Supply Chain management journal
yufeng33
7EvolvingCompetition2.pptxCompetition, Competitive Strategies, CLV, Co-opetition
John Wu, Ph.D.
Professor of Supply Chain and Transportation
CSU San Bernardino
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Evolving Competition
Between products: Coke vs. Pepsi
Between companies: McDonald’s vs. Burger King
Between supply chains: Lenovo vs. Dell
Between systems: Xbox vs. PlayStation
Between eco-systems: iOS vs. Android
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Ever Heard of Rakuten?
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A Japanese e-commerce company that is taking the world by storm and could potential be a tough competitor for Amazon. Think of it as a blend of Amazon and eBay. Rakuten bought Buy.com a few years ago.
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Rakuten hosts many small merchants, helps them sell their goods, then processes payment and collects information from buyers. Rakuten builds a strong user community with reward points and frequent promotional items via email.
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Rakuten members can ear and spend points on Rakuten and in other places. Rakuten runs the largest loyalty program in Japan.
Customer Lifetime Value (CLV)
CLV: Lifetime contribution of a customer
CLV=(Average Order Value) x (Number of Repeat Sales) x (Average Retention Time)
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CLV or CLTV, value of lifetime customer, value of loyal customer, etc. helps managers understand the importance of customer satisfaction and retention. Please research to find values of lifetime customer of some familiar companies. How do loyalty programs such as airlines’ or Rakuten’s help increase such value?
Customer Lifetime Value (CLV)
CLV of Amazon, Apple, Gillett, American Express, McDonald’s, Pampers, Disney, Netflix, Verizon, CSUSB, Toyota, United Airlines?
Please peruse the calculator to find out how much you are worth to the store you frequent: http ://prosocialtools.com/what-is-the-value-of-a-loyal-customer /
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CLV or CLTV, value of lifetime customer, value of loyal customer, etc. helps managers understand the importance of customer satisfaction and retention. Please research to find values of lifetime customer of some familiar companies. How do loyalty programs such as airlines’ or Rakuten’s help increase such value?
How Should Customers be Treated?
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CLV or CLTV, value of lifetime customer, value of loyal customer, etc. helps managers understand the importance of customer satisfaction and retention. Please research to find values of lifetime customer of some familiar companies. How do loyalty programs such as airlines’ or Rakuten’s help increase such value?
Porter’s Generic Competitive Strategies
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Porter argues that there are only three generic strategies for organizations. An organization has to excel in one strategy in order to compete in the marketplace. However, one does NOT need to be good at more than one area to survive and succeed. A low cost vendor, for example, does not need to offer unique features that are not available elsewhere.
Explanations and Examples of Porter’s Generic Strategies
Both cost leadership and differentiation appeal to large groups of people
Difference between segmentation and differentiation is the size of the target group
Fill in the blank, if you buy a product because
it’s cheap, then __________ applies
it’s unique, then ___________ applies
you are unique, then _________ applies
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Some niche players take advantage of the long tail theory. Let’s say there are only a few people who are interested in your products in the whole world. If you offer such unique, hard to find items for them, sooner or later people are going to find you and do business with you. If you have enough such small, niche markets to work with, you have a pretty large business to yourself! Most retailers stock fast moving, best selling items. In other words, they focus on the top 80% of products. Who is there to take care of the remaining 20% of the customers and/or products? The long tail may represent small market niches but together they account for a good sized market.
Ancillary to Porter’s Generic Strategies
Focusing on and doing well in one strategy is good enough. (How many Bo Jacksons are out there?)
Never eat in a revolving restaurant for its food.
A restaurant that has the best food may not have the best service or location.
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Google Bo Jackson. Read about how he excels in both professional leagues.
Some say that hole in the wall restaurants have the best food. Really? Why?
Would you like to be a) 100% better than others in 1% of the things you do or b) 1% better than others in 100% of the things you do?
Other Competitive Priorities
Speed/Lead Time
Flexibility
Quality
Costs
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Porter is not the only scholar that researches competitions. Others have proposed different strategies for organizations to compete in marketplace.
Speed/Lead Time
Lead time is interval between start and end of activity
Lead Time attributes: mean, standard deviation, range, shape
Total product delivery lead time: from design, sourcing, manufacturing, distribution, to order fulfillment
Make to order (MTO) or assemble to order (ATO) vs. make to stock (MTS)
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How long would it take for an organization to deliver its products or services to customers?
Fast food restaurants are popular because…they are fast!
Why would people pay more to ship something overnight?
How long would you wait for your morning coffee to be “customized?”
Research MTO, ATO, and MTS to see how these different processes have different implications of service time.
Time Based Competition (TBC)
Goal: To gain a competitive advantage by offering customers more value by being either faster to product or faster to market.
Reduce Lead Times
Less of/System Simplification
As One/System Integration
At Once/Parallel Activities
More of/Excess Resources
Same as/Standardization
Watch It/Variance Control
Better than/Automation
Time to Market
Time to Product
Fast to Market
Fast to Product
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How did fast food restaurants gain their speed as compared to traditional restaurants?
How did FedEx deliver overnight mail/packages more efficiently and reliably than US Postal Service?
Flexibility
Changes Responses
Product mix, new products, new capabilities, product line breadth and depth
Alternative materials, sourcing, production methods, distribution, supply chain, customer base, product applications
Mass customization
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A few slogans ago, Burger King stressed that customers could customize their burgers to make them taste better (Have It Your Way, Your Way Right Away, When you have it your way, it just tastes better!) .
Companies like Dell and Harley Davidson let customers choose different options for their purchases then strive to deliver them fast. How many choices do you have when you order a cappuccino at Starbucks?
Customization is nothing new; the key success factor is to scale it up and deliver fast. That’s what separates large, profitable companies from mom and pop shops.
Quality
Transcendental, product-based, user-based, manufacturing-based, value-based views
Functionality, reliability, durability, safety, service, aesthetics, perceived quality
TQM: philosophy, system, broad-based corporate strategy
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Quality may mean different things to different people. For example, a quality car may mean high gas mileage for one and reliability for another. Some shoppers look for higher horsepower and torque (the Ultimate Driving Machine!) while others look for safety (Volvo: For Life.) There are many dimensions of quality and companies have to find the ones that appeal to their target customers.
Costs
Performance measurement, operations management, value enhancement
Acquisition cost, repair cost, maintenance cost, operating cost, salvage/disposal cost
Total cost, life cycle cost concepts
Environmental cost, user cost, external cost
Using Activity-Based Costing (ABC) to control costs
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Costs are always important. Higher efficiency always means making the same products with fewer people, less time, and fewer resources. In other words, making them cheaper. It’s one of the most important KPIs (key performance indicators). In the 1980s, Japanese have shown us how to be lean and how to control/lower our costs while still maintaining high quality. We need to include all costs (internal and external) of a product from its birth to the end of its useful life to really understand the true costs of producing and consuming this particular product.
Co-opetition
Question: In the biological world, is there more competition among species, or cooperation?
Organizations may collaborate and compete at the same time, hence the term co-opetition.
Examples: when one hotel is full, they usually send guests to neighboring hotels who are direct competitors; Apple uses Google Map and Samsung chips yet their smartphones and operating systems are in direct competition.
How do you handle such love hate relationships?
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Research competition and cooperation in the biological world, why do we focus on competition and teach more or less a win-lose philosophy?
