notes_MGMT101_summary of the book

Improving relationships with the firm and other

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Improving relationships with the firm and other organizaionts (like suppliers) – this is referred to as the extended value chain f. Service organization add value by customizing rather than standardizing like in manufacturing 5. Lecuture 4 part II – business level strategy a. 3 strategies to overcome the 5 forces and become competitive b. Overall cost leadership b.i. Aggressive construction of efficient-scale facilitites b.ii. Vigorous pursuit of cost reductions from experience b.iii. Tight cost and overhead controls b.iv. Avoidance of marginal customer accounts b.v. Cost minimization in all activities of the value chain b.vi. Learning how to reduce costs takes experience b.vii. Competitive parity – achievement of similarity with competitors with respect to cost, differentiation, or other characteristic b.viii. How it helps: protects against competitors (erodes their margins), no substitutes of comparable price, decrease buyer and supplier power, economy of scales inc barriers b.ix. Problems with cost leadership strategy b.ix.1. Too much focus on one area of the value chain b.ix.2. If all rivals share a common input or raw material b.ix.3. The strategy is imitated too easily b.ix.4. Lack of parity on differentiation b.ix.5. Erosion of cost advantages when pricing information increases (the internet) c. Differentiation c.i. Prestige of brand, technology, innovation, features, customer service, dealer network c.ii. Firms must justify price premiums with differentiating and must cut costs in areas that don’t affect differentiation (cost parity) c.iii. How it helps: protects against rivalry, customer loyalty leads to barriers to entry, reduced buyer power, supplier power as well bc of prestige, reduces substitutes bc of customer loyalty c.iv. Problem with it: c.iv.1. Uniqueness must also be valuable not just different c.iv.2. Too much is bad (too many features in a Mercedes for instance) c.iv.3. Too high of a price premium c.iv.4. It can be easily imitated c.iv.5. Dilution of brand identification through product-line expansion (Gucci)
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c.iv.6. Buyers may not view the product as different d. Focus – based on narrow competitive scope by focusing on a select segment within an industry called a niche d.i. Focus cost d.ii. Focus Differentiation d.iii. How it helps: less rivalry, limited substitutes, overall better in all five forces d.iv. Problems: d.iv.1. Erosion of cost advantages d.iv.2. Subject to competition and imitation after slight timing advantage d.iv.3. Too focused e. How to attain low cost and differentiation e.i. Automated and flexible manufacturing system e.i.1. Mass customization - Produce small quantities of unique products at a low cost (window company in Minnesota) e.ii. Exploiting profit pool – the profit pool is the total profits from an industry at all points along the value chain. Some areas have higher profits, so moving to those is better e.iii. Coordinate extended value chain with IT e.iv. How this helps: all areas, especially in reducing price wars e.v. Problems: e.v.1. In attempting to attain both you may not get either e.v.2.
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