BUS 441 Lecture Notes - Lecture 8: Hundred Days Offensive, Leading Edge, Vertical Integration
10 May 2018
School
Department
Course
Professor
BUS 441 – Business Strategy
Lecture 8 – Fiver Generic Strategies
Overall Low Cost
- Technically only one company can be the overall low cost provider
a. But possible that two companies have the exact same cost but not that probable
- Well run market leader
a. Well run market leader turns out most volume economy of scale overall low cost
b. Will probably be the low cost company
- Benefits
a. Can compete on price
i. Can survive a price war
b. Can establish a barrier to entry
- You have to be cutting cost everyday
- Financial and emotional risk
a. Your people pay the price (i.e. bonuses, benefits, travel) starts to wear on your employees
b. Becomes contagious when you motivate your employees to continuously cut cost, that
becomes their focus and they lose sight of what’s important
- Most cost cutting breakthroughs occur because of technology
a. Change the cost curve
- Senior management will help you cut costs with 2 pieces of advice
a. Stop doing things (everything you do costs money)
b. The things that you are doing, make it more efficient
c. Problem how do you do that?
- Ways you can cut cost
a. Outsource (within country or to foreign country)
b. Lease things instead of buy things
c. Experience curves
d. Kaizen
- Compensation at risk – your compensation is a function of 3 things (you ctrl one, you may infl
the other, and the other one your on your own)
a. You meet/exceed your objectives
b. How successful was your business unit
c. How successful was the entire company in meeting its objectives
Broad Differentiation
- Based on concept of making yourself different (hopefully in a positive way)
- Differentiation = good approach to dealing with commodity products and services
- Can also use differentiation in specialty products
- Works well with commodities
- Extended product
a. Everything that goes around the support of the product
b. Gets you away from just the commodity
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Technically only one company can be the overall low cost provider: but possible that two companies have the exact same cost but not that probable. Well run market leader: well run market leader turns out most volume economy of scale overall low cost, will probably be the low cost company. Can survive a price war: can establish a barrier to entry. You have to be cutting cost everyday. Most cost cutting breakthroughs occur because of technology: change the cost curve. Ways you can cut cost: outsource (within country or to foreign country, lease things instead of buy things, experience curves, kaizen. Based on concept of making yourself different (hopefully in a positive way) Differentiation = good approach to dealing with commodity products and services. Can also use differentiation in specialty products. Extended product: everything that goes around the support of the product, gets you away from just the commodity. If just the commodity, price determines which is bought.
