Planning Concepts & Principles
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:
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.
Making your product or service synonymous with superior and consistent
quality, whether or not a "brand" in the conventional
sense is used.
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
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which can be withdrawn if a competitor's product is bought, or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
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.
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
(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.
of BPR is reversing the task specialisation and focusing instead
on completing a total process with value to customers in one fell
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?
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.
claims several benefits:
1) Customers can deal with a single point of contact (the "case
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.
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.
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
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.