It involves to make the choices of acquisition, management and exploitation of product and process technologies that are consistent with firm’s business strategies and can ultimately drive its business competitiveness.

1. To make technological choices2. To set criteria by which strategies

are embodied into new products and processes

3. Organizational practices and managerial processes for deployment of technological resources

It’s a “good” project!It’s a “good” project! Good managers can meet stretch Good managers can meet stretch

goalsgoals (and I’m a good manager)(and I’m a good manager) Making difficult decisions takes time Making difficult decisions takes time

& energy& energy

It’s very hard to kill projects without It’s very hard to kill projects without a strategya strategy

1.1. Maintaining existing technological Maintaining existing technological capabilities through incremental capabilities through incremental improvementsimprovements

2.2. Expanding existing markets or exploring Expanding existing markets or exploring new one for new businesses or new one for new businesses or products/serviceproducts/service

3.3. Securing distinctive technological Securing distinctive technological capabilities from external sources.capabilities from external sources.

The Industry Life Cycle as an S curveThe Industry Life Cycle as an S curve

Performance

Takeoff

Maturity

Ferment

Time

Discontinuity

Too much emphasis on short-term financial performance

Failing to take advantage of strengths and opportunities

Neglecting operations strategy Failing to recognize competitive threats

2-8

Too much emphasis in product and service design and not enough on improvement

Neglecting investments in capital and human resources

Failing to establish good internal communications

Failing to consider customer wants and needs

Mission◦ The reason for existence for an organization

Mission Statement◦ States the purpose of an organization

Goals◦ Provide detail and scope of mission

Strategies◦Plans for achieving organizational goals

Tactics◦ The methods and actions taken to accomplish strategies

Maria is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably

Mission: Live a good life Goal: Successful career, good income Strategy: Obtain a college education Tactics: Select a college and a major Operations: Register, buy books, take

courses, study, graduate, get job

Example 1

◦ Any factors that allow an organization to differentiate its product or service from those of its competitors to increase market share.

◦ Superior technology is an important source of competitive advantage

1. Where are we now?

2. Where do we want to go?• Business(es) to be in and market positions to

try and achieve?• Buyer needs and groups to serve?• Outcomes to achieve?

3. How do we get there?

1. Growth (a. concentration; b. diversification)

2. Retrenchment

3. Stability (status quo)

4. Combination (multiple strategies)

1a. Growth through concentration – concentrating on your existing specialization

i. market penetration – aggressively targeting current markets with existing product

specialties

ii. market development/geographic expansion - expanding into new markets

iii. market segmentation – dividing existing markets

iv. product development – modify existing

products, or develop new but related products

1b. Growth through diversification – branching out into new areas

i. Horizontal integration – expanding across the general industry by acquiring infrastructures, assets and companies of the same industry or in the same level of production (e.g. Coke acquires Minute Maid fruit juice company).

ii. Vertical integration – expanding into industries populated by suppliers/buyers (e.g. Ford buys steel plant).

iii. Conglomerate diversification – expanding into unrelated industries (e.g. GM buys Hershey’s candy).

iv. Joint venture – expanding together with another company in order to diversity efficiently.

i. Turnaround – downsizing existing company/divisions

ii. Divestiture – selling off existing divisions/subdivisions

iii. Liquidation – bankruptcy

3. Stability - maintain status quo (e.g. continuous improvement)

4. Combination – multiple use of strategies

A competitive strategy consists of moves to ◦ Attract customers◦ Withstand competitive pressures◦ Strengthen an organization’s market position

The objective of a competitive strategy is to generate a competitive advantage, increase the loyalty of customers and beat competitors

A competitive strategy is narrower in scope than corporate strategy

Five competitive strategies are◦ Overall low-cost leadership strategy◦ Broad differentiation strategy◦ Best cost provider strategy ◦ Focused low-cost strategy◦ Focused differentiation strategy

Environmental Scan – Both internal and external factors need to be considered:

1. Internal factors – characteristics in the firm (management, mission, resources, systems process, and structure) that can be

considered strengths or strong points and weaknesses or weak points.

2. External factors - characteristics in the environment that are “outside” the firm (customers, competitors, suppliers, labor force,

shareholders, society, technology, the economy, and governments) that represent opportunities to tap or threats to flank.

Internal Factors

Strengths Weaknesses

E Fx a Opportunitiest ce tr on r a s Threatsl

Strive to be the overall low-cost provider in an industry How to achieve overall low-cost leadership

◦ Scrutinize each cost activity◦ Manage each cost lower year after year◦ Reengineer cost activities to reduce overall costs◦ Cut some cost activities out of the value chain

Competitive strengths of an overall low-cost strategy◦ Organization in a better position to compete offensively on price◦ Organization is better able to negotiate with large customers◦ Organization is able to use price as a defense against substitutes◦ Low cost is a significant barrier to entry◦ Organization is more insulated from the power of suppliers

Striving to build customer loyalty by differentiating an organization’s products from competitors’ products

Keys to success include◦ Finding ways to differentiate to create value for customers

that are not easily copied◦ Not spending more to differentiate than the price premium

that can be charged

A successful differential strategy allows an organization to◦ Set a premium price◦ Increase unit sales◦ Build brand loyalty

Where to look for differentiation opportunities◦ Supply chain◦ Research and development◦ Production activities◦ Marketing, sales and service activities

Strengths of a Differentiation Strategy◦ Customers develop loyalty to the brand◦ Brand loyalty acts as an entry barrier◦ Organization is better able to fend off threats of

substitute products because of brand loyalty◦ Reduces bargaining power of large customers since other

brands are less attractive◦ Seller may be in a better position to resist efforts of

suppliers to raise prices

Trying to differentiate on an unimportant product feature that doesn’t result in providing more value to the customer

Over differentiating the product such that the product features exceed the customers’ needs

Charging a price premium that buyers perceive as too high

Ignoring need to signal value Not identifying what customers consider valuable

Striving to give customers more value for the money by combining an emphasis on low cost with an emphasis on upscale differentiation◦ Combines low-cost and differentiation

The objective is to create superior value by meeting or beating customer expectation on product attributes and beating their price expectations

Keys to success◦ Match close competitors on key product attributes and

beat them on cost◦ Expertise at incorporating upscale product attributes at a

lower cost than competitors◦ Contain costs by providing customers a better product

Competitive advantage comes from matching close competitors on key product attributes and beating them on price

Most successful best-cost providers have skills to simultaneously manage costs down and product quality up

Best-cost provider can often beat an overall low-cost strategy and a broad differentiation strategy where◦ Customer diversity makes product differentiation the norm ◦ Many customers are price and value sensitive

Focus strategy based on low-cost◦ Concentrate on a narrow customer segment beating the

competition on lower cost Focus strategy based on differentiation

◦ Offering niche customers a product customized to their needs

Overall objective of both focus strategies is to do a better job of serving a niche target market than competitors

Keys to success◦ Choose a niche were customers have a distinctive preference,

unique needs or special requirements◦ Develop a unique ability to serve the needs of a niche target

market

Strengths◦ Competitors don’t have the motivation to meet specialized

needs of the niche◦ Organization’s competitive advantage could be seen as a

barrier to entry◦ Organization’s competitive advantage provides an obstacle for

substitutes◦ Organization’s ability to meet the needs of customers in the

niche can reduce the bargaining power of large niche buyers

Risks◦ Broad differentiated competitors may find effective ways to

enter the niche◦ Niche customers’ preferences may move toward the product

attributes desired by a larger market segment◦ Profitability may be limited if too many competitors enter the

niche

The actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas

FinanceHR

Other

– Identify the basic courses of action that each department will pursue in order to help the business attain its competitive goals.