Chapter 4

Question 1

Why are functional level strategies important

Answer 1

They are actions that managers take to improve efficiency and effectiveness of one or more value creation activities

Question 2

How do we measure efficiency

Answer 2

The quantity of inputs that it takes to produce a given output

Question 3

How does a more effiencient company look like

Answer 3

Has fewer inputs to produce the output leading to a lower cost structure

Question 4

What are the functional strategies?

Answer 4

1. Efficiency
2. Quality
3. Innovation
4. Customer Responsiveness

Question 5

What is innovation?

Answer 5

The most important source of competitive advantage because it brings new products that better statisfy consumer needs, improve the quality and reduce costs `

Question 6

What happens when innovation becomes successful

Answer 6

Success new product launches are major drivers of superior

Question 7

What are the reasons for failure?

Answer 7

1. Demand of innovations is inherently uncertain
2. The technology is poorly commercialized
3. Poor positioning strategy
4. Marketing a technology for which there is not enough demand
5. When products are slowly marketed

Question 8

Why is tight integration between R&D, production and marketing important

Answer 8

1. Product development projects driven by customer needs
2. New products are designed for ease of manufacture
3. Development costs are not allowed to spiral out of control
4. The time it takes to develop a product and bring it to market is minimized
5. Close integration between R&D and marketing is achieved to ensure that development projects are driven by customer needs

Question 9

What are the 2 advantages that superior quality provide

Answer 9

1. Strong reputation for quality
2. Different from rivals
3. Create more value in the eyes of customers
4. Provide options of charging at a premium prince
5. Eliminates errors from the production process
6. Reduces wastes
7. Increases efficiency
8. Lower the cost structure
9. Increases its profitability

Question 10

What is the principal tool that most managers use to increase the reliability of their products

Answer 10

Six sigma quality improvement methods

Question 11

What is the total quality management

Answer 11

Philosophy that was widely adopted during the 1980s and early 1990s

Question 12

How do managers implement a reliability improvement program

Answer 12

1. Managers must be committed to the program
2. Individuals must identified to lead the program
3. The need to identify defects, trace them to their source, find out what caused the defect and make necessary corrections
4. Create a metric that can be used to measure quality
5. Set a challenging quality goal and create incentives to reach it
6. Shop-floor employees must participate in the program
7. Must work with suppliers to improve parts they supply
8. Design products with fewer parts to prevent further mistakes
9. Implementation requires company wide commitment and cooperation

Question 13

How can be products be differentiated

Answer 13

By attributes that define product excellence

Question 14

What are some key attributes

Answer 14

1. The form
2. The features
3. Performance
4. Durability
5. Styling

Question 15

How do managers improve the quality and see their products as superior to that of their rivals

Answer 15

1. Managers must collect marketing intelligence to indicate the attributes that are important to customers
2. Company needs to design products in a way where these attributes are embodied in the product
3. The company must decide which attributes to promote and how best to position them in the minds of the customers
4. Competition is not stationary, a company must continue to produce improvement in product attributes

Question 16

How do managers achieve superior responsiveness

Answer 16

They must give customers what they want, when they want it and a price they are willing to pay

Question 17

What does superior responsiveness mean

Answer 17

Giving customers value for money

Question 18

How do you build superior responsiveness

Answer 18

Motivate the entire company to focus on the customer

Question 19

How do managers motivate the entire company to focus on the customer

Answer 19

1. Demonstrate leadership
2. Shaping employee attitudes
3. Using mechanisms for making sure that the needs of the customers are well known within the company

Question 20

How can a company provide a higher level of satisfaction

Answer 20

1. Customizing them to the requirements of individual customers
2. Reducing the time it takes to respond to or satisfy customer needs

Question 21

What does customization mean

Answer 21

Customize products to a greater extent to satisfy customers

Question 22

How can managers satisfy customer demands for rapid response

Answer 22

1. Building brand loyalty
2. Differentiating its products
3. Charging high prices for its products

Question 23

What does achieving superior efficiency look like

Answer 23

1. The fewer the inputs required to product an output and has a lower cost structure
2. The higher its productivity, the lower its costs in contrast to its rivals

Question 24

What is economies of scale

Answer 24

1. Unit cost reduction associated with a large scale of output
2. Companies benefit by keeping prices down and increasing volume

Question 25

What does achieving a greater division of labour and specialization mean

Answer 25

Enables employees to become very skilled at performing a particular task

Question 26

What does learning effects mean

Answer 26

Cost savings that come from learning by doing

Question 27

What are the results of learning effects

Answer 27

Labour productivity increases over time and unit costs decrease as employees learn the more efficient way to perform a task

Question 28

What is the experience curve

Answer 28

Refers to the systematic lowering of the cost structure and consequent unit cost reductions that have been observed to occur over the life of a product

Question 29

What are the clear implications of the experience curve

Answer 29

Increasing a company's product volume and market share will lower its cost structure relative to its rivals

Question 30

Why are flexible product technology designed?

Answer 30

1. Reduces set up times for complex equipment 2. Increase the use of individual machines through better scheduling 3. Improve quality control at all stages of manufacturing process

Question 31

What can mass customization achieve

Answer 31

Low cost and differentiation through product customization

Question 32

What is marketing strategy

Answer 32

Position that a company takes with their market segmentation, pricing, promotion, advertising, product design and distribution

Question 33

What are churn rates

Answer 33

Percentage of a company's customers who defect every year to competitiors

Question 34

What are defection rates

Answer 34

Determined by customer loyalty which turn into a function of the ability of a company to satisfy customers

Question 35

What are one time fixed costs purpose

Answer 35

Acquire new customers

Question 36

What are examples of one-time fixed costs

Answer 36

Administrative, advertising and promotion

Question 37

Why is it important for a company to retain a customer

Answer 37

Leads to the greater volume of customer generated unit sales that can be set against fixed costs

Question 38

What are materials management

Answer 38

Encompasses the activities necessary to get inputs and components to a production facility, through the production process and out through a distribution system to the end user

Question 39

What can companies achieve to adopt a just in time inventory system

Answer 39

Major cost savings from increasing inventory turnover to reduce inventory holding costs and the company's need for working capital

Question 40

How can R&D lower the cost structure

Answer 40

1. Boost efficiency by designing products that are easy to manufacture and decrease the required assembly time 2. Pioneer process innovations to achieve a lower cost structure and improve efficiency which is a major source of competitive advantage

Question 41

What is employee productivity

Answer 41

Key determinant of a company's efficiency, cost structure and profitability

Question 42

How can HR increase employee productivity

Answer 42

1. Hiring strategy 2. Employee training and development 3. Self managing teams 4. Pay for performanc

Question 43

What is the function of information systems

Answer 43

Move to the centre stage in the quest for operating efficiencies and lower cost structures

Question 44

What are examples of how information systems increase productivity

Answer 44

1. Putting ordering and customer service functions online 2. Using web based programs to automate customer and supplier interactions 3. Replacing a physical store with an online virtual store 4. Automating ordering and checkout process

Question 45

What is included in a company's infrastructure

Answer 45

Structure, culture, style of strategic leadership and control system

Question 46

What is the leaderships task

Answer 46

Recognizes the need for all functions of a company to focus on improving efficiency

Question 47

What are fixed costs

Answer 47

Costs that must be incurred to produce a product regardless of the level of output

Question 48

What are diseconomies of scale

Answer 48

Where unit cost increases associated with a large scale of output

Question 49

What are flexible production technology

Answer 49

A range of technologies designed to reduce set up times for complex equipment, increase use of machinery through better scheduling and improve quality control at all stages of manufacturing processes