functional level strategy report

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TO UNDERSTAND THE FUNCTIONAL LEVEL STRATEGIES L I AD O NG

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Page 1: Functional Level Strategy Report

TO UNDERSTAND THE FUNCTIONAL LEVEL STRATEGIES

L IA DO N G

Page 2: Functional Level Strategy Report

Functional Level Strategy

Page 3: Functional Level Strategy Report

THE ROOTS OF COMPETITIVE ADVANTAGE

Page 4: Functional Level Strategy Report

ACHIEVING SUPERIOR EFFICIENCY

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• Efficiency- A level of performance that describes a process that uses the lowest amount of inputs to create the greatest amount of outputs. Efficiency relates to the use of all inputs in producing any given output, including personal time and energy.

• Being efficient simply means reducing the amount of wasted inputs.

Page 6: Functional Level Strategy Report

Efficiency and Economies of Scale

• Economies of Scale- unit cost reductions associated with a large scale of output.

• Diseconomies of Scale- unit cost increases associated with a large scale of output

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Economies and Diseconomies of Scale

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Efficiency and Learning Effects

• Learning Effects- are cost savings that come from learning by doing.-these tend to be more significant when a technologically complex task is repeated because there is more to learn.

Page 9: Functional Level Strategy Report

The Impact of learning and Scale Economies on Unit Costs

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Efficiency and the Experience Curve

• Experience curve- the systematic lowering of the cost structure, and the consequent unit cost reductions, that have been observed to occur over the life of a product.

*Economies of scale and learning effects underlie the experience-curve phenomenon.

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The Experience Curve

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Efficiency, Flexible Production Systems, and Mass Customization

• Flexible production technology- covers a range of technologies designed to reduce setup times for complex equipment, increase the use of individual machines through better scheduling, and improve quality control at all stages of the manufacturing process

• Mass Customization- the ability of companies to use flexible manufacturing technology to reconcile two goals that were once thought to be incompatible: low cost and differentiation through product customization.

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Marketing and Efficiency

Page 15: Functional Level Strategy Report

Achieving Superior Quality

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High-quality products are reliable, in the sense that they do the job they were designed for and do it well, and are also perceived by consumers to have superior attributes.

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Advantages of Superior Quality

1. Strong reputation for quality allows a company to differentiate its products from those offered by rivals, thereby creating more utility in the eyes of customers, which gives a company the option of charging a premium price for its products.

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Advantages of Superior Quality

2. Eliminating defects or errors from the production process reduces waste, increases efficiency, and lowers the cost structure of a company and increases its profitability.

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Attaining Superior Reliability• The principal tool that most managers now use

to increase the reliability of their product offering is the Six Sigma quality-improvement methodology.

• The Six Sigma methodology is a direct descendant of the TQM philosophy that was widely adopted, first by Japanese companies and then by American companies, during the 1980s and early 1990s.

Page 20: Functional Level Strategy Report

Attaining Superior ReliabilityThe philosophy underlying TQM is based on the following

five-step chain reaction:1. Improved quality means that costs decrease because of

less rework, fewer mistakes, fewer delays, and better use of time and materials.

2. As a result, productivity improves.3. Better quality leads to higher market share and allows

the company to raise prices.4. This increases the company’s profitability and allows it

to stay in business.5. Thus the company creates more jobs.

Page 21: Functional Level Strategy Report

Attaining Superior Reliability

A company should have a clear business model to specify where it is going and how it is going to get there.

Page 22: Functional Level Strategy Report

Attaining Superior Reliability

1. Management should embrace the philosophy that mistakes, defects, and poor quality materials are not acceptable and should be eliminated.

2. Quality of supervision should be improved by allowing more time for supervisors to work with employees and giving them appropriate skills for the job.

3. Management should create an environment in which employees will not fear reporting problems or recommending improvements.

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Attaining Superior Reliability

4. Work standards should not only be defined as numbers or quotas but also include some notion of quality to promote the production of defect-free output.

5. Management is responsible for training employees in new skills to keep pace with changes in the workplace.

6. Achieving better quality requires the commitment of everyone in the company.

Page 24: Functional Level Strategy Report

Six Sigma Quality Improvements

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Implementing Reliability Improvement Methodologies

• Under the Six Sigma methodology, exceptional employees are identified and put through a “black belt” training course on the Six Sigma methodology.

• The black belts are taken from their regular job roles and assigned to work solely on Six Sigma projects for the next two years. In effect, the black belts become internal consultants and project leaders.

Page 26: Functional Level Strategy Report

Roles Played by Different Functions in Implementing Reliability Improvement Methodologies

Page 27: Functional Level Strategy Report

Implementing Reliability Improvement Methodologies

• First, it is important that senior managers buy into a quality-improvement program and communicate its importance to the organization.

• Second, if a quality improvement program is to be successful, individuals must be identified to lead the program.

Page 28: Functional Level Strategy Report

Implementing Reliability Improvement Methodologies

• Third, quality-improvement methodologies preach the need to identify defects that arise from processes, trace them to their source, find out what caused them, and make corrections so that they do

• Fourth, another key to any quality-improvement program is to create a metric that can be used to measure quality not recur.

Page 29: Functional Level Strategy Report

Implementing Reliability Improvement Methodologies

• Fifth, once a metric has been devised, the next step is to set a challenging quality goal and create incentives for reaching it

• Sixth, shop floor employees can be a major source of ideas for improving product quality, so their participation needs to be incorporated into a quality-improvement program.

• Seventh, a major source of poor-quality finished goods is poor-quality component parts.

Page 30: Functional Level Strategy Report

Implementing Reliability Improvement Methodologies

• Eighth, the more assembly steps a product requires, the more opportunities there are for making mistakes.

• Finally, implementing quality-improvement methodologies requires organization wide commitment and substantial cooperation among functions.

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Improving Quality as Excellence

• Products can also be differentiated by attributes that collectively define product excellence. These attributes include the form, features, performance, durability, and styling of a product.

• A company can create quality as excellence by emphasizing attributes of the service associated with the product, such as ordering ease, prompt delivery, easy installation, the availability of customer training and consulting, and maintenance services.

Page 32: Functional Level Strategy Report

Improving Quality as Excellence

Page 33: Functional Level Strategy Report

Improving Quality as Excellence

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Example

• It used to take Well-Mark Inc., a managed-care health care company, 65 days or more to add a new doctor to its Blue cross& Blue shield association medical plans. Now thanks to six sigma, the company discovered that half the process it used were redundant. With those unnecessary steps gone, the job now gets done in 30 days or less and with reduced staff. The company also has been able to reduce its administrative expenses by $3 million per year, an amount passed on to consumers through lower health insurance premiums.

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ACHIEVING SUPERIOR

INNOVATION

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Innovation and Competitive Advantage

• Differentiation

• Lower its cost structure

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Failure Rate of Innovation

1. The demand for innovations is inherently uncertain.

2. Technology is poorly commercialized3. Poor Positioning Strategy4. The mistake of marketing technology for

which there is not enough demand5. Slow to get their products to the market

Page 39: Functional Level Strategy Report

Reducing Innovation Failures

• Tight integration between R&D, production and marketing• Tight integration ensures that:

1. Product development projects are driven by customer needs.

2. New products are designed for ease of manufacture.3. Development costs are kept in check.4. Time to market is minimized.5. Close integration between R&D and marketing is achieved

to ensure that product development projects are driven by the needs of customers.

Page 40: Functional Level Strategy Report

Establish cross-functional product development teams

• Heavyweight project manager• The team should be composed of at least 1 member

from each key function• Team members should be physically co-located• Clear plan and goals• Develop processes for communication and conflict

resolution• Managers must make proactive steps to learn from their

experiences

Page 41: Functional Level Strategy Report

Value Creation Function Primary Roles

Infrastructure (leadership) 1. Manage overall project (i.e., manage the development function)2. Facilitate cross-functional cooperation

Production 1. Cooperate with R&D on designing products that are easy to manufacture2. Work with R&D to develop process innovations

Marketing 1. Provide market information to R&D2. Work with R&D to develop new products

Materials management No primary responsibility

R&D 1. Develop new products and processes2. Cooperate with other functions, particularly marketing and manufacturing, in thedevelopment process

Information systems 1. Use information systems to coordinate cross-functional and cross-companyproduct development work

Human resources 1. Hire talented scientists and engineers

Page 42: Functional Level Strategy Report

Superior Responsiveness to Customers

•What they want

•When they want it

•How much they are willing to pay

Page 43: Functional Level Strategy Report

Customer ResponsivenessBuild

BRAND LOYALT

Y

Differentiate

Products

Pricing options

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FOCUSING on the CUSTOMER

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FOCUSING on the CUSTOMER

• Demonstrating leadership• Shaping employee attitudes• Using mechanisms for bringing customers into

the company

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FOCUSING on the CUSTOMER

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SATISFYING CUSTOMER NEEDS

• Customization

• Response Time

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Primary Roles of Different Functions

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Efficiency in Materials Management

•What is Materials Management?•How can efficiency in Materials Management help company?•How to achieve efficiency in Materials Management?

•Materials management encompasses the activities necessary to get inputs and components to a production facility through the production process, and out through a distribution system to the end user. •Because there are so many sources of cost in this process, the potential for reducing costs through more efficient materials-management strategies is enormous. •Just-in-time (JIT) Inventory System•Supply-chain Management

Page 50: Functional Level Strategy Report

Efficiency in R&D Strategy

Design East-to-Manufacture

Products

Pioneer Process Innovations

Twofold means for greater efficiency and lower cost structure

Page 51: Functional Level Strategy Report

Efficiency in Human Resource Strategy

• Hiring Strategy• Employee Training• Self-Managing Teams• Pay for Performance

Page 52: Functional Level Strategy Report

Efficiency in Information Systems

1. Automate Processes2. Reduce Costs of Coordination

Efficiency in Infrastructure1. Provide company-wide commitment to efficiency2. Facilitate cooperation among functions

Page 53: Functional Level Strategy Report

Primary Roles of Value Creation Functions in Achieving Superior Efficiency

Page 54: Functional Level Strategy Report

It is important to keep in mind the relationships between functional strategies,distinctive competencies, differentiation, low cost, value creation, and profitability when looking at the roots of competitive advantage.

Before we end our report...

Page 55: Functional Level Strategy Report

Superior quality can help a company lower itscosts, differentiate its product, and charge a premiumprice.

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A company can increase efficiency by exploiting economies of scale, adopting flexible manufacturingtechnologies; reducing customer defection rates; implementing JIT systems; gettingthe R&D function to design products that areeasy to manufacture etc..

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The failure rate of new-product introductionsis high because of factors such as uncertainty,poor commercialization, poor positioning strategy and slow cycle time.

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To achieve superior responsiveness to customers,a company needs to give customers whatthey want when they want it.

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That’s all folks thank you!

Page 60: Functional Level Strategy Report

• Bioy, Lady Angelique• Cabillada, Christian Jude T.• Clariz, Kevin Leigh• Lim, Ivander• Loyola, Lara Jeanne• Ventura, Kara Courtney

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Thanks for Listening!#worst.edit.eve

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