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Cost Management-final                                                                                                       13

EXHIBIT 4

VALUE CHAIN DIFFERENCES : THE TELECOMMUNICATIONS INDUSTRY

Value ChainStrategic Differences

___________________________________________________

Processes

AT&TNYNEXIBM

ProcurementOwns manufacturingFree to use anyOwns Rolm, CPE

branch (Western Electric)Supplier it wantsmanufacturer

TechnologyTechnological leadershipFocus on softwareStrong R& Din

developmentthrough Bell Labsproductscomputer hardware

and software technologies

OperationsNational presenceRegional monopolyGlobal presence

High quality of equipmentInnovative equipmentLeading computer

through heavy capitalfrom outside suppliers technology

expenditureHigh-quality regionalPartnership with MCi

Similar communicationsnetwork through

standards nationwideinvestment Strongest National telecommunications network.

MarketingNew emphasis onUse of Bell logoStrong reputation

and salesmarketing(still weak)Focus on top 1,000for marketing

High name recognitioncorporate customersexcellence

Long-term relationshipSales and distributionAlready sells to most

with clientscentres close tomajor corporations

Recruits computercustomersExperienced sales executivesforce

Finding innovative ways to perform value-creating activities helps firms to improve their performance and achieve competitive advantage. In order to thrive in the mature, highly competitive meat packing industry, for example, Iowa Beef Processors built its plants tile ranches, thus eliminating the high cost of shipping cattle to northern processing [n order to lower its costs, Tropicana froze slabs of orange juice concentrate near the groves in Florida and shipped the slabs to its large markets in the Northeastern    U. S. ten did the company mix the concentrate with water, thus avoiding the lengthy and shipment of water.

Increased global competition forces firms to focus on worldwide sustainable competitive advantage. Global competition, cites following four major factors that influences national competitive advantage:

factor conditions: The nation's position in factors of production, such as skilled labour or infrastructure, necessary to compete in a given industry;

demand conditions : The nature of domestic demand for the industry's product or service;

related and supporting industries: The presence or absence in the nation of supplier industries and related industries that are internationally competitive; and

firm strategy, structure and rivalry : The conditions in the nation governing how corn-lies are created, organised and managed and the nature of domestic rivalry.

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