Competitive Strategies Corporate Level Directional Strategies

– Growth• Vertical: Backward or forward integration

• Horizontal: Exporting, Licensing, Joint Ventures, acquisitions, etc.

• Diversification

– Stability– Retrenchment

Business Unit Strategies

FINDING A NICHE Low Cost Strategy

– Wal-Mart, Southwest Airlines, H&R Block

Large Market

SmallMarket

Differentiation Strategy– Rolls-Royce, Calloway Golf, Neiman

Marcus

Focus Strategy– Lexus, Porsche, Federal Express

Differentiation Methods

Total Quality Management The Primary Method

of Differentiation Customer Focus Management Takes

Lead Employee Training

and Empowerment Continuous

Improvement System of Capturing

Quality Costs

Other Differentiation Methods Process Innovations

– Computerizing manual operations

Product Innovations– Hewlett Packard (50% of products have

been on the market less than 2 years)

Organizational Expertise– Golf pro shops verses buying golf

equipment at Wal-Mart

Service Marketing

Value of Product or Service

Value Chains– Progression of activities that add value in

the context of organization continuum

INPUTS

Materials Quality Control Inspections Training Labor

CONVERSION(ADDINGVALUE)

Labor & Machinery Indirect Costs

OUTPUTS(CUSTOMER

SATISFACTION)

Product OR Service

Process Value Analysis (Activity Based Management)

Documentation of Activities

Categorize Activities as:– Value Added– Non-Value Added

Define Lead Time– From Order Receipt to

Delivery

Eliminate or minimize non value-added activities

Improve value-added activities

Low Cost Leadership: Improve Costing Systems

Costs are traced to cost objects as closely as possible– Cost objects are targets of accumulations of

costs (products, departments, divisions)– As to cost objects, costs are classified as:

• Direct Costs – Easily traceable to cost objects

• Indirect Costs – Cannot be easily traced to cost objects, thus must be assigned or allocated

– Indirect costs are the problem

Indirect Cost Allocation Methods

Volume Based– Units Produced, Direct Labor Hours,

Machine Hours, Material Cost, Direct Labor Cost

Activity Based Costing– Accumulate costs first by activity pools– Next, assigns activity costs to cost objects– On the basis of respective cost object’s

usage of the activity Gives the TRUE COST

Other Cost Competitive Strategies Cellular

Manufacturing Target Costing Just-in-Time

Inventories Benchmarking