A presentation on Functional Level strategy

1. 2016
Building Competitive advantage
thru Functional-Level strategy

2. Competitive Advantage (CA) thru
Functional level strategies
 Functional Level Strategies:
Improving the effectiveness of company’s
operations to attain;
1. Superior Efficiency
2. Quality
3. Innovation
4. Customer Responsiveness

3. Relationship between Functional Strategies,
Distinctive competencies, Differentiation,
Low cost, Value creation, and Profitability
.
Resourc
es Differe
n-
tiation
Functional
Strategies
Superior:
*Efficiency
*Quality
*Innovation
*Customer
responsivene
ss
Distinctiv
e
Compete
ncies
Capabiliti
es
Value
Creatio
n
Low
cost
Superior
Quality
Build
Shap
e
Build

4. Achieving Superior Efficiency
Simplest measure of efficiency is the quantity of Input
required to produce a given output.
(Efficiency=output/input)
Steps that a company can take to increase efficiency at
functional level:
1. Economies of scale (Microsoft/Ford Model T)
2. Efficiency and Learning effects (Hospital case)
3. Efficiency , Flexible production systems and Mass
customization. (Case of Lands End)
4. Marketing and Efficiency (Relationship between
customer loyalty and profit per customer)
5. Materials Management, Just-in Time, and Efficiency

5. Contd..
6. R & D Strategy and Efficiency
7. Human Resources and Efficiency (Hiring
strategy, Employee training, Self managing
teams, pay for performance)
8. Information systems and Efficiency
9. Infrastructure and Efficiency

6. Achieving Superior Quality
Quality can be thought of in terms of 2 dimensions:
1. Quality as reliability
2. Quality as Excellence.
Improved quality means;
 Less cost
 Productivity improves
 Higher market share
 Higher profitability
 Creates more jobs
Quality improvement program has to be initiated by
Management and nurtured and encouraged.
Deming prize

7. Reliability Improvement
methodologies
 Build organizational commitment to quality (TQM training
to employees)-Xerox example
 Create quality leaders (“Black belt” leaders on six sigma
methodology). Six sigma aims to reduce defects, boost
productivity, eliminate waste, and cut costs.
 Focus on customer
 Identify processes and the source of defect. (GE’s
Lightspeed CT Scanner)
 Find ways to measure quality
 Set goals and create incentives
 Obtain input from employees
 Build long term relationship with suppliers
 Design for ease of manufacture
 Break down barriers among functions

8. Improving Quality as Excellence
 Achieving superior innovation (New products to better
satisfy customer needs, improve quality of existing
products, or can reduce the costs)
(Problems: Uncertainty, Poor commercialization, Poor
positioning, Technological myopia, Being slow to
market)
 Build competencies in innovation;
Skills in basic and applied research
Project selection and management (Development
funnel)
Cross functional integration
Product development teams

9. Achieving superior responsiveness to
customers
 Focusing on the customer;
- Demonstrating leadership (Tata Nano)
- Shaping employee attitudes (McDonald)
- Bringing customers into the company (MTR)
 Satisfying customer needs
- Customisation (amazon.com)
- Response time (Caterpillar spare parts)

10. The following areas need to be
studied
In the area of Finance:
1. Availability of finance and its cost
2. Capital structure, debt and equity ratio
3. Movement of share prices, dividends
4. Budget and Audit
5. Tax planning and tax outlay

11. In the area of Operations
management
1. Manufacturing process, production planning
2. Plant capacity utilisation
3. Adequacy and skills of workforce
4. Inventory Management
5. Level of current assets
6. Labour saving automations
7. Product wise manufacturing costs

12. Human resource management
1. Recruitment, training, promotions,
2. Performance records
3. Industrial relations-Unions and collective
bargaining
4. Employees motiviation, participation in decision
making.

13. Research & Development
 No of New products developed, existing products
modified
 Adequacy of equipments and test instruments
 Sufficiency of R & D engineers
 R & D Expenditure
 New product development
 Interaction with marketing teams

14. Managerial competence
1. Time management
2. Risk taking capabilities
3. Personal goals
4. Are they able to motivate the team
5. Leadership qualities
6. Public relations, Government relations
7. Problem solving ability
8. Charisma of leader

15. Organizational competence
1. Decision making levels, decentralization
2. Teamwork, problem solving process
3. Formal and informal two way communication
4. Information system
5. Rewards and Punishment system and result
orientation
6. Job description, overlap of responsibilities and
authority
7. Timeliness of actions
8. Integrity of owning up mistakes at all levels of
management.