Creating

Competitive Advantage
Core Competency
(KSA)
Knowledge
Skills
Abilities / Attitude
• Core competency
• Competitive Advanatge
 Creating Competitive Advantage:
Functional-Level Strategy

Functional-level strategy is a plan of action to improve the ability of each of an

organization’s functions to perform its task-specific activities in ways that add value to its
goods and services.

 Functional-level strategies are closely aligned and work together to support an organization’s
corporate-level plan.

 Managers can employ either a low-cost strategy or a differentiation strategy at the business-
level to add value to an organization’s products and achieve a competitive advantage.
• Corporate / Strategic Level (Top Management)
• Divisional / Business Level (Middle Management)
• Functional / Operational Level (First- Line Management)

• Stuck in the Middle

 Creating Competitive Advantage:
Functional-Level Strategy - continued

There are four ways to accomplish a low cost or differentiation strategy which includes:

Achieve Superior Efficiency Achieve Superior Quality

Efficiency is a measure of the amount of inputs
required to produce a given amount of outputs.
The fewer the inputs required to produce a given
output, the higher the efficiency and the lower the
costs of outputs.
Quality means producing goods and services that
have attributes such as design, style, performance,
and reliability that are superior to competitors.
High quality products improve an organization’s
brand name, which allows them to charge more.
 Creating Competitive Advantage:
Value Chain and Value Chain Management

Value Chain is a coordinated series or sequence of functional activities necessary to

transform inputs into finished goods or services that customers want to purchase.

 Each activity along the value chain adds value when it lowers cost or differentiates attributes,
and increases the price a company can charge for the good or service.

Value Chain Management is the development of a set of functional-level strategies that

support a company’s business-level strategy and strengthen its competitive advantage.

 The value chain is made up of the following functions:

 Product Development Function  Sales Function

 Materials Management Function  Customer Service Function
 Production Function  Feedback Function
• Responsiveness
• Reliability
• Respect
• Stuck in the Middle
 Improving
Responsiveness to Customers
 Competitive Advantage
Responsiveness To customers Innovation
Need Analysis (Need Assessment)
Exploration
Data Gathering and Analysis
1- Begin with the end in mind
2- Collect Customer Data
3- make data Actionable
4-Evaluate the Action

Utilization
Evaluation
Quality Efficiency
 What do Customers Want?

Managers can discover a customer’s wants and needs (demand) by

using a needs analysis or needs assessment.

 A needs analysis/needs assessment is an analytical tool that

synthesizes customers data from a variety of sources to determine
what customers want and value.

 A needs analysis is comprised of four steps:

 Exploration

 Data Gathering and Analysis

 Utilization

 Evaluation
 Improving Responsiveness to Customers:
Needs Analysis Four Steps

Exploration Utilization

Identify what you know about customer needs and Data is used to create a plan of action to close gaps
anything that is hindering you from meeting those and meet customer needs.
needs.

Evaluation
Data Gathering and Analysis
Results are evaluated to determine if gaps were
Collect customer data from feedback surveys, closed and if customer needs were met.
historical sales data, statistical data, competitive
analysis, market research and other sources to
analyze it and uncover gaps between what customers
are getting and what they want.
 Improving Responsiveness to Customers:
Collecting and Analyzing Customer Data

Best practices for collecting and analyzing customer data include the following:

Begin With the End in Mind Make Data Actionable

Set a goal to improve the customer relationship by Translate customer data into actions that close gaps
helping the customer complete a job or solve a and affect product and service improvements and
problem. (Analysis Paralysis) efficiencies.

Collect Customer Data Continuously Evaluate Actions

Customer needs are constantly changing and Review results to determine if goals have been met
therefore a needs analysis should be done regularly. to improve the customer relationship
 Improving Responsiveness to Customers:
Customer Preferences and Wants

Most customer preferences and wants can be generalized to include:

 A lower price over a higher price.

 High-quality products over low-quality products.

 Quick service and after-sales support over slow service and limited support.

 Products with many useful features over products with just a few features.

 Products that cater to a unique need over products that fit all needs.
 Improving Responsiveness to Customers:
Customer Relationship Management (CRM)

Customer relationship management (CRM) is a technique that uses IT to develop an

ongoing relationships with customers to maximize the value an organization can deliver
to them over time.

CRM systems have three interconnected components:

 Sales and selling

 After-sales service and support

 Marketing
Improving Quality
Quality is a standard of excellence or superiority in a product or service.

High quality products possess attributes such as superior design, multiple

features, reliability, and after-sales support.

Managers seek to control and improve the quality of products and services for
two reasons:

 Customers usually prefer a high-quality product or service over a low-quality

one.

 A high-quality product or service can increase efficiency and thereby lower

operating costs and raise profits.
 Improving Quality:
Total Quality Management (TQM)

Total quality management (TQM) is a management technique that focuses on

improving the quality of an organization’s products and services.

There are ten steps that are necessary for managers to implement a successful TQM
program:

 Build organizational
commitment to quality.
 Focus on the customer.
 Find ways to measure quality.
 Set goals and create incentives.
 Solicit input from employees.
 Identify and trace defects to
their source.
 Introduce just-in-time inventory
systems. (JIT)
 Work closely with suppliers.
 Design for ease of production.
 Break down barriers between
functions.
 Improving Quality:
Six Sigma

Six sigma is a technique used to improve quality by systematically improving how value
chain activities are performed and then using statistical methods to measure the
improvement.

Lean

LEAN_Six Segma

Effective - effeciency
Improving Efficiency
Efficiency is a useful measure of how well an organization uses its
resources – i.e. labor, capital, materials, and energy – to produce
goods and services.
 Improving Efficiency:
Facilities Layout

Facilities layout is the strategy of designing the machine-worker

interface to increase operating efficiency.

Three different methods for facilities layouts or methods for arranging

workstations includes:

 Product Layout

 Process Layout

 Fixed-Position Layout
 Improving Efficiency:
Facilities Layout - continued

Product Layout Process Layout Fixed-Position Layout

Machines are organized so that
each operation needed to
manufacture a product or process
a patient is performed at
workstations arranged in a fixed
sequence.
Mass production is a familiar
name for this layout, and car
assembly lines are the best known
example.
Workstations are not organized in
a fixed sequence, rather each
workstation is relatively self-
contained, and a product goes to
which ever workstation is needed
to perform the next operation.
While this layout method
provides flexibility it often times
reduces efficiency because it is
expensive.
Products stay in a fixed position,
and component parts are
produced in remote workstations,
then brought to the production
area for final assembly.
Self-managed teams often times
work within a fixed-position layout.
 Improving Efficiency:
Flexible Manufacturing

Flexible manufacturing is the set of techniques that attempt to

reduce the costs associated with the product assembly process or
the way services are delivered to customers.

 A goal of flexible manufacturing is to redesign the manufacturing process so

production equipment geared for manufacturing one product can quickly
be replaced with equipment geared to make another product.

 Flexible manufacturing allows companies to produce many more varieties of

a product than before in the same amount of time.

 Flexible manufacturing increases a company’s ability to be responsive to its

customers.
 Improving Efficiency:
Just-in Time Inventory

Just-in time inventory is a system in which parts of supplies arrive

at an organization when they are needed, not before.

 Great cost savings can result from increasing inventory turnover and
reducing inventory holding costs.

 JIT systems require significant coordination with suppliers to monitor and

respond to changes in inventory levels.
 Improving Efficiency:
Self-Managed Work Teams

A self-managed team typically consists of 5 to 15 employees who

produce an entire product instead of just parts of it.

 Team members learn all team tasks and move form job to job which results
in a flexible workforce.

 Cost savings arise in the use of self-managed teams as the need for
supervisors is eliminated thus creating a flatter organizational hierarchy.

 Successful self-managed teams have been proven to increase efficiency by

30% ore more.
 Improving Efficiency:
Business Process Reengineering

Business Processes Workflows Business Process Reengineering

A set of activities that, once
completed, accomplish an
organizational goal or add value to
a product or service.
Each business process involves
clearly defined inputs (managerial,
operational, and supporting) to
yield a single output.
The automation of business
processes by coordinating tasks
between people and synchronizing
data between systems.
Workflows make businesses more
efficient, responsive, and
profitable by ensuring each step of
a process is defined, monitored,
and optimized for productivity.
Workflows give timely process
data to managers and employees
so they can make better decisions.
A management strategy that
focuses on rethinking and
redesigning workflows and
business processes (the value
chain) from the group up to
achieve dramatic performance
improvements in cost, quality,
speed, and service.
The goal of reengineering is to
become more competitive.
 Improving Efficiency:
Information Systems and the Internet

All companies today use the Internet to manage the value chain.

 Using the Internet to manage the value chain reduces the cost of
coordination between the company and its customers, as well as the
company and its suppliers.

 The use of information systems and the Internet in organizations has had a
negative impact on the workforce at times, as organizations realize they can
automate certain employee functions.
Improving Innovation
 Innovation can be split up into two different types:

Quantum Product Innovation Incremental Production Innovation

The development of new, often radically different, The gradual improvement and refinement of existing
kinds of goods and services because of fundamental products that occur over time as existing technologies
shifts in technology brought about by pioneering are perfected.
discoveries.

Quantum product innovations are relatively rare, therefore most managers’ activities
focus on incremental product innovations.
 Improving Innovation:
Strategies to Promote Innovation

Product development is the management of the value chain

activities involved in bringing new or improved goods and services
to the market.

 There are three strategies managers can implement to help ensure that
their product development efforts are a success:

 Involve both customers and suppliers

 Establish a stage-gate development funnel

 Establish cross functional teams

 Improving Innovation:
Strategies to Promote Innovation - continued

Strategies for implementing product development - continued

Involve both Customers and Suppliers

 Successful product development requires inputs from more than just

an organization’s members; also needed are inputs from customers
and suppliers.
 Improving Innovation:
Strategies to Promote Innovation - continued

Strategies for implementing product development - continued

Establish a Stage-Gate Development Funnel

 A stage-gate development funnel is a planning model that forces

managers to choose among competing projects so organizational
resources are not spread thinly over too many projects.

 Managers often make the mistake of trying to fund multiple new

projects at once during product development.

 Product Development Plan – A plan that specifies all of the relevant

information that managers need in order to decide whether to proceed
with a full-blown product development effort.

 Contract Book – A written agreement that details product

development factors such as responsibilities, budgets, timelines, etc.
 Improving Innovation:
Strategies to Promote Innovation - continued

Strategies for implementing product development - continued

Establish Cross-Functional Teams

 The reason for using a cross-functional team is to ensure a high level of

coordination and communication among managers in different
functions.

 For a cross-functional team to succeed, it must have the right kind of

leadership and it must be managed effectively.

 Core Members – The members of a team who bear primary

responsibility for the success of a project and who stay with a project
from inception to completion.