周长辉战略管理课件hill7eirmtheorych04.docx

周长辉战略管理课件hill7eirmtheorych04.docx

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周长辉战略管理课件hill7eirmtheorych04

CHAPTER4

BuildingCompetitiveAdvantageThroughFunctional-LevelStrategy

SYNOPSISOFCHAPTER

Thischapterexplainshowfunctional-levelstrategiescanhelpacompanyachievesuperiorefficiency,quality,innovation,andcustomerresponsiveness,leadingtocompetitiveadvantage.

Functionalstrategiesconsistentwithattainingsuperiorefficiencyareconsideredfirst.Thissectionreviewsthecontributionsthateachofthedifferentfunctionalareasofacompanycanmaketowardincreasingefficiency.Amongthetopicsdiscussedwithregardtotheirimpactonefficiencyareeconomiesofscale,learningeffects,theexperiencecurve,flexiblemanufacturingtechnologies,marketingstrategy,andmaterialsmanagement.ThecontributionsoftheR&Dfunction,thehumanresourcefunction,theinformationsystemsfunction,andcompanyinfrastructurearethenexamined.

Next,thechapteraddresseshowfunctionalstrategiescanimprovequalityofacompany’sgoodsandservices.Oneaspectofqualityisreliability,andtotalqualitymanagement（TQM）isproposedasamethodologyforimprovingreliability.Otheraspectsofquality,suchasform,features,durability,andstylingarealsodiscussed.

Thethirdsectionfocusesonthemeansofachievingsuperiorinnovationthroughfunctionalstrategies.Adiscussionofthereasonsforthehighfailurerateofinnovationsisfollowedbyadetailedexaminationofthewaysinwhichacompanycanbuildadistinctivecompetencyininnovation.

Thefinalsectionofthechapterconcentratesonthecontributionoffunctionalstrategiestoimprovedresponsivenesstocustomers.Achievingsuperiorcustomerresponsivenessrequiressuperiorefficiency,quality,andinnovation.Also,thechapterdescribesstepsthatcompaniescantaketobetterunderstandtheneedsoftheircustomers,bettersatisfythoseneeds,andsatisfythoseneedsmorequickly.

TEACHINGOBJECTIVES

1.Discusshowacompanycanbuildandmaintainacompetitiveadvantagethroughitschoiceoffunctionalstrategies.

2.Identifythedifferentstepsthatcanbetakenatthefunctionalleveltoimproveacompany’sefficiency.

3.Identifythedifferentstepsthatcanbetakenatthefunctionalleveltoimprovethequalityofthecompany’sproduct.

4.Identifythedifferentstepsthatcanbetakenatthefunctionalleveltoimproveacompany’sabilitytoinnovate.

5.Identifythedifferentstepsthatcanbetakenatthefunctionalleveltoimproveacompany’sresponsivenesstoitscustomers.

OpeningCase:

VerizonWireless

VerizonWirelesshasachievedthelowestchurnrate—thenumberofsubscribersthatleaveawirelessservice—intheindustry.Theyhaveachievedthisthroughtheestablishmentofthelargestcoverageareaamongstproviders,whichresultsinfewerdroppedcallsandclearercallquality.TheywereabletoachievethisinpartduetotheiruseofCDMAtechnology,whichislesscostlytoinstallandbetterabletohandlebroadbandservices.Theadoptionofthistechnologywasriskygiventhatitwasunprovenatthetimebutithasproventobereliableandsuitedtoofferingnewservicestosubscribers.Verizonalsoinvestedincustomercareandanalysis,helpingitscustomerstoidentifythebestsubscriptionfortheirneeds.

TeachingNote:

Thiscaseprovidesavividdemonstrationofhowacompanycanimproveitsperformancethroughtheuseofimprovementsatthefunctionallevel.Verizonmadeariskytechnologychoicethathaspaidoffforthemandresultedinincreaseddemandfortheirservices.Thedetailsofthecaserelatetomanyofthetopicsintroducedinthechapter,suchasimprovingefficiency,quality,andresponsivenesstocustomers.Thiscaseprovidesanexcellentintroductiontoanideathatmayatfirstbedifficultforstudentstograsp—thatis,thatthebasisofcompetitiveadvantageisalwaysfoundatthelowestlevelsoftheorganization（thefunctions）.Studentsmayerroneouslyassumethatlarge,diversifiedcompaniesshouldbeturnedaroundprimarilybytheactionsoftopmanagers.Youcanusethiscaseasanopportunitytodemonstratethatreal,lasting,importantchangesare,infact,mostoftenduetomanysmallimprovementsatthefunctionallevel.Thus,functionallevelmanagersplayakeyroleinorganizationalsuccess.

LECTUREOUTLINE

I.Overview

A.Thischapteraddressestherolethatfunctional-levelstrategiesplayinimprovingtheeffectivenessoffunctionaloperationswithinacompany,suchasmanufacturing,marketing,materialsmanagement,researchanddevelopment,andhumanresources.Functionalstrategiesmayalsocutacrosstwoormorefunctionstoattainacommongoal.

B.Functional-levelstrategiescanimproveeffectivenessbyhelpinganorganizationtoachieveefficiency,quality,innovation,andcustomerresponsiveness.

C.Functionalstrategiesareresponsibleforbuildingtheresourcesandcapabilitiesthatleadtodistinctivecompetencies,allowingafirmtopursueadifferentiationand/orlow-coststrategy.

ShowTransparency4.1

Figure4.1:

TheRootsofCompetitiveAdvantage

II.AchievingSuperiorEfficiency

A.Efficiencyismeasuredbythecostofinputs（labor,capital,equipment,know-how,andsoon）requiredtoproduceagivenoutput（thegoodorserviceproducedbythecompany）.Themoreefficientacompany,thelowerthecostofinputsisrequiredtoproduceagivenoutput.Anefficientcompanyhashigherproductivitythanitsrivals,and,therefore,lowercosts.

B.Economiesofscaleareunit-costreductionsassociatedwithalargescaleofoutput.Bothmanufacturingandservicecompaniescanbenefitfromeconomiesofscale.

1.Onesourceofeconomiesofscaleistheabilitytospreadfixedcostsoveralargeproductionvolume.

2.Anothersourceistheabilityofcompaniesproducinginlargevolumestoachieveagreaterdivisionoflaborandspecialization.Specializationimprovesemployeeproductivitybecauseitenablesindividualstobecomeveryskilledatperformingaparticulartask.

3.EconomiesofscaleraiseROICintwoways.TheyreducespendingonCOGS,SG&A,andR&Dasapercentageofsales,improvingreturnonsales.TheyalsomakemoreintensiveuseofexistingPPE,increasingcapitalturnover.

4.Economiesofscaledonotcontinueindefinitely.Typically,diseconomiesofscalearereachedatveryhighvolumes,duetoincreasedbureaucracyandtheresultinginefficiencies.

ShowTransparency4.2

Figure4.2:

EconomiesandDiseconomiesofScale

C.Learningeffectsrefertocostsavingsthatcomefromlearningbydoing.Laborproductivityincreasesasindividualslearnthemostefficientwaytoperformaparticulartaskandmanagerslearnhowbesttoruntheoperation.

1.Learningeffectsaremostimportantinatechnologicallycomplextaskthatisrepeated,andarereallyimportantonlyduringthestart-upperiodofanewprocess.Theimportanceoflearningeffectstendstoceaseaftertwoorthreeyears.

2.Althougheconomiesofscalemoveafirmdownwardalongtheunitcostcurve,learningeffectsshifttheentirecurvedownwards.

ShowTransparency4.3

Figure4.3:

TheImpactofLearningandScaleEconomiesonUnitCost

D.Theexperiencecurvereferstosystematicunit-costreductionsthathavebeenobservedtooccuroverthelifeofaproduct.Accordingtotheexperience-curveconcept,unit-manufacturingcostsforaproducttypicallydeclinebyacharacteristicamounteachtimeaccumulatedoutputoftheproductisdoubled.

ShowTransparency4.4

Figure4.4:

TheExperienceCurve

1.Economiesofscaleandlearningeffectsunderlietheexperience-curvephenomenon.Asacompanyincreasestheaccumulatedvolumeofitsoutputovertime,itisabletorealizebotheconomiesofscale（asvolumeincreases）andlearningeffects.Asaconsequence,unitcostsfallwithincreasesinaccumulatedoutput.

2.Theexperiencecurvesuggeststhatincreasingacompany’sproductvolumeandmarketsharewillbringcostadvantagesoverthecompetition.Theconceptisperhapsmostimportantinthoseindustrieswheretheproductionprocessinvolvesthemassproductionofastandardizedoutput（forinstance,themanufactureofsemiconductorchips）.

3.Ifacompanywishestoattainalow-costposition,itmustridedowntheexperiencecurveasquicklyaspossible.Thisinvolvesbuildinganefficientscaleplantaheadofdemandandaggressivelypursuinglearningeffects.Italsoinvolvesaggressivepricecuttingandmarketinginordertoexpandsalesandgetdowntheexperiencecurveaheadofcompetitors.

StrategyinAction4.1:

TooMuchExperienceatTexasInstruments

TexasInstruments（TI）wasoneofthefirstcompaniestoexploittheexperiencecurveconcept.WhenTIfirstproducedanewproduct,itwouldslashthepricetostimulatedemand,drivinguptheaccumulatedvolumeofproductionanddrivingdowncosts.Asaresult,duringthe1960sand1970sTIhammereditscompetitorsintransistors,semiconductors,handheldcalculators,anddigitalwatches.Ultimately,however,TI’ssinglemindedfocusoncostreductionsleftthecompanywithapoorunderstandingofconsumerneedsandmarkettrends.CompetitorssuchasCasio,Hewlett-Packard,Motorola,andIntelmademajorinroadsintoTI’smarketsbyfocusingonadditionalfeaturesthatconsumersdemanded,ratherthanoncostandprice.TIwasslowtoreacttothistrendandlostsubstantialmarketshareasaresult.

TeachingNote:

Thecaseshowsstudentshowincreasingexperienceandexpertisecanbebothanadvantageandadisadvantage.Thecasedemonstratesanexampleofafirmthatrodedowntheexperiencecurve,benefitingfromtheefficiencyandknow-howimprovements,butthenbecameover-reliantonfurtherimprovementsinefficiency,ignoringchangingconditions.Studentscanusethiscasetounderstandhoworganizationsmustbalancetheirquestfore