentiate their products to a certain degree in order to attract customers and satisfy some minimal level of need. However, some companies differentiate their products to a much greater degree than others, and this difference can give them a competitive edge.
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Cost‐leadership strategies:
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Is to outperform competitors by doing everything the company can to produce goods or services at a cost lower that those of competitors. Two advantages accrue from a cost-leadership strategy. First, because of its lower costs, the cost leader is able to charge a lower price that its competitors and yet make the same lever of profit. If companies in the industry charge similar prices for their products, the cost leader still makes a higher profit than its competitors because of its lower costs. Second, if a rivalry within the industrt increases and companies start to compete on price, the costleader will be able to withstand competition better than the other companies because of its lower costs. For both of these reasons, cost leaders are likey to earn above average costs.
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Fragmented industries
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Many industries are fragmented meaning they are composed of a large number of small and medium sized companies. Restaurant industry is an example of a fragmented industry. Advantages of fragmented industries are that it enables them companies to closer to their customers. Example many home buyers prefer dealing with local real estate agents, who perceive have a better knowledge than national chains. In addition, many industries are fragmented because there are few barriers of entry ( such as restaurant because a single entrepreneur can often bear the cost of opening his own restaurant). High industry costs can also keep an industry fragemented. Finally, a industry can be fragmented because customers needs are so specialized that only small job lots of products are required, and thus there is no room for a large, mass-production operation to satisfy market. These factors can dictate the competitive strategy to pursue.
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Non‐price strategies such as product
proliferation: |
Sometimes, to reduce the threat of entry, companies expand the range of products the range of the products they make to fill a a wide variety of niches. This creates a barrier of entry because potential competitors find it harder to break into and industry because potential competitors find it harder to break into an industry in which all the niches are filled. This strategy of pursuing a broad product line to deter entry is known as product proliferation.
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Declining industries:
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Many industries at one point go into a decline stage. In which the size of the total market starts to shrink Examples include the railroad industry, the Tabaco industry, and steel industry. Reason for decline include technological change, social trends, and demographic shifts. The railroad and the steel industry declined because of technological changes brought valuable substutes. Advent of the internal combustion engine drove the railroad industry into decline, and the steel industry fell into decline woth the raise of plastic and composite material. Social attitudes caused smoking to go down. When the size of the market shrinks, competiton increases. The intensity of completion in a declining industry depends on four factors: 1. Speed of decline 2. Height of exit barriers 3. Level of fixed costs 4. Commodity nature of product ------------- All these point to INTENSITY OF COMPETITION
Finish on page 129 |
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Taking goods developed at home and
selling them internationally |
A company can increase its growth rate by taking goods or services developed at home and selling them internationally. i.e. proctor and gamble, Microsoft,. The returns from such a strategy are likely to be grate if indigenous competitors lack comparable products. It is important to note that the success of many multinational companies is based not just upon the goods or services that they sell in foregin nations, but also upon the distinctive competences ( unique skills) that underline the production and marketing of those goods or services.
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International Strategy:
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A Strategy in which firms try to centralize produce development functions such as r&d at home but establish manufacturing and marketing functions in each major country or geographic region in which they do business. Companies like Xerox sell products that have a universial need, but don’t have significant competiors and thus are not faced with pressures to reduce their cost. They are protected by strong patents that results in a monopoly. Not direct competiors can dominate markets. Page 151
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Location economies:
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Economies benefits that arise from performing a value creation activity in the optimal location for that activity, wherever in the world that might be ( transportation costs and trade barriers permitting). Locating a value creation activity in the optimal location for that activity can have one of two effects: (1) It can lower the costs of value creation, helping the company achieve low cost position 2 it can enable a company to differentiate its product offering , which gives it the option of charging premium price or keeping price low and using differntation as means of increasing sales volume.
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Ways to reduce unit costs
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Requires that a company minimize its unit costs. To attain its goal, it may have to base its production activities at the most favorable low-cost location. It might also have to offer a standardized product to the global marketplace in order to realize the cost savings that come from economies of scale and learning effects. Lower its costs of value creation
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Responding to local taste differences:
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When customer taste preferences differ significantly between countries, as they may be for historical or cultural reasons. In such cases, a multinational company products and marketing message have to be customized to appeal to the tastes and preferences of local customers. This typically creates pressure for the delegation of production and marketing responsiblites and function to a company to overseas subsidiaries. Also, company differinate its products offering and marketing strategy from country to country in and effort to accomadate the diverse demands arising from national differences in customer tastes and preferences, business practices, distribution channels, competitive conditions, and government policies. Because differentiation across countires can involve signifincant duplication and a lact of product standardization, it may raise costs.
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Global standardization strategy:
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A strategy that focuses on increasing profitability be reaping the cost reductions derived from scale economics and location economies. Their strategy is to pursue a low-cost strategy on a global scale. Companies pursuing a gloabal standardization strategy try not to customize their product offering and market strategy to local conditions because customization, which involves shorter production runs and the duplication of functions, can raise costs. Instead, they prefer to market a standardized product worldwide so that they can reap the maximum benifts from economies of scale. They also tend to use their cost advantage to support aggressive pricing in world markets
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A localization strategy:
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A strategy that focuses on increasing profitability by customizing the companys goods or services so they provide a good match to tastes and preferences in different national markets. Loxalization is most appropriate where there are substantial differences across nations with regard to customer tastes and preferences and where cost pressures are not too intense. By customizing the product offering to local demands, the company increases the value of that product in the local market. On the downside, because in involves some duplication of functions and smaller production runs, customization limits the ability of the company to capture the cost reductions associated with mass producing a standardized product for global consumption
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Entry modes used in serving foreign
Markets Exporting |
Most manufacturing companies begin their global expansion as exporters and only later switch to one of the other modes for serving foreign market. Exporting has two advantages: One, it avoids the cost establishing manufacturing operations in the host country, which are often substantial, and it may be consistent with the scales of economies and location ecomies. Page 152
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Entry modes used in serving foreign
Markets licensing |
An arrangement whereby a foreign license buys the rights to produce a company’s products in the licensee’s country for a negotiated fee. ( normally, royalty payments on the number of units sold). The licensee then puts up most of the capital necessary tp get the overseas operation going.
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Entry modes used in serving foreign
Markets franchising |
A specialized form licensing in which the franchiser sells the franchisee intangible property ( normally a trademark) and insists that the franchisee agree to abide by strict rules about the business.
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Entry modes used in serving foreign Joint Ventures
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A separate corporate entity in which two or more companies have an ownership stake.
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Entry modes used in serving foreign Wholly Owned Subsidiaries:
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A subsidiary in which the parent company owns % 100 of the stock.
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