Learning ObjectivesExplain the role of functional strategy and value-chain management in achieving superior quality, efficiency, innovation, and responsiveness to customersDescribe what customers want, and explain why it is so important for managers to be responsive to their needsExplain why achieving superior quality is so important and the challenges facing managers and organizations that seek to implement total quality management

Learning ObjectivesExplain why achieving superior efficiency is so important and the different kinds of techniques that need to be employed to increase itDifferentiate between two forms of innovation, and explain why innovation and product development is a crucial component of the search for competitive advantage

Four Ways to Create a Competitive Advantage

Toyotas Product LineupFigure 9.2

Functional Strategies and Value-Chain ManagementFunctional-level strategy plan of action to improve the ability of each of an organizations departments to performs its task-specific activities in ways that add value to an organizations goods and services

Functional Strategies and Value-Chain ManagementValue chain coordinated series or sequence of functional activities necessary to transform inputs into finished goods or services customers value and want to buy

Functional Activities and the Value Chain

Functional Strategies and Value-Chain ManagementValue-chain management development of a set of functional-level strategies that support a companys business-level strategy and strengthen its competitive advantage

Functional Strategies and Value-Chain ManagementProduct development engineering and scientific research activities involved in innovating new or improved products that add value to a productMarketing functions task is to persuade customers a product meets their needs and convince them to buy it

Functional Strategies and Value-Chain ManagementMaterials management function controls the movement of physical materials from the procurement of inputs through production and into distribution and delivery to the customer

Functional Strategies and Value-Chain ManagementProduction function responsible for the creation, assembly or provision of a good or service, for transforming inputs into outputsSales function plays a crucial role in locating customers and then informing and persuading them to buy the companys products

Functional Strategies and Value-Chain ManagementCustomer service function provides after sales service and supportCan create a perception of superior value by solving customer problems and supporting customers

Improving Responsiveness to CustomersGood value-chain management requires marketing managers to focus on defining the company business in terms of customer needs

What Do Customers Want?A lower price to a higher priceHigh-quality productsQuick service and good after-sales serviceProducts with many useful or valuable featuresProducts that are tailored to their unique needs

Customer Relationship ManagementCustomer relationship management technique that uses IT to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time

Impact of Increased Quality on Organizational PerformanceFigure 9.4

Improving QualityAn organization able to provide, for the same price, a product of higher quality than a competitors product is serving customers betterHigher product quality can increase efficiency

Total Quality ManagementTotal quality management (TQM) focuses on improving the quality of an organizations products and stresses that all of an organizations value-chain activities should be directed toward this goal

Steps to Successful TQM ImplementationBuild organizational commitment to qualityFocus on the customerFind ways to measure qualitySet goals and create incentivesSolicit input from employees

Steps to Successful TQM ImplementationIdentify defects and trace to source.Introduce just-in-time (JIT) inventory systems.Work closely with suppliers.Design for ease of production.Break down barriers between functions.

Focus on the CustomerIdentify what customers want from the good or service that the company providesIdentify what the company actually provides to customersIdentify the gap that exists between what the customers want and what they get (quality gap)Formulate a plan for closing the quality gap

Facilities Layout, Flexible Manufacturing, and EfficiencyFacilities Layout strategy of designing the machine-worker interface to increase production system efficiencyFlexible Manufacturing strategy based on the use of IT to reduce the setup costs associated with a product assembly process

Figure 9.5Three Facilities Layouts

Facilities LayoutProduct layout machines are organized so that each operation is performed at work stations arranged in a fixed sequenceProcess Layout self contained work stations not organized in a fixed sequence

Facilities LayoutFixed-Position Layout the product stays in a fixed spot and components produced at remote stations are brought the product for to final assembly

Changing a Facilities LayoutFigure 9.6

Flexible ManufacturingAims to reduce time required to set up production equipmentBy redesigning the process setup times and costs can be drastically reducedAble to produce many more varieties of a product than before in the same amount of time

Just-in-Time Inventory and EfficiencyJust-in-time (JIT) inventory system gets components to the assembly line just as they are needed to drive down costsMajor cost savings can result from increasing inventory turnover and reducing inventory holding costs

Self-Managed Work Teams and EfficiencySelf-managed work teams produce an entire product instead of just parts of itTeam members learn all tasks and move from job to jobCan increase productivity and efficiency

Process Reengineering and EfficiencyProcess Reengineering fundamental rethinking and radical redesign of the business process to achieve dramatic improvement in critical measures of performance

Two Kinds of InnovationQuantum product innovation results in the development of radically different kinds of goods and services because of fundamental shifts in technology brought about by pioneering discoveries

Two Kinds of InnovationIncremental product innovation results in gradual improvements and refinements to existing products over time as existing technologies are perfected, and functional managers learn how to perform value-chain activities in better ways

Strategies to Promote Innovation and Speed Product DevelopmentProduct development management of the value-chain activities involved in bringing new or improved kinds of goods and services to the market

Strategies to Promote Innovation and Speed Product DevelopmentInvolve both customers and suppliersEstablish a stage-gate development funnelEstablish cross-functional teams

Strategies to Promote Innovation and Speed Product DevelopmentStage-Gate Development Funnel technique that forces managers to make choices among competing projects so that functional resources are not spread thinly over too many projects

A Stage-Gate Development FunnelFigure 9.7

A Stage-Gate Development FunnelProduct development plan specifies all of the relevant information that managers need to make a decision about whether to go ahead with a full-blown product development effort

Members of a Cross-Functional Product Development TeamFigure 9.8

Managing the Value-Chain: Some Remaining IssuesIt is managers job to collect relevant information about the competitive environmentFuture intentions of competitorsIdentity of new customersIdentity of new suppliers

Boundary-Spanning RolesBoundary-Spanning roles Interacting with individuals and groups outside the organization to obtain valuable information from the environment

The Nature of Boundary-Spanning RolesFigure 9.9