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    Building Competitive Advantage Through Functional-Level Strategies

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    Farha Elvy
    The document discusses how functional-level strategies can be used to build competitive advantage. It outlines several strategies that functions like production, marketing, R&D, and human resources can pursue to improve efficiency, quality, innovation, and customer responsiveness including achieving economies of scale, implementing flexible production systems, reducing customer defection through loyalty programs, designing products for ease of manufacture, and instituting employee training programs. The primary roles of each value creation function in achieving superior performance across these areas are also summarized.

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    Building Competitive Advantage Through Functional-Level Strategies

    Uploaded by

    Farha Elvy
    27 views26 pages
    The document discusses how functional-level strategies can be used to build competitive advantage. It outlines several strategies that functions like production, marketing, R&D, and human resources can pursue to improve efficiency, quality, innovation, and customer responsiveness including achieving economies of scale, implementing flexible production systems, reducing customer defection through loyalty programs, designing products for ease of manufacture, and instituting employee training programs. The primary roles of each value creation function in achieving superior performance across these areas are also summarized.

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    MGT489 - Lecture 04

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    The document discusses how functional-level strategies can be used to build competitive advantage. It outlines several strategies that functions like production, marketing, R&D, and human resources can pursue to improve efficiency, quality, innovation, and customer responsiveness including achieving economies of scale, implementing flexible production systems, reducing customer defection through loyalty programs, designing products for ease of manufacture, and instituting employee training programs. The primary roles of each value creation function in achieving superior performance across these areas are also summarized.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    27 views26 pages

    Building Competitive Advantage Through Functional-Level Strategies

    Uploaded by

    Farha Elvy
    The document discusses how functional-level strategies can be used to build competitive advantage. It outlines several strategies that functions like production, marketing, R&D, and human resources can pursue to improve efficiency, quality, innovation, and customer responsiveness including achieving economies of scale, implementing flexible production systems, reducing customer defection through loyalty programs, designing products for ease of manufacture, and instituting employee training programs. The primary roles of each value creation function in achieving superior performance across these areas are also summarized.

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    Building Competitive Advantage

    Through Functional-Level
    Strategies
    Chapter 4
    Overview
    •  Functional Level Strategies
    ü Actions that managers take to improve
    the efficiency and effectiveness of one or more
    value creation activities.
    ü These actions impact efficiency, quality,
    innovation and customer responsiveness.
    Roots of Competitive Advantage
    Achieving Superior Efficiency
    Efficiency and Economies of Scale

    •  Economies of Scale
    ü Reductions in unit costs attributed to larger
    output.
    •  Fixed costs
    ü Costs that must be incurred to produce a product
    regardless of level of output.
    •  Diseconomies of scale
    ü Unit cost increases associated with a large scale of
    output.
    Economies and Diseconomies of Scale
    Achieving Superior Efficiency
    Efficiency and Learning Effects

    •  Learning Effects
    ü Cost savings that come from learning by doing.
    The Impact of Learning and Scale Economies on Unit Costs
    Achieving Superior Efficiency
    Efficiency and The Experience Curve

    •  The Experience Curve


    ü The systematic lowering of the cost structure and
    consequent unit cost reductions that have been
    observed to occur over the life of a product.
    ü Economies of scale and learning effects underlie
    the experience-curve phenomenon
    The Experience Curve
    Achieving Superior Efficiency
    Efficiency and Flexible Production Systems, Mass Customization

    •  Flexible Production Technology


    ü 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.
    •  Mass Customization
    ü The use of flexible manufacturing technology to
    reconcile two goals that were once thought
    to be incompatible: low cost and differentiation
    through product customization.
    Tradeoff Between Costs and Product Variety
    Achieving Superior Efficiency
    Efficiency and Marketing

    •  Marketing Strategy
    ü The position that a company takes with regard to
    pricing, promotion, advertising, product design,
    and distribution.
    •  Customer Defection
    ü The percentage of a company’s customers who
    defect every year to competitors.
    The Relationship Between Customer Loyalty
    and Profit per Customer
    Achieving Superior Efficiency
    Efficiency and Materials Management

    •  Just-in-Time (JIT) Inventory Systems


    ü 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.
    •  Supply Chain Management
    ü 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.
    Achieving Superior Efficiency
    Efficiency and R&D Strategy, HRM Strategy

    •  R&D Strategy and Efficiency


    ü Design products for ease of manufacture
    ü Seek process innovation
    •  Human Resource Strategy and Efficiency
    ü Hiring Strategy
    ü Employee Training
    ü Self-managing teams
    ü Pay for Performance
    Achieving Superior Efficiency
    Efficiency and Information Systems, Infrastructure

    •  Information Systems
    ü Automate processes
    ü Reduce cost of coordination
    •  Infrastructure
    ü Company-wide commitment to efficiency
    ü Facilitate cooperation among functions.
    Primary Roles of Value Creation Functions in Achieving Superior Efficiency

    Value Creation Primary Roles


    Function
    Infrastructure 1. Provide company-wide commitment to efficiency
    (leadership) 2. Facilitate cooperation among functions

    Production 1. Where appropriate, pursue economies of scale


    and learning economies
    2. Implement flexible manufacturing systems

    Marketing 1. Where appropriate, adopt aggressive marketing


    to ride down the experience curve
    2. Limit customer defection rates by building brand
    loyalty
    Primary Roles of Value Creation Functions in Achieving Superior Efficiency (contd.)

    Value Creation Primary Roles


    Function
    Materials 1. Implement JIT systems
    management 2. Implement supply-chain coordination

    R&D 1. Design products for ease of manufacture
    2. Seek process innovations

    Information 1. Use information systems to automate processes


    systems 2. Use information systems to reduce costs of
    coordination

    Human 1. Institute training programs to build skills


    resources 2. Implement self-managing teams
    3. Implement pay for performance
    Achieving Superior Quality
    •  Attaining Superior Reliability
    –  Implementing Reliability Improvement
    Methodologies
    –  Total Quality Management
    •  Increasing product reliability so that it consistently
    performs as it was designed to and rarely breaks down.
    •  Improving Quality as Excellence
    Roles Played by Different Functions in Implementing
    Reliability Improvement Methodologies
    Roles Played by Different Functions in Implementing
    Reliability Improvement Methodologies
    Attributes Associated with a Product
    Offering
    Achieving Superior Innovation
    •  The High Failure Rate of Innovation
    –  Demand for innovation is inherently uncertain
    –  Technology is poorly commercialized
    –  Poor positioning strategy
    –  Marketing a technology for which there is not
    enough demand
    –  Products are slowly marketed
    •  Reducing Innovation Failure
    Functional Roles for Achieving Superior Innovation
    Achieving Superior
    Responsiveness to Customers
    •  Focusing on the Customer
    –  Demonstrating Leadership
    –  Shaping Employee Attitudes
    –  Knowing Customer Needs
    •  Satisfying Customer Needs
    –  Customization
    –  Response Time
    Primary Roles of Different Functions in Achieving
    Superior Customer Responsiveness

    Last Slide

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