Management for All

Friday, October 26, 2012

COST FOCUS

COST FOCUS

The third business level strategy is focus. Focus is different from other business strategies as it is segment based and has narrow competitive scope. This strategy involves the selection of a market segment, or group of segments, in the industry and meeting the needs of that preferred segment (or niche) better than the other market competitors (Bolter & Mcmanus, 1999). This is also known as a niche strategy. In focus strategy, the competitive advantage can be achieved by optimizing strategy for the target segments.

Focus strategy has two variants. They are:

1. Cost Focus; and

2. Differentiation Focus

Cost focus is where a firm seeks a cost advantage in the target segment; and Differentiation focus where a firm seeks differentiation in the target segment (Cherumilan, 2004). We shall discuss these variants later.

Wednesday, October 24, 2012

DIFFERENTIATION

DIFFERENTIATION

CONCEPT OF DIFFERENTIATION :

Every individual customer is unique in itself so is his/her preferences regarding tastes, preferences, attitudes, etc. These needs of the customers are fulfilled by the firms by producing differentiated products. In our day-to-day life we see many such examples of differentiated products. Most of the fast moving consumer goods like; biscuits, soaps, toothpastes, oils, etc. come under the category of differentiated products. To satisfy the diverse needs of the customers, it becomes essential for the firms to adopt a differentiation strategy. To make this strategy successful, it is necessary for the firms to do extensive research to study the different needs of the customers. A firm is able to differentiate from its competitors if it is able to position itself uniquely at something that is valuable to buyers. Differentiation can lead to Differential advantage in which the firm gets the premium in the market, which is more than the cost of providing differentiation. The extent to which the differentiation occurs depends on the overall strategy of the firm. Previously differentiation was viewed narrowly by the firms, but in the present scenario it has become one of the essential components of the firm’s strategy. Reliance Infocomm, offers varied products like; different facilities to its customers in the CDMA telephones. This is differentiation.

When we talk of differentiation, it can be said that virtually any product can be differentiated (Sadler, 2004). The greatest potential of differentiation lies in products, which are of complex nature but do not have to adhere to strict regulatory standards, but the success of a differentiation strategy depends on the firm’s commitment towards customers and the understanding of customer needs as differentiation is all about perceiving on the part of the customer of something unique. Differentiation can be said to have more competitive advantage than the cost advantage as it is quite difficult to imitate the differentiated products. Even if the initiation is done in terms of concept, then also a particular product remains unique regarding its value, style, packaging, etc. Therefore, when we talk about differentiation, it is important to understand the demand of the customers and fulfilling this demand keeping in mind the differentiation advantage. In this case, one thing the firms should concentrate on its creativity and innovativeness than on market research. We have discussed about the concept of differentiation as a whole but we need to know the why aspect of differentiation, i.e., why do the firms need differentiation?

Thursday, October 18, 2012

COST LEADERSHIP

COST LEADERSHIP

The firms operating in this highly competitive environment are always on the move to become successful. To strive in this competitive environment the firms should have an edge over the competitors. To develop competitive advantage, the firms should produce good quality products at minimum costs etc. This means that the firms should provide high quality at low cost so that the customer gets the best value for the product he/she is buying. Therefore, it becomes necessary for the firms to have a strategic edge towards its competitors. One such competitive strategy is overall cost leadership, which aims at producing and delivering the product or service at a low cost relative to its competitors at the same time maintaining the quality. According to Porter, following are the prerequisites of cost leadership (Cherunilam, 2004):

1) Aggressive construction of efficient scale facilities;

2) Vigorous pursuit of cost reduction from experience;

3) Tight cost and overhead control;

4) Avoidance of marginal customer accounts;

5) Cost minimization.

According to Porter cost leadership is perhaps the clearest of the three generic or business level strategies (Bolten & McManus, 1999). To sustain the cost leadership throughout, the firm must be clear about its accomplishment through different elements of the value chain. Figure-1 shows a matrix of the three generic competitive strategies and their interrelationship given by Porter.

Figure-1 : Three Generic Competitive Strategy

Saturday, October 13, 2012

COST STRATEGY TO GAIN COMPETITIVE ADVANTAGE

WHAT IS COST STRATEGY ? HOW TO GAIN COMPETITIVE ADVANTAGE THROUGH COST STRATEGY ?

Cost analysis occupies an important place in business strategy. In order to gain and sustain competitive advantage, a firm should not only monitor its cost performance but also should endeavour to control it. Several strategic decisions like fixation of competitive prices, provision of after-sale services, quality of the products etc. depend upon relative cost level of the business firm. The role of cost in different market conditions is to be examined. The Experience Curve analysis is also important to derive the cost strategy of a firm. Michael Porter in his book Competitive Advantage suggested three generic competitive strategies aiming to develop a dependable position in the long-run and out-perform the competitors. These three strategies are:

1. Cost Leadership,

2. Differentiation,

3. Focus.

All the three strategies can either be used individually or in combination to each other. Figure-1 shows a matrix of the three generic competitive strategies and their interrelationship given by Porter.

Figure-1 : Three Generic Competitive Strategies

Monday, October 8, 2012

EXPERIENCE CURVE AND ITS CAUSES

EXPERIENCE CURVE AND WHAT IS THE CAUSES OF EXPERIENCE CURVE EFFECT ?

Cost has been correlated with the accumulated experience (of say production) by the Experience Curve Effect. The underlying principle behind the experience curve is that as total quantity of production of a standardised item is increased, its unit manufacturing cost decreases in a systematic manner. The concept of the experience curve was presented by BCG in 1966 and since then it has been accepted as one of the important phenomenon.

The experience curve is a rule of thumb. It says “costs of value added net of inflation will characteristically decline 25% to 30% each time the total accumulated experience has been doubled” (Henderson, 1989). This is also known as learning curve. Initially, this inverse relationship was discovered for the learning costs which are the costs for direct labour input in the manufacturing cost. Thus, as the production of a particular item (such as aircraft components) increased, the quantum of time of direct labour component to make each of these successive items declined. This helped the aircraft manufacturers to predict the cost of man-hours required to manufacture in future, say the number of aircraft, and helped them to fix the price accordingly. The Experience Curve Effect phenomenon, where costs fall with accumulated volume of experience, was known to industrial managers for many years. It took momentum as a tool in business strategy after Boston Consulting Group (BCG) provided the concept.

Let us take an illustration to understand this concept. When one starts the production of a new product (2 units), the unit cost is, say Rs. 100. Then, as the accumulated production volume reaches 4 units, the unit cost is reduced by say 20%, to Rs. 80. Furthermore, as the accumulated production reaches 8 units, the cost gets reduced by another 20%, to only Rs. 64, and so on. This trend has been tabulated in Table -1

Table-1 : 80% Experience Curve

The data of this table when plotted on a plain graph, it gives an 80% Experience Curve, as shown in Figure-1. The Experience Curve has a hyperbolic shape.

Monday, September 10, 2012

PROCESS OF STRATEGY

THE PROCESS OF STRATEGY

The process of strategy is cyclical in nature. The elements within it interact among themselves. Figure-1 present the process for single SBU firm. The process has to be adjusted for multiple SBU firms because there it is conducted at corporate level as well as SBU levels as these firms insert SBU strategy between corporate strategy and functional strategy. Initially, the process of strategy was discussed in terms of four phases which are:

1. Identification phase

2. Development phase

3. Implementation phase

4. Monitoring phase

The process of strategy does not have the same steps as stated by different authors.

According to C.K. Prahalad, the process comprises of five steps. They are:

1. Strategic Intent

2. Environmental Analysis

3. Evaluation of strategic alternatives and choice

4. Strategy Implementation

5. Strategy Evaluation and Control

For our understanding, the process has been divided into the following steps:

1. Strategic Intent

2. Environmental and Organizational Analysis

3. Identification of Strategic Alternatives

4. Choice of Strategy

5. Implementation of Strategy

6. Evaluation and Control

FIG-1 : STRATEGIC PROCESS

FIG-1 : Strategic Process in a Single SBU Firm

Friday, June 8, 2012

PORTER'S FIVE FORCES FRAMEWORK

PORTER’S FIVE FORCES FRAMEWORK

The five forces framework developed by Michael Porter is the most widely known tool for analyzing the competitive environment, which helps in explaining how forces in the competitive environment shape strategies and affect performance. The framework as shown in Figure-I suggests that there are competitive forces other than direct rivals which shape up the competitive environment. These competitive forces are as follows:

1) The rivalry among competitors in the industry

2) The potential entrants

3) The substitute products

4) The bargaining power of suppliers

5) The bargaining power of buyers

Figure I : Five Forces Analysis

Five Forces Analysis

Monday, May 14, 2012

Organisational Capability Analysis

Analysis of Organisational Capability

In order to develop successful strategies to exploit the external opportunities or control the external threats(Due to continual changes in external environment) , analysis of an organisation’s capabilities is important for strategy making which aims at producing a good fit between a country’s resource capability and its external situation. Internal analysis helps us understand the organizational capability which influence the evolution of successful strategies.

Many of the issues of strategic development are concerned with changing strategic capability better to fit a changing environment. However, looking at strategic development from a different perspective i.e. stretching and exploiting the organizations capability to create opportunities, it again becomes important to understand these capabilities. The above two perspectives together are called the Resource Based View (RBV) of strategy.

Professionals from different organizations suggest that a firm’s overall strengths and weaknesses and its ability to execute are often found more important to its performance than environmental factors. Internal capabilities and process execution at times allow firms to gain competitive edge over competitors even with relatively lesser resources and lesser advantageous position.

TYPES OF RESOURCES

There are three types of resources – Assets, Capabilities and Competencies, which have been identified under Resource Based View of the firm (RBV). Strategic thinkers explaining the RBV suggest that the organizations are collections of tangible and intangible assets combined with capabilities to use those assets. These help organizations develop understanding these three types of resources and help us to know how a firm’s internal strength and weaknesses affect its ability to compete.

Sunday, May 6, 2012

Value Chain Framework

Value Chain Framework

This is the framework most commonly used to guide analysis of any firm’s strengths and weaknesses. In this framework, any business is seen as a number of linked activities, each producing value for the customer. By creating additional value, the firm may charge more or is able to deliver same value at a lower cost, either of this leading to a higher profit margin. This ultimately adds to the organization’s financial performance.

Figure-I : Value Chain Framework

The value chain framework as shown in Figure-I is a typical value chain within an organization. Using this framework, it is possible to analyze the organization’s contributions of individual activities in a business and how they add up to the overall level of customer value, the firm produces. It is divided into two parts i.e. primary activities and support activities. The primary activities constitute of the following:

Tuesday, August 9, 2011

Cultural Change

What are the factors and steps of cultural change ?

CULTURAL CHANGE

There are a number of internal and external factors which are responsible for cultural change in an organisation.

Composition of the workforce: Overtime, the people entering an organisation may differ in important ways from those already in it, and these differences may impinge on the existing culture of the organisation.

Mergers and acquisitions: Another sosurce of cultural change is mergers and acquisitions, events in which one organisation purchases or otherwise absorbs another. In such cases, rare consideration is given to the acquired organisation's culture. This is unfortunate because there have been several cases in which the merger of two organisations with incompatible cultures leads to serious problems, commonly known as culture clashes. In such cases, the larger and more powerful company attempts to dominate the smaller acquired company.

Planned organisational change: Even if an organisation does not change by acquiring another, cultural change still may result from planned changes. One important force in planned organisational change is technology. Technology affects the behaviour of people on the job. as well as the effective functioning of organisations. project management software

Organisational Culture

Concept of Organisational culture ? Types of organisational culture ? how the organisational culture developed ?

CONCEPT OF ORGANISATIONAL CULTURE

The simplest definition of culture is ‘the way we do things round here' (Deal and Kennedy, 1982). It is a combination of values and beliefs, norms of behaviour that are acceptable or otherwise, written policies, pressures, and expectations coming down from the top, formal and informal systems, processes and procedures, and networks.

The culture of an organisation is a product of history, a variety of external and internal influences, and priorities and values of key people in it. Culture is reflected in the artifacts - rituals, design of space, furniture and ways of dealing with various phenomenon.

Smircich (1983) defines organisational culture as a fairly stable set of taken-for--granted assumptions, shared beliefs, meanings, and values that bring forth a new way of understanding of organisational life. According to Denison (1984), organisational culture refers to the set of values, beliefs, and behaviour patterns that form the core identity of an organisation.

Thursday, July 28, 2011

Learning Organisation

Define the concept of Learning organisation ? What are the philosophy and characteristic of learning organisation ? how it differ from traditional organisation ? how to develop a learning organisation ?

A learning organisation is one that is successful at acquiring, cultivating, and applying knowledge that can be used to help it adapt to change. Learning organisations are skilled at experimenting with new approaches, learning from the experiences, and best practices of others. A learning organisation specifically tries to develop new skills; new knowledge, new cultural norms, and new insights. Moreover, one of its key characteristics is how an organisation can unlearn previous behaviours and develop new cognitive frameworks. Training, organisational behaviour management, and discipline are the three systematic approaches of learning organisation. It has Culture based on the notion that learning is central to success and effectiveness.

Peter M. Senge in his book, “The Fifth Discipline: The Art and Practice of the Learning Organization”, described a learning organization “as a place where people continually expand their capacity to create results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free and where people are continually learning how to learn”.

David Garwin defines a learning organisation as ^"an organisation skilled at creating, acquiring, and transferring knowledge, and at modifying its behaviour to reflect new knowledge and insights."

Thursday, July 21, 2011

Power and Sources of Power

Concept of Power ? distinguish between power, authority and influence. What are the various sources of power ?

CONCEPT OF POWER

Power is said to be like love, impossible to define but easy enough to recognise (Martin, 1977). Power is understood as the ability to influence other people and events.

In the words of White and Bednar, "Power is the ability, to influence people of things, usually obtained through the control of important resources."

A comprehensive definition of power is given by Dahl (1957), when he wrote that "A has power over l3 to the extent that he can get B to do something B would not otherwise do." Russell (1938) conceptualizes power as "the production of intended effects."

Dehl's definition suggests that power must overcome resistance in order to succeed whereas according to Russell, power need not imply resistance. All the above definitions suggest that power involves compulsion.

These has been a recent trend towards empowerment, the shifting of power away from managers and into bands of subordinates. Empowerment occurs in varying degrees in different organisations.

DIFFERENTIATING POWER FROM AUTHORITY AND INFLUENCE

Usually, the term power is intertwined with another concept, authority. But there is a difference between the two concepts. Power refers to the capacity to influence others. The person who possesses power has the ability to manipulate or change the behaviour of others. Authority, on the other hand, is the source of power. Authority is legitimate and it confers legitimacy to power. Power itself need not be legitimate.

Friday, July 15, 2011

Persuasion and Persuasion Process

Write brief on Persuasion – meaning, Theory, Importance and process ?

Persuasion :

Persuasion is the process of changing or reinforcing attitudes, beliefs or behaviour of a person. People respond to persuasive messages in two ways: thoughtfully and mindlessly. When we are in thoughtful mode, the persuasiveness of the message is determined by merits of the message. When we, respond to messages mindlessly, our brains are locked on automatic. We do not have the time, motivation or ability to listen intently. Typically, persuasion is largely dependent upon the attractiveness of the speakers and reaction of the listeners. Persuasion is solely related with communication, learning, awareness and thought.

Meaning of Persuasion :

The notions of communication, learning, awareness and thought pervade definitions of persuasion. Bettinghaus defines persuasion as "a conscious attempt by one individual to change the attitudes, beliefs or the behaviour of another individual or group of individuals through the transmission of some message". This definition indicates that persuasion is assumed to involve conscious intent on the part of the persuader to affect the receiver of a persuasive message. It involves a selection of a strategy perceived to be most effective and the control of message and environmental variable so as to maximise the likelihood that the strategy will be effective. Much persuasive discourse is indirectly coercive, that is, the persuasive effectiveness of messages often heavily depends on the credibility of threats and the promises preferred by the communicator. For example, if the child perceives that the threatening parent is, for some reason or another, unlikely to suspend the child's allowance, the parent's persuasive messages will have minimum impact on the child's study habits. Persuasion is also valued as an instrument of democracy. The concept of persuasion has a clear and important focus in the field of marketing; McGuire states it simply as "changing people's attitudes and behaviour through the spoken and written words".

Thursday, July 14, 2011

Positive Reinforcement Programme

What are the Procedures and rules to follow while implementing Positive Reinforcement Programme ?

Implementing a Positive Reinforcement Programme

If your data reveal that the worker makes the correct response at least once in a while, you need to design a programme that will increase the percentage of correct response. As in anything else there are some basic, general rules that you must master before you implement such a programme.

Rule 1: Reward Selection

The only way to increase behaviour without alienating the employee is to make it more rewarding to perform effectively. Before you can change the contingencies in favour of the desired behaviour, you must identify what the employee finds reinforcing. You can only discover this by observing what the employee prefers to do and how he reacts to various rewards. The greatest danger at this point is in managing and the language of the employee. If you think that you can assume that money, praise attention recognition, time-off, or any other common reward is necessarily a reinforcer for an individual employee, you are probably overgeneralising your way into failure as a behaviour manager. Remember that by definition a reinforcer increases the probability of the preceding behaviour. If the frequency of the behaviour doesn't increase, your reward wasn't a reinforcer. The kind of manager who is likely to be reading this chapter is also the kind of manager who would have trouble accepting next week as an extra paid vacation because he would believe that the lost time would interface with his performance. For such a manager both money and time-off fail to function as reinforcers.

The language of the employee leads a behaviour management project astrally when the supervisor decides that he can ask the employee what would be reinforcing rather than directly observing the effects of various rewards. Verbal behaviour is never a substitute of actual observation. At best the questionnaire approach can waste time and create paper work. At worst, it can lead the manager to punish the very behaviours that he wishes to reinforce by using the wrong opportunities as rewards for the right behaviour. Asked in the abstract, our hard-working manager might say that he would love an extra paid week off but this consequence might not reinforce when it came down to taking the time. In the research for rewards, attitude surveys may point a manager in the appropriate direction, but only direct observation of behaviour will identify specific effective reinforcers.

Subscribe to: Posts (Atom)