MGMT 510 – Assignment 2

Chapter 3

Answer 1

Value creation mainly refers to the enhancement of the product's value in order to increase its

demand and the price. Value is different from price. It is the satisfaction that consumer gets after

the consumption of a specific product. In other words, it can be the quality and characteristics of

the product that can satiate the consumer optimally. So, the brands and companies improve the

quality of their product to create its value.

Following are the components to decide value creation per unit:

Value - Price = Consumer Surplus

Price - Cost = Profit margin

Value – Cost = Value created

Highest number of sales can be achieved by the value creation. Referring to the competitive

advantage, a good or a product can be more valuable as compared to the same or lower price. To

achieve higher competitive advantage, there are two ways.

1. To fix high price to enhance the products value

2. To decrease the price to increase the demand

Answer 2
Value chain can be defined as the concept that a company has enchained operational activities

that modify inputs into outputs. Both primary and support activities are involved. Every single

stage enhances the value of the product in these series of activities. It tries to compete the similar

goods and products of other companies to create a unique product with single or numerous

value- chain activities. Efficiency is important in order to achieve employee productivity. Staffs

performance supports in the success of a competitive advantage to a company through lower

costs. Valve chain help management to know the strength and weakness of a company.

Answer 3

Following are the four building blocks in the value creation can be used by a business to keep

aggressive benefit.

1. Maximum performance

2. Maximum quality

3. Maximum development

4. Maximum consumer responsiveness

Competitive advantage can be sustained by achieving greater profitability than the standard

productivity of all other businesses in the market. Moreover, in order to sustain competitive

advantage, a company has to get capable to keep above-average productivity over different

years.
Answer 4

Internal analysis helps a company to evaluate its internal environment to examine its resources,

competencies, and competitive advantages. It further assists in identifying the strengths and

weaknesses to examine to what extent the company's performance is going on compared to its

own competitors and as well as their previous performance. This helps the company to determine

whether they are more or less in the profit compared to their competitors or whether the

company's performance has been improved or not. Furthermore, it also helps to examine the

value of the product that whether the value has been increased or reduced, and also their cost

structure compared to their competitors in the industry. Additionally, internal analysis also helps

whether they are using the company's resources productively or not. Profitability is any

company's key measure to its financial performance, which apprehends the return that a company

is giving rise to on its investment. Having a number of different measures of profitability, such as

return on asset and return on equity, several authorities agree that return on investment capital

(ROIC) is the best measure owing to its concentration on the real working performance of the

business.

Answer 5

The reason for the company's failure is when they are incapable to contend their rival in the

market, and their development in the business is minimum as contrasted to the other businesses.

The company does not face failure. However its capital is lowering and its profit crosses down

the levels and it can be in such position for long time. The company face defeat or fails when it is

inefficacious to show an average profit when compared to its rivals in the industry. On this stage

it fails to attract the investments because the capital is considerably falling.

There are three main reasons why a company fails. Inertia, existing strategic commitments and

Icarus paradox.
Inertia: It refers to the concept that when a company is not efficient enough to adapt its strategies

in favor of the transforming context. One of the main reasons is the manner the business controls

its procedure and fails to take the judgment fast which supports to the aggressive benefit. The

power decision is important aspect in the decision-making procedure.

Existing Strategic Commitments: Company's current obligations confine its capability to

compete against its competitors, but this can result in weakness against the company's rivals.

The company must keep itself abreast of the long-term new emerging technologies and make it

clear that it is not overcommitted.

Icarus Paradox: Company get extremely amazed by its early success, and it thinks that same

efforts will help out to be successful in the future. This makes company short sighted, and it

lacks the efforts and the techniques that might be required for taking the competitive advantage.

Chapter 4

Answer 1

Such strategies are activities and the aims that are handed over to different sections that lever the

corporate level plan and business level plan. Such strategies allocate the results the business
wishes to observe obtained by daily actions of particular sections of the business. This type of

strategy should portray business aims that need the engagement of particular working fields. As

soon as such strategies are made, managers can establish personal staff assignment to support the

business goal.

To maintain the competitive advantage a company has to adjust and adapt its functional-level

strategies. For instance, if the company becomes inefficient to compete with its competitors in

the industry, it has to make the adjustments in the functional level strategies to overcome the

insufficiency of the strategies.

Functional-level strategies can enhance effectiveness by assisting a business to obtain

performance, quality, innovation, and consumer responsiveness.

Answer 2

Economies of scale refers to the unit cost reduction related to the large-scale output. They are not

only beneficial for the company but also for the customer as he gets to enjoy the lower prices.

The economy grows in the result of low prices, which levers increased demand.

There are 2 important kinds of the economies of scale.

Internal

External

Internal economies of scale can be managed through the management as they are internal to the

business. Whereas, external economies of scale is based on external aspects. Such aspects are

mostly, the business, geographic position, and the government.

Economies of scale causes the firm to build its creation and acquire and more benefit and

Competitive Advantage itself implies the points of interest that an organization can get by

making an ever-increasing number of benefits that should be possible by expanding the investor's
worth and diminishing the expense of the fabricated items. This can bring about the

improvement of the firm in the commercial center and can assist the firm with standing apart

among every one of its opponents by giving a better favorable position over item's deals and

creation.

Answer 3

Strategic innovation is a business procedure of reinventing or redesigning its business plan to

improve corporate development, establish company value and its consumers, and make

competitive benefit.

There are several methods; innovation is the most imperative source of competitive benefit. This

is mainly as innovation consequences in novel products consequently satiating customers need to

high extent, enhances the attributes and standard of the current products, or even reduces the cost

of the customer's desired products. The capability of developing innovative novel products or

procedures provides a company with a main competitive benefit allowing the company to:

1. Distinguish its goods and charge premium prices

2. Reducing the cost structure below that of its competition.

Competitors, somehow, manage to copy effective innovation and oftentimes thrive. Hence,

perpetual commitment to innovation is the prerequisite to withholding a competitive advantage.

Answer 4

Customer relationship is an imperative factor in order to competitive advantage. It is vital for a

company to respond to customer demands briskly to achieve a competitive advantage. For every

customer, time is a worthwhile asset. The companies that satiate the customer demand for quick

response develop a loyal and faithful relation with the brand, distinguish its products, and can

receive higher price payments for its products. These all feature support the business to get an

effective competitive benefit.

responsiveness to the customers means providing consumers value for their cash, and actions

taken to improve the performance of a business production procedure and the quality of its

products should be in contact with this aim. Additionally, providing customers what they desire

may need to develop the novel products with new characteristics.