In our first year we initially decided to follow a cost-leadership strategy. The principle behind this strategy is to reduce costs and we did this in four ways. Firstly we changed the supplier so the components were cheaper and we had 2 months credit. This proved very beneficial to our business as it allowed us to improve our cash flow which allowed for more investment early on into advertisement. Advertisement was also crucial in reducing our costs by economies of scale. This meant spreading our cost over an increased rate of output. E. Pertusa-Ortega, J. Molina-Azorín and E. Claver-Cortés (2008) proposed that experience is a source of efficiency so we trained ourselves in production in order to reduce these costs and effort expended . Lastly and most importantly was the product design and this is where we changed our strategy once more to focus on a particular market segment. Porter argued that strategies based on market segments needed to keep customer needs firmly in mind for long term success . Michael Porter argued two fundamental means of competitive advantage, cost-leadership and differentiation . Using a strategy clock illustrated the space between cost-leadership and differentiation strategies and this is when we decided to focus on a hybrid strategy, cost-focuser. This involved paying particular attention to the needs of consumers in one section of the market that we believe had viable segment economics. There were a lot of customers and they’re needs were close to those which our product fulfilled and so it was quicker and cheaper to adapt our product to this market segment. We redesigned our product in order to satisfy the customer needs but we forgot about cost of the product in order to provide a product of hig... ... middle of paper ... ...me. Fortunately we reacted to this issue by creating a forceful credit control strategy, after one month of not paying we sent a phone call and after two moths threatened legal action. This helped improve our cash flow and thus allow for reinvestment into the business. To conclude our first year our balance was still positive and we had survived but now had a competitive advantage. We had gained a competitive advantage through two of the four key terms of VRIO , value and organisational support. Strategic capabilities are only of value if they generate higher revenues or lower costs, or both. Our business was organised in a way to provide support for our valuable capabilities and as such simply outsourcing orders and being the coordinator was still generating a profit and improving our cash flow. It was the key to our success as a business over the three years.
It depends on the company, which strategy they would fellow- comparing their competitors’ strategy. It does not matter whether the follow cost leadership or differentiation strategy, they must manage their own value chain.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.
The new president believes that the key to the new strategy is to be able to understand the true nature (i.e. costs of customers and orders. He feels that if the company is able to tie costs to customers in an accurate manner, it will enable the company to better focus on higher profitability. Major Issues: What is the ' Understand the cost structure of the company. Allocate costs on a per customer and per order basis. Implement a new cost system that will support the new cost allocation methodology.
Porter, Michael E. "From competitive advantage to corporate strategy." Harvard Business Review (1987): 43-59. Print. May 2014.
A generic strategy is a ‘core idea about how a firm can best compete in the marketplace (Pearce & Robinson, p.195, 2011)’. In order to competitive, firms must be able to control their costs and create differentiation with their products and services. Cost control within an organization applies to several areas. In the case of Alexander Mann Solutions, it will apply to operational expenses, such as salaries as well as fixed costs. One of the advantages of controlling costs is the ability to provide services at a lower cost and still benefit from the higher profit margins. Unfortunately Alexander Mann Solutions has not been able to create effective strategies enabling organizational costs to be at a
Throughout the course, I have discussed numerous aspects of Toyota Motors Corporation. This company is very successful within the automotive manufacturing industry, despite their numerous issues based on product recalls and unethical standards. Although these were serious setbacks, Toyota still remains the number one automaker in which they produced 10.08 million units in 2015 (Schmitt, 2016). In addition, the corporation has numerous strategies, practices, and policies that attributes to their success.
From the A12 redesign proposal, it shows that the current standard cost system is unable to link the reduction in the number of parts to activity reductions and cost savings. The labor-direct-based standard cost system reflects the cost of A12 is distorted. Using the ABC system, according to the activities of A12 allocate the overhead cost to A12 that could find that the current overhead cost of A12 was overstated by the standard cost system. At last, A12 Junction Box could be identified it is an attractive and profitable product, at the same time, it demonstrates the value of ABC.
Strategic Leadership The only thing harder than being a strategic leader is trying to define the entire scope of strategic leadership a broad, difficult. concept. The symposia are a lot of fun. We cannot always define it or describe it in every detail.
...M. E. (2008). Competitive advantage: Creating and sustaining superior performance. New York: Simon and Schuster.
The positioning school of strategy emphasizes making a strategy based on proper market analysis and logic so that organization’s product would have a dominant position in the market against other competitors. Furthermore, the positional school of strategy encourages competitive advantage over competitors while using decision-making and performance measurement tools such as the Porter’s five forces and the Boston Consulting Group Matrix to determine how to maintain dominance in the
Apple in the recent years had developed a competitive advantage in their market. A competitive advantage implies the creation of a unique advantage over competitors (Heizer & Render, 2011). One way Apple competes is on differentiation, or distinguishing the offerings of an organization in a way that the customer perceives as adding value (Heizer & Render, 2011). Another way Apple has created a competitive advantage is through experience differentiation, or engaging a customer with a product through imaginative use of the five senses so the customer experiences the product (Heizer & Render, 2011). Through differentiation, Apple has created a true competitive advantage over many of their competitors.
Discussion Question 6.1 What are some drawbacks and risks to a broad generic business strategy? Differentiation and cost leadership are two generic business strategies. The goal of a differentiation strategy is to create a value that is higher for the customers than the value created by the competition. Costs are kept low and features that are unique are also delivered to the customer. On the other hand, with cost leadership the goal is for the firm to create a value for the customer that is the same or similar but at a lower price (Rothaermel, 2013). There are several drawbacks and risks to a broad generic business strategy. With differentiation there will always be in a change of customer’s taste or what the customer wants. In addition, there will imitation by the competitors of the firm. Other companies often are able to gain a higher level of differentiation because of being more diverse and seeking a focus strategy. A drawback with differentiation strategy is that profits will be higher than with a cost leadership. Differentiation often will create a barrier that is higher and a cost
The second way is to achieve low direct and indirect operating costs is gained by offering high volumes of standard products and offering basic no-frills products. Production costs are kept low by using less parts and using standard components. Limiting the number of models produced to ensure larger producti...
Shields, M., & Young, S. (1992). Effective long-term cost reduction: a strategic perspective. Journal of Cost Management , 6 (2), 16-30.
Competitive strategy is the approach that an organisation takes in order to gain advantage over its competitors. According to Porter, there are two major sources of competitive advantages: costs and differentiation. Cost-based competitive advantage involves reducing production costs so that an organisation can earn higher profit margin or offer products at lower price compared to competitors. Differentiation-based competitive advantage involves offering unique properties that are not offered by competitors’ products. Differentiation allows an organisation to charge a premium for their products because they offer additional benefits to buyers.