Part II Business Level Strategies

1. Part II Business Level Strategies Cost Leadership

2. Wal-Mart • Growth • The dark side

3. Two Generic Strategies • Cost-leadership (chapter 4) • Product differentiation (Chapter 5)

4. Other cost leaders • BIC • Timex • Casio

5. 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

6. 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

7. 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

8. Sources of Cost Advantages • Differential Low-cost access to Productive inputs • Productive inputs • Land • Labor • Capital • Raw Materials

9. Ethics The Race to the Bottom

11. Nike • Response

12. Sources of Cost Advantages • Technological Advantages independent of scale • Technological Hardware • Technological Software

13. Sources of Cost Advantages • Policy Choices • HP wanted a $49 printer to compete with Lexmark • 43% of sales and 65% of profits

14. Cost Leadership and… • The Threat of Entry • The Threat of Rivalry • The Threat of Substitutes • The Threat of Suppliers • The Threat of Buyers

15. Cost Leadership & Sustained Competitive Advantage

17. 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

18. The imitability of sources of Cost Advantage • Easy to duplicate • Economies and Diseconomies of scale • Costly to duplicate • Learning curve? • Differential low-cost access

19. Organizing for cost leadership