MGMT 386 Lecture Notes - Lecture 8: Cost Leadership, Product Differentiation, Resource-Based View
generates economic value by having lower-cost products/services than competitors
size differences and economies of scale
size differences and diseconomies of scale
experience differences and learning curve economies
differential low cost access to productive inputs
technological advantages independent of scale
policy choices
the 6 sources of cost advantage
economies of scale
said to exist when the increase in firm size (volume of production) is associated with lower costs
(average cost per unit); as the volume of production increases, the cost per unit decreases
specialized machines
large plant or equipment
employed specialization
overhead costs
the 4 ways value from increased production is leveraged (economies of scale)
diseconomies of scale
a firm's costs begin to rise as a function of the volume of production
physical limits to efficient size
worker de-motivation
managerial diseconomies
physical distance to market and suppliers
causes of per-unit cost increases when production is excessive (diseconomies of scale)
learning curve
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a concept that formalizes the relationship between cumulative volumes of production and falling per
unit costs
learning curve economies
a firm becomes more efficient at a process with experience
history
market timing
natural endowment
locking up a source
the 4 events differential low cost access to productive inputs may result from
technology independent of scale
the different technology that firms employ to manage their businesses; may help small firms become
more competitive
valuable
protectable
in reference to technology independent of scale, the size of the advantage depends on how
_______________ and _______________ the technology is
policy choices
choices firms make about the kinds of products or services they will sell- choices that have an impact on
relative cost and product differentiation position
functional
the most appropriate organizational structure for a cost leader
function
a functional organizational structure will divide management responsibility by:
managerial controls
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policies intended to influence behavior by aligning the interests of the individual with the interests of
the organization
business
cost leadership is a _____________ level strategy
differentiation
generate economic value by increasing the perceived value of products/services relative to the
perceived value of other firms' products/services
product attributes
firm customer relationships
firm linkages
bases of differentiation (3)
product attributes
unique component to the ACTUAL product or service
firm-customer relationships
unique relationships with customers
firm linkages
unique relationships within or between firms
product features
product complexity
timing of introduction
location
the 4 product attributes
customization
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