CHAPTER 3: Strategic Initiatives for Implementing Competitive Advantages

Supply Chain Management

  Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability. The four basic components of supply chain management are:

1. Supply chain strategy - the strategy for managing all the resources required to meet customer demand for all products and services.
2. Supply chain partners -the partners chosen to deliver finished products, raw materials, and services including pricing, delivery, and payment processes along with partner relationship monitoring metrics.
3. Supply chain operation - the schedule for production activities including testing,packaging and preparation for delivery. Measurements for this component include productivity and quality.
4. Supply chain logistics - the product delivery processes and elements including orders,warehouse, carriers, defective product returns, and invoicing.  

Effective and Efficient Supply Chain Management's Effect on Porter's Five Forces

  Effective and efficient supply chain management systems can enable an organization to:

• Decrease the power of its buyers.
• Increase its own supplier power.
• Increase switching costs to reduce the threat of substitute products or services.
• Create entry barriers thereby reducing the threat of new entrants.
• Increase efficiency while seeking a competitive advantage through cost leadership.

Customer Relationship Management

  Customer relationship management (CRM) involves managing all aspects of a customer's relationship with an organization to increase customer loyalty and retention and an organization's profitability.

CRM overview

Based on the figure,its provides an overview of a typical CRM system. Customers contact an organization through various means including call centers, web access, email, faxes, and direct sales. A single customer may access an organization multiple times through many different channels. The CRM system tracks every communication between the customer and the organization and provides access to CRM information within different systems from accounting to order fulfillment. Understanding all customer communications allows the organizations to communicate effectively with each customer.

CRM Strategy

  

  It is important to realize that CRM is not just technology, but also a strategy that an organization must embrace on an enterprise level.Although there are many technological components of CRM, it is actually a process and business goal simply enhanced by technology. Implementing a CRM system can help an organization identify customers and design specific marketing campaigns tailored to each customer, thereby increasing customer spending. A CRM system also allows an organization to treat customers as individuals, gaining important insights into their buying preferences and behaviors and leading to increased sales, greater profitability,and higher rate of customer loyalty.

Business Process Re-engineering

  A business process is a standardized set of activities that accomplish a specific task, such as processing a customer's order. Business process re-engineering (BPR) is the analysis and redesigns of workflow within and between enterprises. The concept of BPR traces its origins to management theories developed as early as the 19th century. The purpose of BPR is to make all business process the best-in-class.

Seven Principles of Business Process Re-engineering

Finding Opportunity Using BPR

  Companies frequently strive to improve their business processes by performing tasks faster, cheaper, and better.

Better, Faster, Cheaper of BPR

  Based on the figure that displays different ways to travel the same road. A company could improve the way that it travels the road by moving from foot to horse and then from horse to car. However, true BPR would look at taking different path. A company could forget about traveling on the same old road and use an airplane to get to its final destination. Companies often follow the same indirect path for doing business, not realizing there might be a different, faster and more direct way of doing business.

Pitfalls of BPR 

  One hazard of BPR is that the company becomes so wrapped up in fighting its own demons that it fails to keep up with its competitors in offering new products or services. While American Express tackled a comprehensive re-engineering of its credit card business, MasterCard and Visa introduced a new product- the corporate procurement card. American Express lagged a full year behind before offering its customers the same service.

Enterprise Resource Planning

  Today's business leaders need significant amounts of information to be readily accessible with real-time views into their businesses so that decisions can be made when they need to be, without the added time of tracking data and generating reports. Enterprise resource planning (ERP) integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprise-wide  information on all business operations.

Auto Insurance Claims Processes

Past Year Question for Chapter 2 MGT300

MARCH 2012

Porter's Five Force Model is a one of common tools used in industry to analyze and develop competitive advantages . List and describe each of the five (5) forces in Porter's Five Force Model .

1. Buyer Power which is the ability of buyers to affect the price they must pay for an item. Factors used to assess buyer power include number of customers,their sensitivity to price, size of orders, differences between competitors,and availability of substitute products. If buyer power is high, customers can force a company and its competitors to compete on price, which typically drives price down.
2. Supplier Power the suppliers ability to influence the prices they charge for supplies. Factors used to appraise supplier power include number of suppliers,size of suppliers,uniqueness of services,and availability of substitute products.If supplier power is high,the supplier can influence the industry.
3. Threat of Substitute Products or Services which is high when there are many alternatives to a product or services and low when there are few alternatives from which to choose.For example, travelers have numerous substitutes for airlines transportation including automobiles,trains and boats.
4. Threat of New Entrants which is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to joining a market.
5. Rivalry Among Existing Competitors which is high when competition is fierce in a market and low when competitors are more complacent.

OCTOBER 2012

 Explain four (4) organizational information cultures .

1. INFORMATION FUNCTIONAL CULTURE : Employee use information as a means of exercising influence or power over others .
2. INFORMATION SHARING CULTURE : Employees across departments trust each other to use information (especially about problems and failures) to improve performance.
3. INFORMATION INQUIRING CULTURE : Employees across departments search for information to better understand the future and align themselves with current trends and new directions. .
4. INFORMATION DISCOVERY CULTURE : Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.

Describe three (3) Porter Generic Strategies . Support your answer with example.

1. BROAD MARKET AND LOW COST :  Its business strategy is to be the low-cost provider of goods for the cost-conscious consumer. For example , Walmart competes by offering variety of product at low prices .
2. BROAD MARKET AND HIGH COST : Its business strategy offers a variety of specialty and upscale products to affluent consumers. For example, Neiman Marcus offering a broad range of differentiated product at high prices.
3. NARROW MARKET AND LOW COST : Its business strategy is to be the low cost provider of shoes . For example , Payless Shoes offering a specific product, shoes ,at low prices.
4. NARROW MARKET AND HIGH COST : Its business strategy allows it to be a high cost provider of premier designer jewelry to affluent consumer.

MARCH 2013

Describe five (5) primary value activities .

1. INBOUND LOGISTICS : Acquires raw materials and resources and distributes manufacturing as required .
2. OPERATIONS : Transform raw materials or inputs into goods and services .
3. OUTBOUND LOGISTICS : Distributes goods and services to customers.
4. MARKETING AND SALES : Promotes, prices and sell products to customers .
5. SERVICES : Provides customer support after the sales products to customers.

The End of Chapter 2

CHAPTER 2: IDENTIFYING COMPETITIVE ADVANTAGES

What is the competitive advantages?

  A competitive advantage is a feature of a product or service on which customers place a greater value than they do on similar offerings from competitors.Competitive advantages provide the same product or service either at a lower price or with additional value that can fetch premium prices. 

The introduction of Apple's iPod and iTunes,a brilliant merger of technology, business and entertainment, offers an excellent example.

  When a company is the first to market with a competitive advantage, it gains a particular benefit, such as Apple did with its iPod. This first-mover advantage occurs when a company can significantly increase its market share by being first with a new competitive advantage.FedEx created a first-mover advantage by developing its customer self-service software,which allows people to request parcels online.Other parcel delivery companies quickly began creating their own online services.Today,customer self-service on the Internet is a standard feature of the parcel delivery business.

FedEx created a first-mover advantage.

Competitive intelligence is the process of gathering information about the competitive environment, including competitors' plans, activities and products, to improve a company's ability to succeed.It means understanding and learning as much as possible as soon as possible about what is occurring outside the company to remain competitive.For example Frito-Lay,a premier provider of snack foods such as Cracker Jacks and Cheetos.

Frito-Lay,a premier provider of snack foods such as Cracker Jacks and Cheetos.

 Managers use three common tools to analyze competitive intelligence and develop competitive advantages including:

1. The Five Forces Model 
2. The three generic strategies
3. Value chain analysis

Porter's Five Forces Model

Buyer Power is the ability of buyers to affect the price they must pay for an item. Factors used to assess buyer power include number of customers,their sensitivity to price, size of orders, differences between competitors, and availability of substitute products.If buyer power is high,customers can force a company and its competitors to compete on price,which typically drives prices down.

Supplier Power  is the supplier's ability to influence the prices they charge for supplies.

Threat of Substitute Products or Services is high when there are many alternatives to a product or service and low when there are few alternatives from which to choose.

Threat of New Entrants is high when it is easy for new competitors to enter a market and low when there are significant entry barriers to joining a market.

Rivalry Among Existing Competitors is high when competition is fierce in a market an low when competitors are more complacent.

The Three Generic Strategies-Choosing a Business Focus

Broad market and low cost: Its business strategy is to be low-cost provider of goods for the cost-                                                            conscious consumer.

Broad market and high cost: Its business strategy offers a variety of specialty and upscale products to                                                       affluent consumers.

Narrow market and low cost: Its business strategy is to be low-cost provider of goods.

Narrow market and high cost: Its business strategy allows it to be a high cost provider.

Value Chain Analysis- Executing Business Strategies

Inbound logistic: acquires raw materials and resources and distributes to manufacturing as required.

Operations: transforms raw materials or inputs into goods and services.

Outbound logistics: distributes goods and services to customers.

Marketing and sales: promotes, prices and sells products to customers.

Service: provides customer support after the sale of goods and services. 

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