BHARATH COMPADV PAPER 1

8/7/2019 BHARATH COMPADV PAPER 1

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COMPETITIVE ADVANTAGE - TOOLS &TECHNIQUES

[ Mr.R.SATISHB.Tech., MBA., M.Phil., PGDPM&IR., DIS., [Ph.D.] &

Mr.S.MUTHUMANI MCS., MBA., M.Phil., [Ph.D.]

SATHYABAMA DEEMED UNIVERSITY, CHENNAI-119. ]

ABSTRACT :

There has been a fundamental change in the marketing scenario inIndia a change from the sellers market to the buyers market . Thereis keen competition not only among Indian manufacturers but also

from foreign companies having manufacturing operations in India. Asyour prices come down , you can place your products with in the reachof ever expanding markets. Cost control is also necessary forcompeting in export markets. Ratios provide standards of comparisonfor appraising the performance of a business firm. They can be usedfor cost control purposes in two ways. Effective Benchmarking is anever increasing management prerequisite for implementingmeaningful positive change . It is not the latest management fad. InIndia there is not much evidence of concerned efforts by the firms totake advantage of benchmarking. There is also need for conceptualclarity amongst the managers. Training programmes , seminars and

other forums can provide opportunity for bringing managers togetherfor appreciating and sharing information on vital aspects ofbenchmarking. This paper also highlights the new frontiers of the CRMvision , which makes use of the latest business models based on stateof the art information technology framework [i.e., the internet ] ,encompass a concept which is referred to as electronic customerrelationship management [eCRM]


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COMPETITIVE ADVANTAGE - TOOLS &TECHNIQUES

[ Mr.R.SATISH B.Tech., MBA., M.Phil., PGDPM&IR., DIS., [Ph.D.] & Mr.S.MUTHUMANI MCS., MBA., M.Phil., [Ph.D.]

SATHYABAMA DEEMED UNIVERSITY , CHENNAI-119 ]

INTRODUCTION

There has been a fundamental change in the marketing scenario inIndia

a change from the sellers market to the buyers market . There iskeen

competition not only among Indian manufacturers but also fromforeign

companies having manufacturing operations in India. Also due to

liberalized imports , Indian products have to compete with imported

products. In developed countries where incomes are high , firms can

employ non-price factors to beat their competitors but in India andother

developing countries , where incomes are lower , price seems to be the

major determinant of demand. While the selling price is not within the

control of the firm, a reduction in costs is very much within the firms

control. As your prices come down , you can place your products with

in

the reach of ever expanding markets. Cost control is also necessary for

competing in export markets. Also you can effect more improvementby

working on the big leaks. Again you have to evaluate your results in


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order to determine the direction of your efforts.

Cost control has two aspects . [i] a reduction in specific expenses , and

[ii]a more efficient use of every rupee spent. For example , if sales canbe

increased with the same amount of expenditure , say on advertisingand

salesmen , the cost as a percentage of sales is cut down. In practice,cost

control will ultimately be achieved by looking into both these aspectsand

it is impossible to assess the contribution which each has made to the

overall savings. Potential savings in individual businesses will ,however ,

vary between wide extremes depending upon the levels of efficiency

already achieved before cost controls are introduced.

It is useful to bear in mind the following rules covering cost control

activities :

1. It is easier to keep costs down than it is to bring costs down.

2. The amount of effort put into cost control trends to increasewhen

business is bad and decreases when business is good; and

3. There is more profit in cost control when business is good than

when business is bad. Therefore one should not be slack when

conditions are good.

One step that could lead to an improvement in costs is modernizationof


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plants and equipment and the second step equally important is to

concentrate on what has come to be known as core competencies.Firms

may examine to what extent they can vacate certain areas where they

have lost their cost advantage. Budgeting and standard costing aretwo

methods that could be easily adopted for cost control.

The technique of standard costing has been developed to establish

standards of performance for producing goods and services . These

standards serve as goals for attainment and as bases of comparisonwith

actual costs in checking performance.

The analysis of variance between actual and standard costs will :

Help fix the responsibility for non-standard performance , and

Focus attention on areas in which cost improvement should be

sought by pinpointing the source of loss and inefficiency.

The principle here is one of control by exception. Instead of attemptingto

follow a mass of cost data , the attention of those responsible for cost

control is concentrated on significant variances from the standard. If

effective action is to be taken ,the cause and responsibility of avariance ,

as well as its amount must be established. The prime objective of

standard costs is to generate greater cost consciousness and help incost

control by directing attention to specific areas where action is needed.


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RATIO ANALYSIS

Ratio is a statistical yardstick that provides a measure of therelationship

between two figures. This relationship may be expressed as a rate( costs

per rupee of sales ) , as a percent ( cost of sales as a percentage ofsales ),

or as a quotient ( sales as a certain number of times the inventory ).

Ratios are commonly used in the analysis of operations because theuse

of absolute figures might be misleading.

Ratios provide standards of comparison for appraising theperformance

of a business firm. They can be used for cost control purposes in two

ways.

1. A businessman may compare his firms ratios for the periodunder

scrutiny with similar ratios of the previous periods. Such a

comparison would help him identify areas which need hisattention.

2. The businessman can compare his ratios with the standard ratios

in his industry. Standard ratios are averages of the resultsachieved

by thousands of firms in the same line of business.


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In these comparisons reveal any significant differences , themanagement

can analyse the reasons for these differences and can take appropriate

action to remove the causes responsible for increases in costs. Someof

the most commonly used ratios for cost comparisons are given below:

Net Profits / Sales

Gross Profits / Sales

Net profits / Total assets

Sales / Total assets

Production costs / costs of sales

Selling costs / costs of sales

Sales / Inventory

Material costs / Production costs

Labour costs / Production costs

Overheads / Production costs

POSSIBLE BUSINESS BENEFITS LEADING TO COMPETITIVE

ADVANTAGE ARE

Improved material efficiency

Improved product quality

Improved community relations

Improved media coverage

Positive pressure group relations

Assured present and future compliance ( the license to operate )

Reduced risk exposure

Lower insurance premium

Cheaper finance & Increased staff commitment

A TOOL FOR COMPETITIVE ADVANTAGE : BENCH MARKING


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American Productivity Quality Centre ( APQC ) defines benchmarkingas

the process of identifying , understanding , and adapting outstanding

practices and processes from organizations anywhere in the world tohelp

your organization improve its performance.

One can benchmark performance indicators or business processeswhich

drive performance indicators. Performance indicators are usually

expressed in numbers (metrics) , such as :

Profit margins

Return on investment

Cycle times

Percentage defects

Service response time

Sales per employee

Cost per unit of product or services

For benchmarking business processes , the study may includesubjects,

such as :

How one develops a new product or service

How one manages customers order or billing or respond to anEnquiry

How one produces or deliver a product or service

We took competitive analysis one step further and came up withwhat

we now call competitive benchmarking. Its an intense , in depth studyof


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what we think is our best competition. Its a continuing , never-ending

process , and its an integral part of our new and stronger emphasis on

quality. We look at how they make a product. How much it coststhem

to make it How they distribute it , market it , sell it and support it

How their organization works. What kind of technology they have.

NEED FOR BENCHMARKING

To achieve customer satisfaction

To identify and adapt best practices

To encourage creating thinking , get out of the box

To find and comprehend the practices that will help them reachnew standards of performance

To empower their people to move forward to change existingwork practices

To base their goals on an external orientation

To focus the entire organization on the most critical businessgoals.

BENCHMARKING SHOULD BE DONE WHEN

More than incremental improvement is required

The process is new to the organization

The strategic needs require external analysis

There is a large technology gap

The performance of the organization is unsatisfactory

Improvement seems to stagnate.


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Benchmarking is a valuable management tool because it provides a

disciplined , logical approach for objectively understanding andassessing

an organizations strengths and weakness in comparison to the best of

the best.

CLASSIFICATION OF BENCH MARKING

1. PARTNER [ AGAINST WHOM TO BENCHMARK ]

Internal

Competitive

Functional

Generic

2. SUBJECT- [ WHAT IS TO BE BENCHMARKED ]

Performance

Strategic

Process

BENCHMARKING PROCESS

SLNO

PHASE OBJECTIVES RELEVANT QUESTIONS

1 PLANNING To prepare a plan forbenchmarking

1. What is the subjeto be benchmarked

2. Who are the becompetitors ?

3. What is the best dacollection method ?

2 ANALYSIS To understandcompetitors strengths

and to assess theirperformance against thesestrengths

4. What is the currecompetitive gap ?

5. What is the projectcompetitive gap ?

3 INTEGRATION To use the data gatheredto define the goalsnecessary to gain ormaintain superiority andto incorporate these goals

6. How are the resuof the analycommunicated ?


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into companies formalplanning processes

4 ACTION The strategies and actionplans established throughthe benchmarking process

are implemented andperiodically assessed withreports of companiesprogress in achievingthem.

7. What are the negoals ?

8. What is the acti

plan ?

5 MATURITY To determine when thecompany has attained aleadership position and toassess whetherbenchmarking hasbecome an essential ,

ongoing element of itsmanagement process

9. Is the compaachieving its plan ?

10. What is the plan frecalibration ?

SUCCESS FACTORS FOR BENCHMARKING

SEVEN TIPS that can help make benchmarking teams more successful

are :

Management commitment to benchmarking

Openness and willingness to change

Do the study quickly

Choose a broad and-shallow or narrow and-deep scope

Integrate critical success factors

Do not fall for the best-in-class fallacy

Manage the change from start

CRM : ANOTHER TOOL FOR COMPETITIVE ADVANTAGE


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From ancient times , a phrase like Customer is God has beenaround

in the business world . What your customers think about the product or

services you sell , the people who represent you or your company as a

whole , is the ultimate measure of your success at the market place. A

relatively new discipline called Customer Relationship Management

[CRM] is primarily concerned with improving the effectiveness and

efficiency of business operations. The new frontiers of the CRM vision ,

which makes use of the latest business models based on state of theart

information technology framework [i.e., the internet ] , encompass a

concept which is referred to as electronic customer relationship

management [eCRM]

PRIMARY REASONS FOR ADOPTING CRM ARE

Rising cost of sales

Increased global competition

Dwindling margins

Constant need for more information

Ineffective sales/Account management

Productivity

Customer Care

Changing Paradigms


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CONCLUSIONS

Our policy is to reduce the price , extend the operations, andimprove

the article. You will note that the reduction of price comes first. Wehave

never considered any costs as fixed. Therefore , we reduce the price toa

point where we believe more sales would result. The new price forces

costs down (by forcing) everybody in the plant to the highest point of

efficiency. Training programmes , seminars and other forums can

provide opportunity for bringing managers together for appreciatingand

sharing information on vital aspects of benchmarking.

In todays increasingly complex environment , customer relationship

management is critical to corporate success. To be successful , a

business must fulfil the client-vendor relationship throughout the

customer life cycle to ensure that their customers as well as the

organization receive the benefits expected.

REFERENCES :

1. Zaire M [1998] , Effective Management of Benchmarking

Projects , Butterworth-Heinemann , Oxford.2. Ajay Pandit & Khanna [1999], Benchmarking A tool for

competitive advantage , productivity . Vol 40, No.2 , July 1999.3. Ajay Pandit & Saini [2002], CRM A tool for competitive

advantage , productivity . Vol 43, No.1 , Apr 2002.4. R.L.Varshney [2003], cost control competitive advantage ,

productivity . Vol 52, No.24 , Jan 2003.


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BHARATH COMPADV PAPER 1