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Strategic Planning Concepts & Principles
BARRIERS TO ENTRY
Obstacles making it difficult or impossible for competitors to enter a particular business segment. Barriers sometimes exist naturally but astute managers will try to raise these barriers and introduce new ones in order to restrict competition amongst their customers. It is worthwhile reflecting from time to time on what can be done to raise barriers, by examining a checklist of potential barriers:
- INVESTMENT SCALE: Building a bigger or better plant, service network or retail outlet can discourage competitors from trying to compete with you, especially if your installed customer base means it would take longer for them to get the scale of business to cover the cost of the initial investment, or if your investment gives you a lower cost base than existing competitors.
- BRANDING: Making your product or service synonymous with superior and consistent quality, whether or not a "brand" in the conventional sense is used.
- SERVICE: Providing such a high level of service that customers will be naturally loyal and not want to switch to competitors.
- COST TO SWITCH: Locking customers in, for example by promotional schemes such as "Air Miles" where customers are saving up for incentives and will not want to switch to another supplier, or by giving OVERRIDING
- DISCOUNTS once a level of sales has been triggered, or even by supplying equipment (such as freezer cabinets for shops selling ice cream) which can be withdrawn if a competitor's product is bought, or in professional services by knowing so much about a client's business that it would take another supplier too long to "come up to speed".
- PROPERTY/LOCATION: Obtaining the best sites can be crucial in businesses. It is worth asking from time to time whether the desired location might change in the future and then moving to lock up suitable new sites, as for example in edge of town/out of town superstores.
- EXPERTISE/HIRING THE BEST PEOPLE: Knowing how best to do something that is important to customers is an underrated barrier. The key thing is to locate the functional expertise that is most important and then make sure that your org/unit is better than any other at this.
- LOWER COST PRODUCER: One of the very best barriers is to be able to produce a particular product or service for a particular market at a lower cost than competitors, usually by having larger scale in that SEGMENT than competitors and defending that relative advantage ferociously.
BPR (BUSINESS PROCESS RE-ENGINEERING)
BPR claims to reinvent the way that companies do business, from first principles, by throwing out the view that companies should be organised into functions and departments to perform tasks, and paying attention instead to processes. A process here is a set of activities that in total produce a result of value to a customer, for example, developing a new product.
The essence of BPR is reversing the task specialisation and focusing instead on completing a total process with value to customers in one fell swoop.
"Doing" BPR, means taking a clean sheet of paper and asking fundamental questions like: Why do we do this at all? How does it help to meet customer needs? Could we eliminate the task or process if we changed something else? How can we get away from specialisation, so that several jobs are combined into one?
Performance improvement comes from eliminating the expense and misunderstandings implicit in "hand-offs" from one part of the organisation to another, as well as eliminating internal overheads necessary to manage the complexity brought on by task specialisation.
The process claims several benefits:
1) Customers can deal with a single point of contact (the "case manager").
2) Several jobs can be combined into one, where the primary need to satisfy the customer is not lost in organisational complexity.
3) Workers make decisions, compressing work horizontally (that is, doing without supervisors and other overhead functions that are necessary as a result of specialisation), resulting in fewer delays, lower overhead costs, better customer response, and greater motivation of staff through empowerment.
A visual design and/or name that is given to a product or service by an organisation in order to differentiate it from competing products and which assures consumers that the product will be of high and consistent quality. Examples include brands such as Coca-Cola, Ford, Colgate, Gillette, Kodak and Avis.
Companies often create "sub-brands" or new brands within a particular category, such as Diet Coke or SA Air Link. Consumers prefer brands because they dislike uncertainty and need quick reference points.
Brands have other major advantages for suppliers:
1) They can help to build consumer loyalty and thus give a higher and more enduring market share.
2) Most brands involve a price premium which can be very substantial and which greatly exceeds the extra cost in terms of superior ingredients and marketing.
3) Branding facilitates the creation of new market segments within an established product category: for instance, low-calorie or low-fat versions of almost any food or drink product, the creation of at least three classes of airline travel, or longer-lasting products such as Duracell.
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