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Management Practices

Lecture 13

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Recap

PORTER’S FIVE-FORCES MODEL

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Today’s Lecture

• Value Chain Management• Functional Strategies for Competitive

Advantage• Functional Activities and the Value Chain

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Four Ways to Create a Competitive Advantage

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Functional Activities and the Value Chain

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Functional Strategies and Value-Chain Management

• Value-chain management – development of a set of functional-level strategies

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

– Good value-chain management requires marketing managers to focus on defining the company business in terms of customer needs

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What Do Customers Want?

Although specifying exactly what customers want is not possible because their needs vary from product to product, it is possible to identify some general product attributes or qualities that most customers prefer:

1. A lower price to a higher price2. High-quality products3. Quick service and good after-sales service4. Products with many useful or valuable features5. Products that are tailored to their unique needs

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Customer Relationship Management

• Customer relationship management – technique that uses IT to develop an ongoing

relationship with customers to maximize the value an organization can deliver to them over time

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Customer Relationship Management- Benefits

CRM systems provides a number of important advantages for both small and large companies.

• Decrease cost of customer acquisition. Data enables companies to correctly identify their target audience and to focus all of the marketing efforts on that particular group of people.

• Increase sales. Analyzes current customer service practices and can be used to pinpoint shortcomings and areas that need improvement. Better customer service will ultimately result in a higher sales volume.

• Increase efficiencies. Employees can access important information quickly and process and can be automated.

• Better and more accurate data. Analytics and reporting allows the sales, marketing and customer service teams to work together and introduce improvements.

• Data security. Not only does a CRM manage your data but security allows you to control who has access to certain data and features.

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Impact of Increased Quality on Organizational Performance

Figure 9.3

An organization able to provide, for the same price, a product of higher quality than a competitor’s product is serving customers better. Higher product quality can increase efficiency

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Total Quality Management

• Total quality management (TQM) – focuses on improving the quality of an

organization’s products and stresses that all of an organization’s value-chain activities should be directed toward this goal

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Total Quality Management

1. Identify what customers want from the good or service that the company provides

2. Identify what the company actually provides to customers

3. Identify the gap that exists between what the customers want and what they get (quality gap)

4. Formulate a plan for closing the quality gap

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

– The goal of Six Sigma is to improve a company’s quality to only three defects per million by systematically altering the way all the processes involved in value chain activities are performed, and then carefully measuring how much improvement has been made using statistical methods.

– Six Sigma shares with TQM its focus on improving value chain processes to increase quality; but it differs because TQM emphasizes top-down organization wide employee involvement, whereas the Six Sigma approach is to create teams of expert change agents, known as “green belts and black belts,” to take control of the problem-finding and problem-solving process and then to train other employees in implementing solutions.

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Three Facilities Layouts

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Just-in-Time Inventory and Efficiency

• Just-in-time (JIT) inventory system gets components to the assembly line just as they are needed to drive down costs

• Major cost savings can result from increasing inventory turnover and reducing inventory holding costs

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Just-in-time-benefits

• Funds that were tied up in inventories can be used elsewhere.

• Areas previously used to store inventories can be used for other more productive uses.

• Throughput time is reduced, resulting in greater potential output and quicker response to customers.

• Defect rates are reduced, resulting in less waste and greater customer satisfaction.

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Process Reengineering and Efficiency

• Process Reengineering – The fundamental rethinking and radical redesign

of business processes to achieve dramatic improvement in critical measures of performance such as cost, quality, service, and speed.

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A Stage-Gate Development Funnel

Stage-Gate Development Funnel is a technique that forces managers to make choices among competing projects so that functional resources are not spread thinly over too many projects

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Summary

• Value Chain Management• Functional Strategies for Competitive

Advantage• Functional Activities and the Value Chain

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Next Lecture

• Organizational Control and Change• Control Process Steps• The Goal-Setting Process• Management by Objectives