Chapter11

Chapter11 - STRATEGY AND THE FIRM Strategy actions managers...

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STRATEGY AND THE FIRM Strategy – actions managers take to attain the firm’s goal Profitability – ratio or rate of return concept. Calculated by profit/total revenue VALUE CREATION Two condition determine firm’s profits: The amount of value customers place on the firm’s goods or services and the firm’s cost of In production In general, firm charges price that is less than the value customers value on that good and services. The value creation – Activities performed that increase the value of goods or services to consumers. Differentiation strategy – strategy that focuses on increasing the attractiveness of a product Michael Porter argued that low cost and differentiation are two strategies for creating value and attaining a competitive advantage in an industry. THE FIRM AS A VALUE CHAIN Primary Activities Primary activities have to do with the design, creation, and delivery of the product; its marketing; and its support and after-sale service. Subdivided into four functions: Research and Development Production Marketing and sales Service R&D – concerned with design of products and production processes. Production – concerned with the creation of a good or service Marketing and sales – help to create value in several ways. Through brand positioning and advertising. Service – to provide after-sale service and support. Support Activities Provide inputs that allow the primary activities to take place. 1. Information system – refers to electronic systems for managing inventory, tracking sales, pricing products, selling products, dealing with customer service inquiries, and so on. 2. Company infrastructure. We mean the context within which all the other value creation activities occur. This include organizational structure, control systems, and culture of the firm. THE ROLE OF STRATEGY
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This note was uploaded on 04/13/2011 for the course BMOS 1020 taught by Professor Leduc during the Spring '11 term at UWO.

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Chapter11 - STRATEGY AND THE FIRM Strategy actions managers...

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