Differentiation

Efficiency

Customer responsiveness

Quality Innovation

Higher prices

Lower costs

New productsImproved

Product

PC

V

Profit

Greater value…

►Quality• Closer to customer needs• Customer focus• Cross functional integration

• Greater value

• Higher prices• Supplier relationships

…Higher prices

Lower costs

PROFIT

Efficiency

Innovation

Quality

Customer responsiveness

V P C

Higher customer value and prices

Improving the product/service ( => greater customer responsiveness)

► Manufacturing/Production • Raise quality -> increase in

value► Sales and Marketing

• Market segmentation• Tailor product to segments’

needs► Customer Service

• The product’s success (and the company reputation) depend on quality of the service as well as that of the product

► HR• Training

► E.g. Call centre staff

► IT• CAD/CAM

► Increase product variety

► Better able to meet segment needs

• Customer support ► Customer relationship

management software

Cost leadership

Efficiency

Customer responsiveness

Quality Innovation

Higher prices

Profit

Newprocesses

Fewer defects

Lower costs

New products

ImprovedProduct

V

PC

Reducing costs (greater efficiency)

► Manufacturing/Production • Economies of scale

► Spreading of fixed costs► Specialization

• Learning effects► More applicable to complex

operations► Purchasing

• JIT (less inventory)• Supplier relationships

► Marketing• Reputation, word of mouth• Penetration• Defection rates

► HR• Training• Self managing teams• Incentives

► IT• EDI

► JIT, data entry

• Customer support ► (e.g. FAQs, expert

systems for problem diagnostics

► Call centre management