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Video 1.3 Text

I would like to take a few minutes and discuss how managers achieve competitive advantages through operations. As outlined in your textbook the three ways to achieve competitive advantage is through either differentiation, low cost, or responsiveness or through some combination of the three. While some companies will try to compete using all three, most don’t. Instead managers will try to focus on the method that best suits the company.

So let’s look quickly at the three methods.

The first is Differentiation, which is the idea of providing a unique product. Now do not forget that these advantages can be applied to both a firm that produces a physical product and to a firm that provides services. Differentiation makes a consumer want your product so bad that they are willing to pay extra for the product.

Next is competing on cost. Low cost does not necessarily mean low value or low quality, but a firm that wants to be the low-cost leader must focus on driving down costs wherever possible. In the U.S. think of Southwest Airlines, or in Europe the low-costs carrier Ryanair. Both focus on providing the customer with the lowest cost ticket available. However, by doing so they have to reduce the traditional amenities that the legacy carriers offer such as assigned sitting, no meals, or meals offered for a price.

The third method is competing on response. To compete on response the firm must provide a quick and reliable response to their customers. So think about FedEx’ motto “absolutely, positively on time.” For Overnight Delivery of packages there are several firms (DHL, UPS, and FedEx are the big ones), and they really do not have a very differentiated product, they simply pick up your package and delivery it the next day (or two). They are not the cheapest option, so clearly FedEx must compete on reliability, which is part of competing on Response.

Another example is Apple, Apple clearly competes by focusing on differentiation of their product. While they may try to compete a little by being responsive to their customers, they definitely do not compete by being a low-cost provider. So, for Apple, managers must focus on things that will set their products apart from others, and they do a pretty good job of this.

As I said at the beginning, some firms may focus on more than one method of achieving competitive advantage through operations, but most will clearly focus on one. By using the 10 operations decisions managers can achieve their chosen competitive advantage.

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