Messages

46

Business Administration / Slow Penetration:

« on: April 15, 2017, 09:14:28 AM »

Slow Penetration: Launching a new product at a low price and low promotional expenses. This strategy makes sense when the market is large and highly aware of the product, market is price sensitive and there is a chance of potential competitors.

47

Business Administration / Rapid Penetration:

« on: April 15, 2017, 09:14:03 AM »

Rapid Penetration: Launching the product at a low price and spending heavily on promotion. This strategy makes sense when the market is large, the market is unaware of the product, most buyers are price sensitive, competition is strong, unit manufacturing cost falls in company’s scale of production and company gains the benefit of experience.

48

Business Administration / Slow Skimming:

« on: April 15, 2017, 09:13:39 AM »

Slow Skimming: Launching a new product at a high price and low promotion. This strategy makes sense when the market is limited in size. Most of the market is aware of the product, willing to pay even at a high price and potential competition is not imminent.

49

Business Administration / Rapid Skimming

« on: April 15, 2017, 09:13:16 AM »

Rapid Skimming: Launching a new product at a high price and high promotion level. This strategy makes sense when a large part of the potential consumers are unaware about the product.

50

Business Administration / Benefits/managerial influence/implication of PIMS model.

« on: April 15, 2017, 09:11:51 AM »

Benefits/managerial influence/implication of PIMS model.

PIMS framework can be beneficial in the following ways.

1. Provides a realistic and consistent plan:  It provides a realistic and consistent method for establishing potential return levels for individual business.

2. Stimulates managerial thinking: It stimulates managerial thinking on the reasons for deviations from par performance.

3. Provides insights into strategic moves:  it provides insights into strategic moves that will improve the par return on investment.

4. Encourages a more discerning appraisal: it encourages a more discerning appraisal of business unit performance.

51

Business Administration / PIMS= Profit Impact of Market strategy

« on: April 15, 2017, 09:11:24 AM »

: PIMS= Profit Impact of Market strategy
The PIMS project analyzed the data they had gathered to identify the options, problems, resources and opportunities faced by each SBU. Based on the spread of each business across different industries, it was hoped that the data could be drawn upon to provide other business, in the same industry, with empirical evidence of which strategies lead to increased profitability.
There is a positive relationship between profitability and market share. The study reveals that return on invested capital is the highest for the firm with the largest market share.
The information deals with such items as—
1. The market condition: a description of the market conditions in which the business operates, including such things as the distribution channels used by the SBU, the number and size of its customers, and rates of market growth and inflation.
2. The business unit competitive position: the business unit’s competitive position in its marketplace, including market share, relative quality, prices and costs relative to the competition, and degree of vertical integration relative to the competition.
3. Annual measure: annual measure of the SSBU’s financial and operating performance over periods ranging from two to twelve years.
Overall result of the study: The original PIMS data survey led the PIMS project to identify 37 variables which account for the majority of business success. From the 37 factors 7 factors are very important. If minimum 7 factors it can work, they are;
a. Return on investment (ROI): The ratio of net pretax income to average investment. Operating income is what is available after deduction of allocated corporate overhead expenses but before deduction of any financial charges on assets employed. “Investment” equals plus long-term debt, or equivalently, total assets, employed minus current liabilities attributed to the business.
b. Market share: The ratio of dollar sales by a business, in a given time period, to total sales by all competitors in the same market. The “market” includes all of the products or services, customer types, and geographic areas that are directly related to the activities of the business. For example, it includes all products and services that are competitive with those sold by the business. 
c. Product quality: The quality of each participating company’s offerings, appraised in the following terms;
   What was the percentage of sales of products or services form each business in each year that was superior to those of competitors?
   What was the percentage of equivalent products?
   Inferior products?

d. Market expenditure: Total costs for sales force, advertising, sales promotion, marketing research, and marketing administration. The figures do not include costs of physical distribution.
e. Research & Development Expenditure: Total costs of product development and process improvement, including those costs incurred by corporate-level units that can be directly attributed to the individual business.
f. Investment intensity: Ratio to total investment to sales.
g. Corporate diversity: An index reflects;
   The number of different 4-digit Standard Industrial Classification industries in which a corporation operates.
   The percentage of total corporate employment in each industry, and
   The degree of similarity or difference among the industries in which it participates.

52

Business Administration / experience curve

« on: April 15, 2017, 09:09:23 AM »

experience curve
A conceptual framework that many large corporations have used successfully is
the experience curve (originally called the learning curve).
As it applies to manufacturing , the experience curve concept holds that unit production costs decline by some fixed percentage (commonly 20%-30%) each time the total accumulated volume of production (in units) doubles.
Graph that depicts the 'experience effect' (increases in productivity) as reflected in reduced average and marginal costs. Unlike the learning curve, an experience curve takes into account both fixed and variable costs

53

Business Administration / Strategic group

« on: April 15, 2017, 09:08:51 AM »

Strategic group
A strategic group is the group of firms in an industry following the same or similar strategy along the strategic dimensions. An industry could have only one strategic group if all the firms followed essentially the same strategy.
Strategic group forms by the following basis
a.   Target market
b.   Product

54

Business Administration / Risks of focus

« on: April 15, 2017, 09:08:21 AM »

risks of focus

1. The focus strategy is imitated:
2. The target segment becomes structurally unattractive because
• Structure erodes.
• Demand disappears.
3. Broadly targeted competitors overwhelm the segment:
• The segment's differences from other segments narrow.
• The advantages of a broad line increase.
4. New focusers sub-segment the industry.

55

Business Administration / Risks of differentiation strategy

« on: April 15, 2017, 09:07:51 AM »

Risks of differentiation strategy

1. Differentiation is not sustained, because
• Competitors imitate.
• Bases for differentiation become less important to buyers.
2. Cost proximity is lost.
3. Differentiation focusers achieve even greater differentiation in segments.

56

Business Administration / Risks of cost leadership

« on: April 15, 2017, 09:07:16 AM »

Risks of cost leadership
Cost leadership is vulnerable to the same risks. Some of these risks are..
1. Cost leadership is not sustained because,
•   Competitive imitate: your strategy may be imitate by your competitors.
•   Technology changes: technological change that nullifies past investments or learning
•   Other bases for cost leadership erode
2. Proximity in differentiation is lost.
3. Cost focuser achieve even lower cost in segment.

57

Business Administration / Differentiation focus:

« on: April 15, 2017, 09:06:43 AM »

Differentiation focus: Differentiation focus, like cost focus, concentrates on a particular buyer group, product-line segment, or geographic market. In using differentiation focus, the company or business unit seeks differentiation in its target segment. This strategy is valued because of a belief that a company or a unit that focuses its efforts can serve its narrow strategic target more effectively than can its competition

58

Business Administration / Cost Focus:

« on: April 15, 2017, 09:06:17 AM »

Cost Focus: Cost focus is a low-cost competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche, to the exclusion of others. In using cost focus, the company or business unit seeks a cost advantage in its target segment.  This strategy is based on the belief that a company or business unit that focuses its efforts can serve its narrow strategic target more efficiently than can its competition.

59

Business Administration / Cost leadership:

« on: April 15, 2017, 09:05:48 AM »

Cost leadership: Though cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. Cost leadership requires
   Efficient scale facilities.
   Cost reduction from experience.
   Tight cost and overhead control.
   Avoidance of marginal customer accounts.
   Cost minimization in R&D, service, sales force, Advertising etc.

 In this regard, a great deal of managerial attention is required because, low cost relative to   competitors becomes the theme (idea) running through the entire strategy, though quality, service and other areas cannot be ignored.

60

Business Administration / Economic of scale effect

« on: April 15, 2017, 09:04:43 AM »

Economic scale effect: Economics of scale at the plant level refer to unit cost reductions achieved through mass production techniques. The economic scale effect relates to the input and output relationship. The classic example of such economies is Ford’s Model T automobile. The world’s first mass-produced car, the Model T-Ford, was introduced in 1923. Until then it had cost Ford approximately $ 3000 (in 1958 dollars) to build and assemble an automobile. By introducing mass production techniques, the company achieved greater division of labor (i.e. splitting assembly into small, repeatable tasks) and specialization, and reduced the cost of manufacturing cars to less than $900 per unit (in 1958 dollars) at large output volumes.  These may three types;
   Increasing
   Decreasing
   Constant