Trade-Offs

 Focus and trade-offs, cant do it all at the same time



Lexus cant be made and sold for $25,000. T or F?

 A few examples:  Generally low-cost strategy is not compatible with flexibility or speed of delivery

Cost

Flexibility Quality

Delivery

 High quality and low cost tend to be incompatible  Straddling occurs when a firm seeks to mimic a competitors position while trying to maintain their original (successful) position.
  

The case of Continental Airlines (CA) response Southwest Airlines (SW) While maintaining its full-service position, sought to match SW on some routes Eliminated meals, 1st class service, lowered prices, increased frequency but maintained other features because it remained as a full service airline for other routes (transfer luggage, agent commissions, etc.)

 CA reacted to Southwest.

 Lost millions, CEO got fired, returned to the former market.

Order Qualifiers and Winners

 Order qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers


Through the 1980s nobody got fired buying IBM products

 Order winners are the criteria that differentiate the products and services of one firm from another


Caterpillar 48 hours parts/service guarantee

 Class examples:

Steps in Developing a Manufacturing Strategy

1. Segment the market according to the product group 2. Identify product requirements, demand patterns, and profit margins of each group 3. Determine order qualifiers and winners for each group 4. Convert order winners into specific performance requirements

Differing Manufacturing Requirements

Consider group 1

Consider group 2

Why buy?

Focus on?