Building sustainable competitive advantage through Value chains

7/31/2019 Building sustainable competitive advantage through Value chains

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WELCOME TO SESSION 4OFSTRATEGIC MANAGEMENT

S G Raja Sekharan


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Direct Objectives of the course

To introduce to you concepts andmanagement practices at a strategiclevel.

To give you all a hands on experience ofstrategic level thinking that seniormanagers do everyday.


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Indirect Objectives of the course

To improve your learn_ability skillsTo make you think - think long termTo improve your team interaction skills

To build you up for success in life


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Strategic management course plan

Session 1 Introduction and overview to SM

Session 2/3 External and Internal environment

Session 3/4 Building SCA though value chains

Session 5 Growth through Integration, Diversification,Outsourcing and M&A

Session 6 Change management

Session 7 Tailoring strategies to fit specific industry &company situations

Session 8/9 Strategy Implementation and control

Session 10 Industry interaction


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Todays agenda

Team presentations Group 6 -"Amitabh Chaturvedi in

Dhanalakshmi Bank - what he did well

and what went wrong"


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Todays agenda

Team presentations Group 7 -Fabindia and its current

SWOT


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Todays agenda

Team presentations Group 8 -PC vs Smart phones Vs

Tablet - Changes in the global

computing market in the past decadeand the trends in the future and whatshould the key players do


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Todays agenda

Team presentations Group 9 - trends in the newspaper

market in India (or South India) and

critically examine the strategies of thenew management of The Hindu.


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Todays agenda

Team presentations Group 10 - SWOT for Jubilant

Foodworks Limited and its growth

strategy


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Todays agenda

Team presentations Group 11 - SWOT for Future group and

its future strategy


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Todays agenda

My Inputs on Building sustainablecompetitive advantage through Valuechains - - This will go on till end of next

session.


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WHAT IS VALUE CHAIN?


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WHAT IS VALUE CHAIN?

A COMPANYS VALUE CHAIN

IDENTIFIES THE PRIMARY ACTIVITIES

THAT CREATE CUSTOMER VALUE

AND THE RELATED SUPPORT

ACTIVITIES.


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Building sustainable competitiveadvantage through Value chains means

Breaking down a companys operationsinto primary and secondary activities soas to expose the major elements of thecompanys cost structuredeveloping data for comparing a

companys costs, activity by activity,against the costs of key rivals; and

Identifying which internal activities are asource of cost advantage ordisadvantage.


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Which activity adds max. value in

Cement industry: Inbound logisticsManufacturingOutbound logistics

Marketing and SalesService and supportProcurementHuman resources

AccountingR&D and technology

The key cost elements in cement are coal, powertariff, railway, freight, royalty and cess on limestone


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Airline industry: Inbound logisticsManufacturingOutbound logistics




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Cigarette industry: Inbound logisticsManufacturingOutbound logistics




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Auto ancillary industry: Inbound logisticsManufacturingOutbound logistics




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Courier industry: Inbound logisticsManufacturingOutbound logistics




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Edible oil industry: Inbound logisticsManufacturingOutbound logistics




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Plantation industry: Inbound logisticsManufacturingOutbound logistics




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Ways of Building SustainableCompetitive Advantage though

functional value chains


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Resources, Capabilities, andCompetencies


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Resources are its financial, humanresources, physical and intangibleresources they are firm specificand difficult to imitate e.g. a highlymotivated sales team, large cash

reserves etc


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Capabilities are the firms ability touse the resources by putting themto productive use example greatR&D capability or great marketingcapability


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A competence is something anorganization is good at doing. It isnearly always the product ofexperience, representing anaccumulation of learning and the

buildup of proficiency in performingan internal activity


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Resources, Capabilities, andCompetencies leads to strategy

Strategy is either a low coststrategy or a differentiated strategyor a focus strategy


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Low cost vs differentiatedstrategy

Concept of ValueCreation/unit


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Functional level strategies forCompetitive Advantage

Function-level strategies arestrategies aimed at improving the

effectiveness of a companysoperations


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Achieving Superior Efficiency

Functional steps to increasing efficiency: Economies of Scale

Learning Effects

Experience Curve Flexible Manufacturing and Mass Customization

Marketing

Materials Management and Supply Chain

R&D Strategy Human Resource Strategy

Information Systems

Infrastructure


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WE WILL DISCUSS ACHIEVINGSUPERIOR EFFICIENCY INDETAIL IN THE NEXT SESSION


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Achieving Superior Quality

Reliability They do the jobs they were designed for and do it

well

Excellence Perceived by customers to have superior attributes

Qualitycan be thought of in terms of:


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Achieving Superior Quality

Reliability They do the jobs they were designed for and do it

well

Excellence Perceived by customers to have superior attributes

1. A strong reputation for quality allows acompany to differentiate its products.

2. Eliminating defects or errors reduces waste,increases efficiency, and lowers the coststructure increasingprofitability.

Qualitycan be thought of in terms of:


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Implementing ReliabilityImprovement Methodologies

Imperatives that stand outamong companies that havesuccessfully adopted quality improvement methods:

Build organizational commitment to quality Create quality leaders

Focus on the customer Identify processes and the source of defects Find ways to measure quality


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Implementing ReliabilityImprovement Methodologies

Imperatives that stand outamong companies that havesuccessfully adopted quality improvement methods:

Set goals and create incentives Solicit input from employees

Build long-term relationships with suppliers Design for ease of manufacture Break down barriers among functions


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ACHIEVING SUPERIORQUALITY TAKES TIME AS IT

NEEDS TO BE EMBEDDED INTHE CULTURE OF THE

COMPANY


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Achieving Superior Innovation

Building distinctive competencies that result ininnovation is the most important source ofcompetitive advantage.

Innovation as a culture is extremely difficult andtime consuming to create and if done well can bea great competitive advantage


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Achieving Superior Innovation

Innovation can: Result in new products that satisfy customer

needs better

Improve the quality of existing products

Reduce costs


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Examples of Indian innovativecompanies


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Building Competencies inInnovation

Many organizations employ a top downapproach to innovation.They may solicit input from deeper in

the organization, but the formulation ofthe innovative ideas remains at the top Some examples of top down innovation

are

Apple Inc Tata Nano


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Hybrid approach to innovation creates astructure in the middle of theorganization that encouragesinnovations from bottom up and worksto shape them into viable business ideas

Some examples are

Design teams in fashion industry R&D teams in most industries

Creative teams in advertising companies


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Theoretically the best approach is thenetwork model where everybody iscreative and contributes an example isthe way Wikipedia is structured.

It is difficult to create and I cannot thinkof one corporate example.It needs

an organization full of people with trust oneveryone's ability, open to change andconfident of contributing; and

an organization structure that is not strong

on command and control


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Achieving SuperiorResponsiveness to Customers


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ACHIEVING SUPERIORCUSTOMER

RESPONSIVENESS TAKESTIME AS IT NEEDS TO BE

EMBEDDED IN THE CULTURE

OF THE COMPANY


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Achieving SuperiorResponsiveness to Customers

Focusing on the customer Demonstrating leadership Shaping employee attitudes Bringing customers into the company

Satisfying customer needs Customization -Tailor to unique needs of groups of

customers

Faster response time

F i l l l i f


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Functional level strategies forCompetitive Advantage

Function-level strategies arestrategies aimed at improving the

effectiveness of a companysoperations


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THANK YOU

Building sustainable competitive advantage through Value chains

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