Part II Business Level Strategies Cost Leadership.
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Transcript of Part II Business Level Strategies Cost Leadership.
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Part II Business Level Strategies
Cost Leadership
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Wal-Mart
• Growth
• The dark side
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Two Generic Strategies
• Cost-leadership (chapter 4)
• Product differentiation (Chapter 5)
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Other cost leaders
• BIC
• Timex
• Casio
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Sources of Cost Advantages
• Size differences and economies of scale example: ATM– With higher production volume
• Firms can use specialized machines• Firms can build larger plants
– Process manufacturing
• Firms can increase employee specialization
• Firms can spread overhead cost across more units produced
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Sources of Cost Advantages
• Size differences and Diseconomies of scale example: Oregon mills– Physical limits to efficient size– Managerial diseconomies– Worker de-motivation– Distance to markets and suppliers
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Sources of Cost Advantages
• Experience differences and learning-Curve Economies– The learning curve
• Each time production doubles average labor costs go down by a certain percentage
• The learning curve and Competitive advantage example: Texas Instrument
– Doesn’t always happen Beer Industry
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Sources of Cost Advantages
• Differential Low-cost access to Productive inputs– Productive inputs
• Land• Labor• Capital• Raw Materials
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Ethics The Race to the Bottom
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Sources of Cost Advantages
• Technological Advantages independent of scale– Technological Hardware– Technological Software
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Sources of Cost Advantages
• Policy Choices• HP wanted a $49
printer to compete with Lexmark
• 43% of sales and 65% of profits
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Cost Leadership and…
• The Threat of Entry
• The Threat of Rivalry
• The Threat of Substitutes
• The Threat of Suppliers
• The Threat of Buyers
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Cost Leadership & Sustained Competitive Advantage
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Entrepreneurship
• Oakland A’s– Small Market– Second most wins – Evaluate players– Batters
• OBP & Total Bases
– Pitchers• First pitch strikes & speed
of fast ball
– Consistency in farm system
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The imitability of sources of Cost Advantage
• Easy to duplicate– Economies and Diseconomies of scale
• Costly to duplicate– Learning curve?– Differential low-cost access
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Organizing for cost leadership
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