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ValueChainManagement FunctionalStrategiesforCompetitiveAdvantage McGraw Hill IrwinContemporaryManagement 5 e Copyright 2008TheMcGraw HillCompanies Inc Allrightsreserved chapternine 9 3 LearningObjectives Explaintheroleoffunctionalstrategyandvalue chainmanagementinachievingsuperiorquality efficiency innovation andresponsivenesstocustomersDescribewhatcustomerswant andexplainwhyitissoimportantformanagerstoberesponsivetotheirneedsExplainwhyachievingsuperiorqualityissoimportantandthechallengesfacingmanagersandorganizationsthatseektoimplementtotalqualitymanagement 9 4 LearningObjectives ExplainwhyachievingsuperiorefficiencyissoimportantandthedifferentkindsoftechniquesthatneedtobeemployedtoincreaseitDifferentiatebetweentwoformsofinnovation andexplainwhyinnovationandproductdevelopmentisacrucialcomponentofthesearchforcompetitiveadvantage 9 5 FourWaystoCreateaCompetitiveAdvantage 9 6 Toyota sProductLineup Figure9 2 9 7 FunctionalStrategiesandValue ChainManagement Functional levelstrategyplanofactiontoimprovetheabilityofeachofanorganization sdepartmentstoperformsitstask specificactivitiesinwaysthataddvaluetoanorganization sgoodsandservices 9 8 Question Whatiscoordinatedsequenceoffunctionalactivitiesnecessarytotransforminputsintofinishedgoods A InputchainB TransformationseriesC ValuechainD Valuestring 9 9 FunctionalStrategiesandValue ChainManagement Valuechaincoordinatedseriesorsequenceoffunctionalactivitiesnecessarytotransforminputsintofinishedgoodsorservicescustomersvalueandwanttobuy 9 10 FunctionalActivitiesandtheValueChain 9 11 FunctionalStrategiesandValue ChainManagement Value chainmanagementdevelopmentofasetoffunctional levelstrategiesthatsupportacompany sbusiness levelstrategyandstrengthenitscompetitiveadvantage 9 12 FunctionalStrategiesandValue ChainManagement ProductdevelopmentengineeringandscientificresearchactivitiesinvolvedininnovatingneworimprovedproductsthataddvaluetoaproductMarketingfunction staskistopersuadecustomersaproductmeetstheirneedsandconvincethemtobuyit 9 13 FunctionalStrategiesandValue ChainManagement Materialsmanagementfunctioncontrolsthemovementofphysicalmaterialsfromtheprocurementofinputsthroughproductionandintodistributionanddeliverytothecustomer 9 14 Question Whichfunctionprovidesaftersalesserviceandsupport ProductionfunctionSalesfunctionCustomerservicefunctionCallcenterfunction 9 15 FunctionalStrategiesandValue ChainManagement Productionfunctionresponsibleforthecreation assemblyorprovisionofagoodorservice fortransforminginputsintooutputsSalesfunctionplaysacrucialroleinlocatingcustomersandtheninformingandpersuadingthemtobuythecompany sproducts 9 16 FunctionalStrategiesandValue ChainManagement CustomerservicefunctionprovidesaftersalesserviceandsupportCancreateaperceptionofsuperiorvaluebysolvingcustomerproblemsandsupportingcustomers 9 17 ImprovingResponsivenesstoCustomers Goodvalue chainmanagementrequiresmarketingmanagerstofocusondefiningthecompanybusinessintermsofcustomerneeds 9 18 WhatDoCustomersWant AlowerpricetoahigherpriceHigh qualityproductsQuickserviceandgoodafter salesserviceProductswithmanyusefulorvaluablefeaturesProductsthataretailoredtotheiruniqueneeds 9 19 CustomerRelationshipManagement CustomerrelationshipmanagementtechniquethatusesITtodevelopanongoingrelationshipwithcustomerstomaximizethevalueanorganizationcandelivertothemovertime 9 20 ImpactofIncreasedQualityonOrganizationalPerformance Figure9 4 9 21 ImprovingQuality Anorganizationabletoprovide forthesameprice aproductofhigherqualitythanacompetitor sproductisservingcustomersbetterHigherproductqualitycanincreaseefficiency 9 22 TotalQualityManagement Totalqualitymanagement TQM focusesonimprovingthequalityofanorganization sproductsandstressesthatallofanorganization svalue chainactivitiesshouldbedirectedtowardthisgoal 9 23 StepstoSuccessfulTQMImplementation BuildorganizationalcommitmenttoqualityFocusonthecustomerFindwaystomeasurequalitySetgoalsandcreateincentivesSolicitinputfromemployees 9 24 StepstoSuccessfulTQMImplementation Identifydefectsandtracetosource Introducejust in time JIT inventorysystems Workcloselywithsuppliers Designforeaseofproduction Breakdownbarriersbetweenfunctions 9 25 FocusontheCustomer IdentifywhatcustomerswantfromthegoodorservicethatthecompanyprovidesIdentifywhatthecompanyactuallyprovidestocustomersIdentifythegapthatexistsbetweenwhatthecustomerswantandwhattheyget qualitygap Formulateaplanforclosingthequalitygap 9 26 FacilitiesLayout FlexibleManufacturing andEfficiency FacilitiesLayoutstrategyofdesigningthemachine workerinterfacetoincreaseproductionsystemefficiencyFlexibleManufacturingstrategybasedontheuseofITtoreducethesetupcostsassociatedwithaproductassemblyprocess 9 27 Figure9 5 ThreeFacilitiesLayouts 9 28 DiscussionQuestion Whichfacilitieslayoutisthebesttouse ProductlayoutProcesslayoutFixedpositionlayoutContingencylayout 9 29 FacilitiesLayout ProductlayoutmachinesareorganizedsothateachoperationisperformedatworkstationsarrangedinafixedsequenceProcessLayoutselfcontainedworkstationsnotorganizedinafixedsequence 9 30 FacilitiesLayout Fixed PositionLayouttheproductstaysinafixedspotandcomponentsproducedatremotestationsarebroughttheproductfortofinalassembly 9 31 ChangingaFacilitiesLayout Figure9 6 9 32 FlexibleManufacturing AimstoreducetimerequiredtosetupproductionequipmentByredesigningtheprocesssetuptimesandcostscanbedrasticallyreducedAbletoproducemanymorevarietiesofaproductthanbeforeinthesameamountoftime 9 33 Just in TimeInventoryandEfficiency Just in time JIT inventorysystemgetscomponentstotheassemblylinejustastheyareneededtodrivedowncostsMajorcostsavingscanresultfromincreasinginventoryturnoverandreducinginventoryholdingcosts 9 34 Self ManagedWorkTeamsandEfficiency Self managedworkteamsproduceanentireproductinsteadofjustpartsofitTeammemberslearnalltasksandmovefromjobtojobCanincreaseproductivityandefficiency 9 35 ProcessReengineeringandEfficiency ProcessReengineeringfundamentalrethinkingandradicalredesignofthebusinessprocesstoachievedramaticimprovementincriticalmeasuresofperformance 9 36 TwoKindsofInnovation Quantumproductinnovationresultsinthedevelopmentofradicallydifferentkindsofgoodsandservicesbecauseoffundamentalshiftsintechnologybroughtaboutbypioneeringdiscoveries 9 37 TwoKindsofInnovation Incrementalproductinnovationresultsingradualimprovementsandrefinementstoexistingproductsovertimeasexistingtechnologiesareperfected andfunctionalmanagerslearnhowtoperformvalue chainactivitiesinbetterways 9 38 StrategiestoPromoteInnovationandSpeedProductDevelopment Productdevelopmentmanagementofthevalue chainactivitiesinvolvedinbringingneworimprovedkindsofgoodsandservicestothemarket 9 39 StrategiestoPromoteInnovationandSpeedProductDevelopment InvolvebothcustomersandsuppliersEstablishastage gatedevelopmentfunnelEstablishcross functionalteams 9 40 StrategiestoPromoteInnovationandSpeedProductDevelopment Stage GateDevelopmentFunneltechniquethatforcesmanagerstomakechoicesamongcompetingprojectssothatfunctionalresourcesarenotspreadthinlyovertoomanyprojects 9

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