Professional Documents
Culture Documents
Cost Leadership
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Mission
Objectives
Strategy Implementation
Competitive Advantage
Internal Analysis
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international expansion may allow a firm to have enough sales to justify investing in additional capacity to capture economies of scale
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international expansion may propel a firm down the experience curve because of higher volumes
Example: Fuel Injectors
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Buyers
lowers incentives for buyers to vertically integrate
Rivalry
Substitutes
limits attractiveness of substitutes competitors rationally avoid price competition
Suppliers
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Generally
Economies of Scale
Diseconomies of Scale Learning Curve Economies
Mature
Rare Rare Not Rare Rare Not Rare Rare
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Rare
Rare Rare Rare
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Organizational Structure
Three Organizational Structures Simple Functional Multi-Divisional
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Organizational Structure
Simple Structure Owner / Manager Owner/Manager makes all major decisions directly and monitors all activities
difficult to maintain this structure as the firm grows in size and complexity
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Organizational Structure
Functional Structure (U-Form: Unitary)
divides management responsibilities by function
marketing
finance accounting
procurement production
HR logistics etc.
R&D
CEO is the only executive with enterprise-wide perspective CEO is responsible for strategy & coordination of functions
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall.
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Organizational Structure
Functional Structure
Chief Executive Officer
Finance
Accounting
Marketing
Human Resources
Production
R&D
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Organizational Structure
Multi-Divisional Structure (M-Form)
functions are replicated in each division as appropriate this structure makes sense when the firm is involved in more than one business or has grown large enough to justify geographic divisions CEO has strategic responsibility with the help of vice presidents, etc.information is filtered through layers CEO balances coordination & competition among divisions
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall.
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Organizational Structure
Multi-Divisional Structure (M-Form)
Chief Executive Officer
Corporate R&D Corporate Finance Strategic Planning Corporate Marketing Corporate Human Resources
Division
Finance Production
Division
R&D
Division
Accounting Human Resources
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Marketing
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall.
Organizational Structure
The Functional Structure and Cost Leadership
specialization within functions facilitates cost reduction
CEO can use this structure to: ensure best cost reduction practices are shared among divisions
allow and encourage decision-making by those who are in the best positions to do sothose close to decisions ensure that functions are coordinating efforts in pursuit of a common strategy
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Organizational Controls
Policies intended to influence behavior by aligning the interests of the individual with the interests of the organization
Management Controls
Formal budgeting policies credit policies Informal culture
attitudes
leadership styles
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Organizational Controls
Compensation Policies
stock options bonuses based on: cost reduction financial performance non-monetary awards vacations parking places office decor
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Organizational Controls
Organizational Controls and Cost Leadership
management controls and compensation policies can be focused on cost reduction supply contracts that stipulate cost reductions over time tight credit policies austere travel policies (e.g., no first class)
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Summary
Business Level Strategy Cost Leadership
Cost Advantages
Economies of Scale Diseconomies of Scale Learning Curve Economies Differential Input Access Technology Policy Choices
Copyright 2012 Pearson Education, Inc. publishing as Prentice Hall.
Product Differentiation
Competitive Advantage Depends on Meeting VRIO Criteria Emphasis on Organization (Implementation) Structure & Control
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