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Shivangi-1. GAINING COMPETITIVE ADVANTAGE
image (3. MEASUREMENT SYSTEMS,…
Shivangi-1. GAINING COMPETITIVE ADVANTAGE
1. ENVIRONMENTAL CHANGES
Both Micro and Macro factors affect the business functioning:
- Macro Factors: Political turmoil, artificial intelligence, nanotechnologies, and robotics
- Micro Factors: Erosion of business models due to loss in economies of scale, shortened product life cycle and dis-aggregation of market segment.
MARKET BEHAVIORS
Organization's reaction to the changes and their reaction to the changes is classified under four different heads.
PASSIVE
- Organisations do not observe changes in the business
environment or do not react to the changes taking place.
- The decision of not acquiring Google by Yahoo in the early 2000s inspite of seamless opportunity in Cloud and virtual interface by the competitor.
OPPORTUNISTIC
- Organisations observe changes and adjust their operations to the least visible and rarely acceptable ones.
- Diversification by ITC inspite of probable uncertain market and low experience.
VISIONARY
- The precursor companies that foresee changes and act faster.
- Aesthetics and ease of operation of Apple products 40 years
ago, when a computer was designed for a narrow group of specialists was a visionary approach to future change.
ADAPTIVE
- Observing the environmental changes and reacting with the most acceptable reaction to address the change.
- The emphasize on healthy lifestyles have resulted in market of healthy food or fitness centers on large scale.
LEVELS OF COMPETITION
THIRD LEVEL
- The organization applying this approach focuses on tools and method that will not be an element of the overall operating system but works as ancillary process.
- Examples include Total Quality Management, Enterprise Resource Planning and Customer Relation Management that work independently from the whole organization.
- They can be imitated easily with large number of substitutable solution.
SECOND LEVEL
- Creating a coherent system, usually unique for
the entire organisation, it includes creation of short term tools and method which are unique and hard to follow.
- KAIZEN system used by Japanese companies or the four-leaf clover model are example of second level of competition.
- The competitor have to follow the entire system to gain advantage which is difficult.
FIRST LEVEL
- Ability to observe the market and understand changes, and a high level of responsiveness.
- The organization's ability to learn the market is the only source of permanent competitive advantage.
3. MEASUREMENT SYSTEMS
PERFORMANCE PYRAMID
- It is use as a connector between the vision and strategy of a company and ts everyday operations.
- It is composed of four parts:
- First Level: The organisation vision, which defines the markets and the method of competition.
- Second level: The level of business units and the criteria for their evaluation i.e. short-term financial goals (cash flow, profit) and long-term market objectives (market share).
- Third level: Business operation systems including elements such as customer satisfaction, organizational flexibility and productivity.
- Last level measures quality, promptness of deliveries, order execution time and wastage
EFQM EXCELLENCE MODEL
(European Foundation of Quality Management
- Method of evaluating the company’s activities in the scope of quality management and improvement processes.
- The model includes two parts:
- Enablers: leadership, people management, policy and strategy, resources and processes.
- Results: employee satisfaction, customer satisfaction, impact on communities and business results.
ACTIVITY-BASED COSTING
- It is a tool for the improvement of behaviour patterns and practices within an organisation by assessing the marketing cost and the value added by them.
- Although the ABC system is a system of cost accounting, it also includes non-financial parameters thereby displays a holistic picture of the organization.
- Less emphasis on behavioral changes and staff requirement and more focus is on IT matters.
ABC looks at the time to communicate with the customer via the phone or social media
- The amount of travel time for the sales associate between the firm and customer, administrative costs, office expenses,
- Business that do not perform, fail to measure actual profit and are likely to misallocate their marketing effort.
BALANCE SCORECARD
- It is a model in which organization's strategic objective and mission can be transformed into a set of measures.
- Balanced Scorecard model places an emphasis on four management processes:
- Building harmony within an organisation around its vision and strategy.
- Communicating the strategy within the organisation and involving individual people to implement it.
- Business planning enabling the integration of financial and organisational plans.
- Strategic learning of the organisation.
RELEVANCE IN THE BUSINESS
- Increased effectiveness and productivity by means of concentrating on strategic areas and fields of operation of an organization.
- Cost cutting through the application of comprehensible indices in internal communication.
- A company can explore new opportunities and potential, as well as recording a higher return on investment.
LIMITATION IN IMPLEMENTATION
Balance Scorecard does not give any information as to the measure to be used and its implementation in business administration.
BENCHMARKING
- Benchmarking involves comparing the activities of a company with the best, identifying any differences and making changes on that basis
- The concept of benchmarking is linked with Xerox, the company regained its share of the market, reduced costs, improved quality and avoided a financial catastrophe.
RELEVANCE IN THE BUSINESS
- Identify profitable areas of the market
- Forecast the changes taking place in a given sector.
- Determine key success factors
- Find strengths and weaknesses in competitors
- Understand the market and undertake actions aimed at internal improvements.
- Control and reduce the costs of operating and increase the efficiency of processes.
LIMITATION IN IMPLEMENTATION
- The availability of information and selection of proper benchmarks or control parameters for assessment.
PERFORMANCE PRISM
- This measurement system includes four perspectives:
- The satisfaction of stakeholders (investors, customers, intermediaries, employees, governmental agencies, local communities and suppliers.
- Strategies (corporate, business units, brands, products, services, activities).
- Processes ( Designing products and services, generating and fulfilling demand, planning and company management.
- Competences (personnel, practices, technology, infrastructure) and the contribution of shareholders.
MARKETING AUDIT
- A systematic, critical and objective review and assessment of the marketing activities.
- It includes audit of the following organization's functions:
- Company's Business environment
- Strategy
- Organization's marketing activities, marketing systems, productivity and functions.
LIMITATION IN IMPLEMENTATION
- Absence of independent auditors
- Poor level of involvement among the company’s
personnel in the process of assessment
- Limited availability of information
and poor internal communication
- Method of qualitative research dominates in some auditing technique
MARKETING RETURN ON INVESTMENT
- All the marketing activities should be treated as an investment and not as cost.
- Understanding the long term goals of the organization and communicating it with the marketing department.
- Technological improvement has limited barrier with marketing measurement i.e. information transmission, systematic functioning.
4. STAGES OF IMPLEMENTING MEASUREMENT SYSTEM
IDENTIFYING KEY BUSINESS DRIVERS
- It specify the factors that have a decisive impact on the sales and results of marketing activities. For eg: number of customer entries.
DEVELOPING MEASUREMENT SYSTEM
- Measurement plan and schedule are defined, including details regarding reporting, deciding on obligations and allocating resources.
CONCEPTS AND BUSINESS MODELS
- It describes the form of processes,customer behavior pattern, market activities, business model and market strategy of the company.
ASSESSMENT AND ADJUSTMENT
- It includes dissemination and sharing of market knowledge within the organisation.
- Learning the market and predicting the directions
of changes in the future.
5. MEASUREMENT INDEX
- Enables building knowledge about the market
- Facilitates the creation of market value, represents an early warning system.
- Determines the criteria of value hierarchy within an organisation
- Identifies control values and helps to monitor performance.
FEATURES
- Reflect an organisation’s vision, objectives and strategy
- Simple and comprehensible
- Provide appropriate feedback on time
- Create a balanced picture of activities and effects.
- Reflect business processes suppliers and customers
- Engaged in defining them
- Concentrate on and incline to improvement.
2. MEASUREMENT OF MARKETING ACTIVITIES
- It helps in analyzing the marketing activities as an investment with stipulated return on investment.
- Models that help in complete and systematic assessment of marketing activities include:
- MSAT (Measurement System Assessment Tool)
- KMAT ( Knowledge Measurement Assessment Tool)
ESSENTIALS OF MEASUREMENT
- Evaluate the internal processes within an organisation and the dynamics of changes taking place outside it.
- A full assessment relates to the performance of the sector and the activities undertaken by competitors.
- Comparing the result achieved by other market.
IMPORTANCE OF MEASUREMENT
- Proper assessment of expenditure and the results achieved.
- Distinguish between expenses and marketing investment.
- Better allocation of resources
- Creates public trust in the organization.
- Helps in effectiveness in management and shaping of new organization culture.
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