Unit 1 Value Chain Management PDF

Unit 1: Value chain Management: Functional Strategies for Competitive Advantage Chapter 10 © McGraw Hill 1  Learning Objectives 1 1. Explain the role of functional st...

Unit 1: Value chain Management: Functional Strategies for Competitive Advantage Chapter 10 © McGraw Hill 1  Learning Objectives 1 1. Explain the role of functional strategy and value chain management in achieving superior quality, efficiency, innovation, and responsiveness to customers. 2. Describe what customers want, and explain why it is so important for managers to be responsive to their needs. 3. Explain why achieving superior quality is so important, and understand the challenges facing managers and organizations that seek to implement total quality management. © McGraw Hill 2  Learning Objectives 2 4. Explain why achieving superior efficiency is so important, and understand the different kinds of techniques that need to be employed to increase efficiency. 5. Differentiate between two forms of innovation, and explain why innovation and product development are crucial components of the search for competitive advantage. © McGraw Hill 3  Figure 9.1 Four Ways to Create a Competitive Advantage Access the text alternative for slide images. © McGraw Hill 4  Functional Strategies and Value Chain Management 1 Functional-level strategy: Plan of action to improve the ability of each of an organization’s departments to performs its task- specific activities in ways that add value to an organization’s goods and services. © McGraw Hill 5  Functional Strategies and Value Chain Management 2 Value chain: The coordinated series or sequence of functional activities necessary to transform inputs such as new product concepts, raw materials, component parts, or professional skills into the finished goods or services customers value and want to buy. © McGraw Hill 6  Functional Strategies and Value Chain Management 3 Value chain management: Development of a set of functional-level strategies that support a company’s business-level strategy and strengthen its competitive advantage. © McGraw Hill 7  Figure 9.2 Functional Activities and the Value Chain Access the text alternative for slide images © McGraw Hill 8  Functional Strategies and Value Chain Management 4 Product development: Engineering and scientific research activities involved in innovating new or improved products that add value to a product. Marketing function: Once a new product is developed, marketing’s task is to persuade customers that a product meets their needs and to convince them to buy it. © McGraw Hill 9  Functional Strategies and Value Chain Management 5 Materials management function: Controls the movement of physical materials from the procurement of inputs through production and into distribution and delivery to the customer. © McGraw Hill 10  Functional Strategies and Value Chain Management 6 Production function: Production function is responsible for the creation, assembly or provision of a good or service—for transforming inputs into outputs. Production for physical products generally means manufacturing or assembly. Production for services takes place when the service is provided or delivered to the customer. © McGraw Hill 11  Functional Strategies and Value Chain Management 7 Sales function: Plays a crucial role in locating customers and then informing and persuading them to buy the company’s products. Personal, face-to-face communication, selling to existing and potential customers. © McGraw Hill 12  Functional Strategies and Value Chain Management 8 Customer service function: Provides after-sales service and support. Can create a perception of superior value by solving customer problems and supporting customers. © McGraw Hill 13  What Do Customers Want? 1. A lower price. 2. Products that are high-quality. 3. Quick service and good after-sales service. 4. Products with many useful or valuable features. 5. Products that are tailored to their unique needs. © McGraw Hill 14  Customer Relationship Management Customer relationship management (CRM): Technique that uses technology to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time. © McGraw Hill 15  Figure 9.3 Impact of Increased Quality on Organizational Performance Access the text alternative for slide images © McGraw Hill 16  Total Quality Management Total quality management (TQM): Focuses on improving the quality of an organization’s products and stresses that all of an organization’s value chain activities should be directed toward this goal. © McGraw Hill 17  Steps to Successful TQM Implementation 1 1. Build organizational commitment to quality. 2. Focus on the customer. 3. Find ways to measure quality. 4. Set goals and create incentives. 5. Solicit input from employees. © McGraw Hill 18  Steps to Successful TQM Implementation 2 6. Identify defects and trace them to their source. 7. Introduce just-in-time inventory systems. 8. Work closely with suppliers. 9. Design for ease of production. 10.Break down barriers between functions. © McGraw Hill 19  Six Sigma A technique used to improve quality by systematically improving how value chain activities are performed and then using statistical methods to measure the improvement. Founded by Motorola. © McGraw Hill 20  Example – Meyers Brothers Kalicka (MBK) MBK values continuous learning, which laid the foundation for involvement with Six Sigma. Some senior managers attended a presentation on Six Sigma, and Melyssa Brown, senior manager in the auditing department, underwent the first level of training, earning a “green belt” certification. Her improvements in the data sharing process improved interaction with clients, reduced the unproductive client hours, and increased delivery of services. She is now looking at streamlining billing and administrative work. © McGraw Hill 21  Just-in-Time Inventory and Efficiency Just-in-time (JIT) inventory system gets components to the assembly line just as they are needed to drive down costs. Major cost savings can result from increasing inventory turnover and reducing inventory holding costs. © McGraw Hill 22  Self-Managed Work Teams and Efficiency Self-managed work teams produce an entire product instead of just parts of it. Team members learn all tasks and move from job to job. Teams can increase productivity and efficiency. © McGraw Hill 23  Process Reengineering and Efficiency Process reengineering: The fundamental rethinking and radical redesign of business processes to achieve dramatic improvement in critical measures of performance such as cost, quality, service, and speed. © McGraw Hill 24  Information Systems, the Internet, and Efficiency Information systems: Operating efficiencies and a lower cost structure. Example of Cisco Systems. Internet: Real-time information. Reduces the number of employees, reducing costs. © McGraw Hill 25  Two Kinds of Innovation 1 Quantum product innovation: The development of new, often radically different, kinds of goods and services because of fundamental shifts in technology brought about by pioneering discoveries. Internet and the World Wide Web. Fast-casual food. © McGraw Hill 26  Two Kinds of Innovation 2 Incremental product innovation: The gradual improvement and refinement of existing products that occur over time as existing technologies are perfected. Examples: Google’s Chrome: thousands of small improvements. © McGraw Hill 27  Strategies to Promote Innovation and Speed Product Development 1 Product development: Management of the value chain activities involved in bringing new or improved goods and services to the market. Example: Monte Peterson, former CEO of Thermos, and the new barbecue grill. © McGraw Hill 28  Strategies to Promote Innovation and Speed Product Development 2 Establish cross-functional teams. Involve both customers and suppliers. Establish a stage-gate development funnel. © McGraw Hill 29  Strategies to Promote Innovation and Speed Product Development 3 Stage-gate development funnel: A planning model that forces managers to choose among competing projects so organizational resources are not spread thinly over too many projects. Example: 3M’s 15% rule. © McGraw Hill 30  Figure 9.5 A Stage-Gate Development Funnel Access the text alternative for slide images © McGraw Hill 31  A Stage-Gate Development Funnel 1 Product development plan: A plan that specifies all of the relevant information that managers need in order to decide whether to proceed with a full-blown product development effort. © McGraw Hill 32  A Stage-Gate Development Funnel 2 Contract book: A written agreement that details product development factors such as responsibilities, resource commitments, budgets, timelines, and development milestones. Example: 3M team members and top management negotiate contract at launch. © McGraw Hill 33  Establish Cross-Functional Teams Core members: Members of a team who bear primary responsibility for the success of a project and who stay with a project from inception to completion. © McGraw Hill 34  Figure 9.6 Members of a Cross-Functional Product Development Team © McGraw Hill 35 Because learning changes everything. ® www.mheducation.com © 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill.