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Module 4.2
Competitive Advantage Through Functional-Level Strategy
Competitive Advantage Through Functional-Level Strategy
I. Through Superior Efficiency:
Ways to boost efficiency-
1. Economies of scale:
Cost reductions can be realized through leveraging output…..e.g., spread fixed costs over a large volume of work.
Competitive Advantage Through Functional-Level Strategy
Through Superior Efficiency:
Ways to boost efficiency-
2. Learning effects:
Cost savings based on experience…..Labor costs should fall as experience grows
Also, cost reductions are realized over the life of production
Competitive Advantage Through Functional-Level Strategy
Caution!
Economies of scale and learning effects do not carry on indefinitely!
Competitors can “catch up”! (differentiation becomes important through factors such as customer service, quality, etc.)
New technology can wipe out effects of cost advantages
High volume does not always lead to cost advantages
Competitive Advantage Through Functional-Level Strategy
Through Superior Efficiency:
Ways to boost efficiency-
3. Flexible manufacturing:
E.g., Its probably better to mass produce a low number of standard items and to avoid specialty items
Competitive Advantage Through Functional-Level Strategy
Through Superior Efficiency:
Ways to boost efficiency-
4. Marketing–The position a company takes based on the “4 Ps”:
Defection rates are  to a company’s costs
Acquiring new customers means new fixed costs!
 Cost economies are realized through retention!
Duration that a customer stays with a company is also important!
Consider that long-term customers provide free advertising!
Competitive Advantage Through Functional-Level Strategy
Through Superior Efficiency:
Ways to boost efficiency-
5. Materials management (JIT)
Getting raw material into a production then out to the customer as a finished product
JIT inventory systems can reduce costs
Competitive Advantage Through Functional-Level Strategy
Through Superior Efficiency:
Ways to boost efficiency-
6. R & D Strategy
Can raise efficiency by designing products that are simple to make!
New innovations can provide increased efficiencies
Competitive Advantage Through Functional-Level Strategy
Through Superior Efficiency:
Ways to boost efficiency-
7. HR Strategy
Efficiency is  to productivity of employees.
This can be accentuated through:
A. Training
Skills are  efficiency
 it behooves a company to train skills!
Cross training can also raise efficiency
Competitive Advantage Through Functional-Level Strategy
Through Superior Efficiency:
Ways to boost efficiency-
7. HR Strategy
B. Self-managing teams:
Consider teams that produce the entire product or complete an entire task
Cross training becomes essential
Performance bonus should be linked to the team results
Competitive Advantage Through Functional-Level Strategy
Through Superior Efficiency:
Ways to boost efficiency-

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