- Traditional Administration.
Classic Schools. School of Scientific Administration. Most Significant Ideas and Works by Frederick Taylor.
He was the founder of this school. The main theme that guides him is to demonstrate his thesis that the scientific administration can achieve an identity between the interests of the workers and the bosses.
With this he wants to achieve maximum prosperity for both the employer and the employee.
It also seeks greater well-being based on greater production derived from work efficiency. He argues that the productivity argument would achieve important economic and social goals.
He criticized the initiative administration that existed until 1880 since, according to him, it could not be improved because with it the worker was not taught or encouraged to produce the maximum of his potential.
It proposes to replace the initiative administration by the scientific administration, after having carried out a study of the conditions and characteristics of each job.
With this, he manages to know the production levels without useless efforts and using the appropriate methods and tools. This level is taken as a production standard, and on the basis of it the levels of the entire factory are controlled. With this you can plan how much each worker and the whole factory can and how much should produce.
Together, everything that will make up the scientific organization of work must be studied in a rational way, namely: movements, methods, internal transport, norms and elements.
In order for the results to be favorable, workers must be economically incentivized to increase their interest in producing more.
Methodological scheme:
It arises from the exposition of the four fundamental principles of administration:
- Develop for each element of the worker's work a science that replaces the old empirical methods. Scientifically select and instruct, teach and train the worker, instead of leaving to chance the possibilities of improving their training and techniques. of work as well as responsibilities: The worker only has to respond to the task that was defined by the levels of production and that according to the scientific study he can and should do.Cooperate with the workers so that all the work is carried out in accordance with applicable scientific principles.
| Representatives | Fundamentals | Techniques | Contributions | Disadvantages | Values
Institutional |
| Frederic Winslow Taylor
Henry R. Towne Henry L Gantt Frank B. Gilbreth Charles Babbage |
Rationalization of labor and saving of materials, in order to increase profits | Production techniques.
Times and movements. Incentive system. |
More perfect methods of study and organization of work processes in the production, specialization and training of workers, as well as the piece-rate wage system. | Economic success is preferred to the physical well-being of staff.
Non-scientific foundations for increasing productivity. |
Economic. |
- School of Industrial and General Administration.
For Fayol the lack of an administrative teaching is due to the "lack of doctrine": There is no consecrated administrative doctrine, arising from public discussion, there are only personal doctrines that recommend the most contradictory practices, although sometimes they are "located under the aegis of the same principle ».
It tries to obtain an enumeration "all the operations to which the companies give rise" and classifies its activities:
- Technical activities: production, transformation, manufacturing, Commercial activities: purchases, sales, exchanges, Financial activities: raising and administration of capital, Security activities: protection of people's assets, Accounting activities: inventories, balances, costs, etc.,
Administrative activities: forecasting, organization, command, coordination, control.
Administrative activities are present everywhere, and their weight is increasing as you move up the hierarchy. For administrative activities to be carried out, a certain number of administrative principles must be applied to them:
- Management principles and elements
Division of Labor: It is the natural order. Its purpose is to produce more and better with the same effort.
Authority and Responsibility: Authority is the right to command and the power to be obeyed.
Discipline: It is obedience to the existing authority system.
Command Unit: Each person, for the execution of their functions, should only receive orders from a boss, otherwise, control is affected and the entire administrative structure collapses, losing consistency and efficiency.
Management Unit: There should be a single boss and a single program for each set of activities.
Subordination of private interest to general interest: The interest of a person should not prevail over the interest of the company.
Staff remuneration: It is the price for the service provided.
Centralization: Each organism tends to concentrate decisions in the head.
Hierarchy: It is the pyramid made up of the bosses, from the highest authority to the base.
Order: It is the material order and the social order.
Equity: Good sense, experience and kindness.
Staff Stability: If an employee is displaced once he has learned to do his job, he will never perform well.
Initiative: Give each person the opportunity to decide and execute, restricted by the limits of hierarchy, discipline and order.
Union of the Staff: The union builds strength and harmony. Furthermore, it is the basis of good administration.
Fayol breaks it down into 5 groups of operations.
Forecast: it allows calculating the future and preparing it through an action program. A program must meet the following conditions:
Unity
Continuity
Flexibility
Accuracy
Organization: establish a structure for the social body with a unity of command, a definition of responsibilities, with established decision procedures, and training of leaders.
Command: the boss corresponds.
Have knowledge of your staff.
Eliminate the incapable.
Know the agreements that govern between the company and its agents.
Set a good example.
Inspect the social body.
Hold meetings with your collaborators.
Do not be absorbed by the details.
Make activity, initiative and dedication reign.
Coordination: «harmonize the acts of a company». Fayol sees 2 means of coordination:
The weekly meeting of the chief liaison officers when it is impossible to hold a weekly meeting.
Control: to verify if everything is in accordance with the program, with the orders and the principles.
| Representatives | Fundamentals | Techniques | Contributions | Disadvantages | Values
Institutional |
| Henry Fayol | Application to the diverse knowledge of each school based on the administrative process | Empirical.
Desicionales. Mathematical Models. Psychological. Humanistic. Economic. |
A logical order of activities is established and applied, through the application of the administrative process. | Requires administrators with scientific knowledge. | Economic.
Organizational |
School of Human Relations.
Contributions.
By highlighting social needs, the human relations movement improved the classical perspective that viewed productivity almost exclusively as an engineering problem. In a way, Mayo rediscovered Robert Owen's old principle that a genuine interest in workers, "life machines" as Owen used to call them, would pay dividends.
In addition, these researchers emphasized the importance of manager style and thereby revolutionized manager training. The focus was increasingly focused on teaching administrative skills as opposed to technical skills. Lastly, his work revived interest in group dynamics. Administrators began to think based on group processes and rewards to complement their previous focus on the individual.
Limitations. Although Hawthorne's experiments profoundly influenced how managers conceived of their work and how management research was later conducted, they had many design, analysis, and interpretation deficiencies. The consistency of the Mayo and colleagues' conclusions with the data is still the subject of much debate and much confusion.
The concept of "social man" was an important counterweight to the unilateral model of "economic-rational man"; but it also did not fully describe individuals in the workplace. Many administrators and writers assumed that the satisfied employee would be more productive. However, attempts to increase production in the 1950s by improving working conditions and staff satisfaction did not deliver the impressive productivity improvement that had been expected.
Apparently, the social environment of the workplace is only one of the interaction factors that influence productivity. Here are others: salary levels, the degree of interest in the tasks, the culture and organizational structure, the relations between employees and managers. In conclusion, the issue of productivity and worker satisfaction has turned out to be a more complex problem than originally thought.
Mayo and his colleagues were the first to apply the scientific method to their studies of people in the workplace. Later researchers had more rigorous training in the social sciences (psychology, sociology, and anthropology), also using more refined research methods. Hence the latter have been called "behavioral scientists" and not "theorists of" human "relationships.
| Representatives | Fundamentals | Techniques | Contributions | Disadvantages | Values
Institutional |
| George Elton Mayo
Roberto Owen |
It follows that it is not material factors, but psychological and social factors that contribute most to the growth of labor productivity. | Psychological.
Sociological. |
Definition of work as an important activity in man, as well as recognition of the importance of social and individual relationships. | Idealism regarding human relationships is sometimes inoperative. | Economic.
Social. |
- Strategic planning
The strategic planning process consists of eight steps that are shown in the following figure and that we will analyze immediately.
- Business mission
Each business unit needs to define a specific mission within the even broader context of the corporation (its products, applications, its level of competition, market segments, vertical and geographic position). You also have to define your specific goals as an independent business.
- Analysis of the external environment (Analysis of opportunities and risks)
The business unit must monitor the key forces of the micro environment (demographic / economic, technological, political / legal and sociocultural) that may affect its business, and of the important environmental actors (customers, competitors, distribution channels, suppliers), which affect their ability to make profits in their market. The business unit must establish a marketing intelligence system to detect important trends and developments.
Opportunities
One of the most important purposes of exploring the environment is discerning new opportunities (a marketing opportunity is a needs area in which a company can achieve profitable performance).
These opportunities can be listed and classified according to their degree of attractiveness and the chances of success that the company would have in each opportunity. The probability of a company's success with a specific opportunity depends on whether its business skills match not only the key requirements for achieving success and operating in the target market, but also exceeding that of its competitors.
Risks
Some of the development processes in the external environment pose risks. We can define environmental or environmental risks (an environmental risk is a challenge posed by an unfavorable trend or development in the environment, which would lead, in the absence of a marketing action aimed at deterioration in sales or profits).
The different risks identified must be classified according to their severity and probability of occurrence.
There are four possible outcomes: an ideal business (one that has large significant opportunities and few or no significant risks), a speculative business (offers many opportunities and presents considerable risks), a mature business (has few opportunities and significant risks) and finally a conflictive business (few opportunities and numerous risks).
- Analysis of the internal environment (analysis of strengths and weaknesses)
Every business needs to periodically evaluate its strengths and weaknesses, for this a table can be made as shown below on behalf of the same company or by an external consultant.
Each factor is evaluated as if it were a major force, minor force, neutral factor, minor weakness, or major weakness.
By examining its pattern of attributes or strengths and weaknesses, the business will not correct its weaknesses, nor will it flaunt its strength with others. The question to ask is whether the business should limit itself to those opportunities in which it currently has the required strength, or whether it should consider the possibility of better opportunities where perhaps it would have to acquire or develop certain attributes.
Sometimes a business is deficient not because its departments lack the necessary strength but because they do not work as a single team.
- Goal formulation
Once the business unit has defined its mission and analyzed its internal and external environment, it is ready to establish its specific goals and objectives for the planning period.
Most business units pursue a mix of objectives that include: profitability, sales growth, increased market share, risk containment, innovations, popularity, etc. The business unit sets these goals and manages by goals. For this system to work, the various objectives of the business unit must be hierarchical, quantitative, realistic and consistent.
The transformation of objectives into concrete goals, capable of being quantified, facilitates the process of planning, instrumentation and administrative control.
A company must set realistic goals. The levels should come from an analysis of the opportunities presented to a business unit and its attributes, but not from empirical ideas.
Lastly, the company's objectives must be consistent. It is not possible to "maximize both sales and profits" or "achieve the highest sales at the lowest cost", or "design the best product in the shortest possible time". These goals are written in an exchange relationship.
- Strategy formulation
The goals indicate that you intend to achieve a business unit; while the strategy offers the answer as to how to get there. Every company must adapt a strategy to achieve its goals, Michael Porter synthesized them into three generic types:
- Total cost leadership: Here the company works hard to obtain the lowest production and distribution costs; therefore, it is able to set lower prices than its competitors and capture a greater market share.
The problem with this strategy is that other companies will usually emerge that offer even lower prices.
- Differentiation: In this case the business is focused on achieving a superior commitment in some important area for the benefit of the client, valued by the market as a whole. You can strive to be a leader in service, quality, style, technology and more, but you are unlikely to be a leader in everything. The company cultivates those attributes that will give it a different performance advantage in some line of profit. Focus: In this type of strategy, the business focuses on one or more narrow market segments, rather than striving to participate in the entire market. The company gets to know the needs of these segments and implements cost leadership or some form of differentiation within the target segment.
According to Porter, companies that practice the same strategy, aimed at the same market, constitute a strategic group. The company that implements the best strategy will have the highest profits.
Companies are discovering that the most effective strategy may require finding strategic partners.
The result is that companies are building strategic networks very quickly.
- Formulation of programs
Once the business has developed its main strategies, it must implement support programs.
- Instrumentation
Even when the firm has developed a clear strategy and well thought-out support programs, this may not be enough, as the company may fail in its implementation processes. Strategy is just one of the seven elements that the best managed companies present.
- Feedback and control
The company needs to monitor its results and the new developments in its environment. Some areas are very stable from one year to the next; however, others change rapidly.
When a change takes place, the company needs to review its instrumentation, programs, strategies, and sometimes even its objectives.
In June 1951, in Arroyito (Córdoba), ARCOR SRL was established as a company dedicated to the manufacture of caramel.
The initial capital was provided by a group of partners made up of the Pagani brothers (Renzo, Fulvio, Elio), the Maranzana brothers (Tito, Pablo and Vicente), Mario Seveso, Enrique Brizio and other minor partners, in total 23 shareholders, all friends with each other.
Pagani had the support of the Arroyito population to start his new venture.
This city also had cost advantages, location and available labor (for all the people who wanted to
work in the factory they offered affordable houses). In other urban centers, the most qualified personnel were hired, since they in turn trained the other operators.
- Administration and Competitive Strategy
Its meaning.
Manage: rule, rule, care.
Strategy: art of coordinating and directing operations.
Competition: rivalry between companies operating in the same market.
Competitive strategy: defines how to get advantages in each of the areas, according to the activity in which the company competes.
Whatever the collective power of these forces, the purpose of a company's strategy is to find a position within the sector from which it can defend itself in the best possible way or even guide them in its favor.
Knowledge of these factors that define competitive pressure constitutes the frame of reference in which the elaboration of an agenda of strategic measures must be inserted.
The predominant competitive forces are those that determine the profitability of a sector; hence its enormous importance for the purposes of formulating a company's strategy.
Threat of Entry of New Competitors
A competitor entering a sector for the first time brings with it new capabilities, the desire to achieve a certain market share and substantial resources.
Societies that seek diversification through the absorption of companies and thus penetrate a market, many times get to boost their resources to produce a real shock, as Philip Morris did when he acquired the Miller beer and food Suchard.
The seriousness of the threat that a new entry in the sector occurs, depends on the existing obstacles and the reaction that can be expected from the current competitors. If the obstacles are large and the expected reaction is very active, the threat will be small.
There are fundamentally six kinds of obstacles that can hinder this entry:
1 - Economies of scale
These economies are a deterrent for the applicant to enter the sector, since they force him to enter with large-scale facilities, or to accept a very disadvantageous cost.
2 - Product differentiation
The creation of a brand constitutes an obstacle, in the sense that it forces those who intend to enter the sector to spend a lot of money to overcome customer loyalty towards an existing brand.
3 - Capital needs
The need to invest a high volume of financial resources in order to compete is also an obstacle to entry, especially when the capital needed is to finance unrecoverable expenses for fixed installations, initial advertising, research and development, customer credit, stocks and absorb initial farm losses.
4 - Cost disadvantages independent of size
Companies that belong to a sector enjoy certain advantages over their potential competitors. These advantages may have their cause in: access to better sources of supply of raw materials, technology, official subsidies, favorable location, learning and experience, among others. Sometimes they have legal support, as in the case of patents.
5 - Access to distribution channels
Logically, newcomers to the sector must ensure the distribution of their products. For example, a new food product must displace others from the shelves due to price, promotion, sales effort, or any other procedure. The more limited the wholesale or retail channels are and the more secure the current competitors are, the more difficult it will be to enter. The "new", sometimes, must create their own channels.
6 - Government policy
The government can limit or even prohibit the entry of new companies to certain sectors, using various tools: non-tariff barriers, import quotas, tariffs, more rigid hygiene controls, taxes, common markets, etc.
Bargaining Power of Clients and Competitors
A group of clients is powerful if:
- It is dominated by few companies and is more concentrated than the sector it sells to.
- Your product is unique or at least differentiated; Or also if the fixed costs that the buyer must bear to change the supplier are high. For example: the manufacture of beverages, the customer's production lines are connected to those of the supplier; he is not obliged to compete with other products that could be sold to the sector.
A group of competitors is powerful if:
- It is a concentrated group or makes purchases in large volumes.
- Products are standardized or undifferentiated, you will surely find alternative suppliers. The materials purchased form a component of your own product and represent a significant part of your cost; they will better select their suppliers. Product quality has a major impact on the customer's purchase decision; they will not be as price sensitive.
Threat of Substitute Products or Services
Substitute products or services limit the possibilities of a sector, since they establish a ceiling on the sale prices that it can set. As long as the quality of the product is not improved or some kind of difference is created in it (via marketing, for example), the sector will see reduced benefits and possibly growth.
Some substitute goods: tea and coffee; taxis and buses; butter and margarine etc. The rise in the price of one of them increases the quantity demanded of the other, whatever its price.
Struggle Between Current Competitors (for a market position)
The rivalry between the current competitors in a sector is manifested in a struggle to get a position in the sector, using various tactics: price competition, the introduction of new products and / or advertising. The intensity of this rivalry depends on the presence of a number of factors:
- The competitors are very numerous or approximately equal in size and power. The growth of the sector is slow, which precipitates the fight to obtain a market share, with the consequent repercussion in companies that have expansion projects. The rivals are different in strategy, origin and personality. They have very different ideas on how to compete and continually try to put them into practice.
The balance of forces.
Marketing innovations can consolidate brand identification or help differentiate the product.
As a sector reaches maturity, the growth rate changes; leading to a decrease in benefits and many times, the expulsion of some of its members.
Once the forces that shape the sector's competition are known, a company can develop a strategy that goes on the offensive. The purpose of this strategy goes beyond the simple fact of responding to existing forces; what it tries is to alter its determining causes.
The fundamental thing for the growth of a company (and even for its survival) is to install itself in a position that is as less vulnerable as possible to the attacks of its direct opponents (old or new) and to the wear and tear that suppliers, substitute products may cause them and customers.
- Competition Espionage System
Its importance.
Knowledge of the likely movements of each competitor and their ability to respond to change is vital.
Data on competitors can come from various sources and the complete analysis of these will contribute to the practice of our company.
Compiling information simply by carrying out work within the business organization is simply a waste of time.
The effort, interest, utility, analysis and creativity; these are just some of the approaches to consider in order to successfully interpret the direction that we must take to formulate the strategy.
System functions.
Collect Field Data - Sources
- Sales forces, technical staff, distribution channels, advertising agencies, contracted staff of competitors, industrial associations, market research companies, counter engineering.
Collect Published Data - Sources
- Newspaper articles. Job application notices. Government documents. Company management speeches. Analyst reports. Documents presented in regulatory entities of the activity. Patent records. Judicial records.
- Keys to Compete
Companies today are facing serious challenges in trying to improve their performance in the market. Many have doubts in determining their competitive strategy.
Next, we mention as a practical case Olivetti from Argentina, which markets computers, provides IT solutions and technical support (Oliservice) to important companies: Techint, BNL and GrupoTelecom, among others.
Project sales: large-scale computing systems.
Features
1 - It requires a long sales cycle (between 6 months and 2 years), and a lot of patience.
2 - A multidisciplinary sales team is required (sales, engineering, operations, finance, senior management, security).
3 - It can include a bid situation or request for proposals.
4 - The purchase decision is made by a high level group.
5 - Often includes political as well as economic considerations.
Success strategies
1 - The supplier's staff maintains a very close business relationship with the personnel of the purchasing company.
2 - The team needs the capacity to influence the personnel of its own company and to transmit a quick response.
3 - It is useful for the President to be part of the sales team.
4 - The bid price should be established in the context of what can be the total value of continued operations during the life of the client, multi-year contracts are aspired.
5 - The team must carefully study the customer's purchase criteria and determine which competitors will bid, and their respective advantages and disadvantages.
6 - You need to understand your customer's business and your customer's business.
7 - You need to make sales and sell solutions.
8 - The solution should show how the feature / function / benefit translates into value for the customer.
Role of the Marketing Department
1 - Cost and price analysis.
2 - Provide market research and competitive information.
3 - Develop a business and brand identity.
4 - Determine the strategic implications for the company.
- The Lessons of the Crisis
Argentine consumers are depressed. Without silver in their pockets and hopeless, they consume the bare minimum. The recession broke into their homes: it forced to cut expenses and damaged purchasing power in the middle sectors, those that move the economy.
There are less "brand" buyers; more rational and permeable to the new proposals for "B" brands or second brands and private brands of supermarkets. Against this background, the marketing managers who are responsible for managing large companies must make tactical and strategic decisions. Those who take the right ones will get the best market segments, the strongest, the most loyal.
Here are ten winning strategies:
1 - The consumer who suffers a drop in their purchasing power, appreciates when the brand gives them opportunities to maintain their lifestyle.
To retain this new type of consumer, one of the keys is to sell a viable "glamor": brands and products that are affordable, but with aspirational attributes; that are positioned as valuable, without necessarily being expensive. And, without lowering the price of the product.
The companies that applied this type of strategies, in general, are the ones that have suffered least from their performance during this recession.
In Coca-Cola, since 2001, one of the anti-crisis measures that stands out is the launch of a 250 cc bottle. It sells for $ 0.50 in kiosks. Thus, they managed to increase sales volume by 15%.
By having a small package in its offer, the brand accompanies the consumer who saw his purchasing capacity reduced, but avoids falling into the pernicious measure of lowering his prices.
2 - Launching new products and emphasizing innovation is the way to differentiate yourself from «B» brands.
In the recession, is it better to launch or retreat? Big companies have no doubts: brands must be more relevant than ever, through technological innovation.
Unilever made the strategic decision not to produce for supermarket brands. Even in times of crisis - for Argentines - what has to do with their health, cleanliness and hygiene is essential; and they are willing to pay the difference to get the best.
In the area of softeners, it obtained good results with its Vívere brand, from a great technological and communication effort aimed at launching a new version of the product every three months, which allowed them to reduce the cycle of innovation and novelty.
3 - There are creative ways to lower prices without harming the brand.
The best tactic is to differentiate yourself aiming to improve the relationship between price, quality and performance, to generate the feeling of paying less or equal, for more.
The appeal to increase the volume to give the price per unit.
In drinks, almost all brands offered discounts by buying packs of 4, 6 or 8 bottles.
In food, Quickfood (Paty) prepared boxes of family hamburgers and others, 20 + 4, to reach customers with high consumption and reduced purchasing power.
4 - It is necessary to attend the marketing in alternative points of sale.
Consumers search for deals, compare prices and control expenses. This forces leading brands to modify their planning, to cover all points of sale and with the right product for each channel. To achieve this, they must face two challenges:
Production. Flexible structures are needed, which allow adaptable sizes and types of packs to the consumer's needs. Individual presentations for people living alone; small containers for those who prefer to spend little by little and large containers for those who save by buying large volumes.
Logistics. Processes must be optimized, ensuring presence in all channels, with the appropriate stock and varieties for the segments served there.
Promotions, the development of specific communications and POP materials grew.
Stani - Nabisco and La Serenísima, for their Bazooka - Oreo and Danonino products, no longer invest their entire budget in expensive television campaigns, because they know that they must also go to schools and encourage immediate consumption on local channels.
5 - We must design strategies that appeal to the convenience of buying today.
Price offers limited in time make the customer generally think that the brand is in trouble. North, through their promo »Countdown» or Disco actions, such as »Buy 2 pay 1«, or Frávega and Compumundo »Only for today or this week«, transmit to the public a certain urgency to mobilize stocks.
There are better ways to encourage consumption.
For example, strategies around topics such as: "Nutrition Week", "Wine Fair", "Perfumery Month", etc.; with tastings, games, talks with experts and other activities that generate traffic in the sector.
On the other hand, the banded packs or "combos", which add to one type of traditional product another gift whose consumption is associated - for example, lactal bread with dulce de leche, soft drinks or beers with snacks, cars with fuels -, also they contribute in terms of movement of stocks and introduction of new consumers.
6 - The impulse purchase products are beginning to be perceived as expendable, and new ways of reaching the consumer must be considered.
Some brands have already started to develop specific strategies to encourage impulse buying at alternative points of sale. In addition, they encourage sale with prizes to the best sellers, and they invest heavily in marketing. Let's see some cases:
Arcor and Pepsico work in promotions together with the supermarkets. They provide displays so that their products are close to boxes or related products that promote consumption. At the same time, they make co-brand alliances with brands with a great presence in the children's universe: Disney, Fox Kids and Cartoon Network, with animated fashion characters.
7 - The formula to combat the advance of private labels is to segment.
The top companies in the market cannot lose space. Thus, they develop second brands:
Mills - 1st brands: Cook (oil), Matarazzo (pasta), Vieníssima (sausages).
Mills - 2nd brands: Ideal (oil), La Bella (pasta), Hammond and Wilson (sausages).
The alternative of producing for supermarkets is well seen by some leaders, because they allow the company's productive capacity to be kept busy - reducing operating costs - and / or because they help maintain market share.
The key of this business for the producers is that the private brand products are not perceived as competitors of the premium brand. The risk that rational consumers detect them is very great, because they would stop buying the traditional brand; To avoid this, producers create fancy names.
8 - During crises, investing in advertising is cheaper, and the message is more relevant. It is the best opportunity to beat competitors.
There were those who, with a well-defined strategy, reinforced their brand or launched products. They benefited, thanks to the lower noise made by others, and thus obtained a greater impact on their communications than in a stable or rising economic cycle.
Nestlé, Repsol / YPF, Gillette, Johnson & Johnson and Quilmes did not substantially lower their advertising budgets, but instead rationalized communication and marketing expenses.
The so-called "non-traditional advertising" advanced and captured much of what is invested in open TV. For many advertisers, it is very effective, more emotional and avoids the negative effect of zapping. Arcor, Garbarino and Pepsi are the ones that invest the most in this modality.
9 - Faced with the low growth expectations, square meters should be replaced by warmth and planning.
Today the use of geomarketing and the application of feasibility studies are imposed. The trend is to improve profitability with lower fixed expenses, smaller premises and located in busy areas; These have a more comfortable design for consumers.
Polo, Levi's, Kosiuko and Cheeky (among others) seek the protection of a store like Falabella, which ensures exposure and a lot of affluence. However, they emphasize their own premises; This proximity allows clients to enjoy quality attention and advice.
10 - In the face of «infidelity», the relationship with customers must be personalized.
In Travel Pass they decided to bet on communication via the Internet. They were able to reach customers more economically, deepen the relationship, and further segment the database.
Loyalty breaks when, in the face of the need to sell, promotions are launched in which only new consumers benefit, throwing away what is invested in old customers.
Has anyone investigated what effect it produces on Cablevisión subscribers to see that the company will grant new customers one month of free subscription?
Where the consumer perceives greater added value, it will tip the balance.
- Bibliography consulted:
- "Be competitive" and "Competitive strategy" by Michael E. Porter. "Marketing according to Kotler" by Philip Kotler. Target magazine.
Hard Investments and Soft Investments
Hard Investments:
They have to do with capital or fixed assets, real estate, equipment, new plants, etc.
Soft Investments:
They have to do with investments in the change of business culture, improvement of excellence, of competitive advantages, enhancement of entrepreneurial capacity, etc.
The idea is that the soft investment area (viable in times of recession and economic adjustment) is an area of opportunities in itself, and is in turn a means to be in a better position for the opportunities that are derived from investment area hard.
Static and dynamic competitive advantages.
Taking this analysis to a competitive framework, a difference arises in the so-called static and dynamic competitive advantages.
Static competitive advantages:
They are based on hard investments. They only serve for a certain period of time, as they become obsolete over time and can lead to competitive disadvantages by becoming exit barriers.
Dynamic competitive advantages:
They are based on soft investments. They are ideal for turbulent and changing contexts. They arise from the corporate culture, since from it the management criterion will be outlined towards the entire structure. A business culture with a hard approach will never train its human resources, nor will it carry out any type of innovation.
A soft approach will form a culture where human resources will be trained and incentivized to increase the level of creative and innovative potential.
To visualize hard and soft approaches in more detail, we see five strategic models.
Strategic thinking models
We have a basic model of analysis of the key elements of driving that allows a comparison between the different models.
The hard block includes
- Production infrastructure (buildings, machines, equipment) Production technology (molds, dies, plans and production know-how)
The soft block includes:
- Human resources Marketing and sales (quality and innovation) Customer service General management (style and driving ability) Enterprising and winning competitive activity.
- Model 1
It is the oldest, it corresponds to the time of growing markets when demand always exceeded supply, and therefore, whoever had the means to produce and knew how to manufacture was successful. (table 1)
- Model 2
It is a modified version of the previous one, (´60) when the decrease in demand began to be noticed and marketing and commercialization in general became more valuable. (table 2)
- Model 3
It is a transition model from the early and mid-1970s, when the need to obtain competitive advantages to attract demand was begun to be considered very seriously, since supply was beginning to be lower. However, this search for advantages through differentiation was considered only on the product, through manufacturing technology or series production. (table 3)
- Model 4
This is a modern and evolved model, which was applied in the late 1970s and early 1980s. Puts the perception of opportunities in the management team. (table 4)
- Model 5
This is the most modern of business management concepts. Not only does it put the perception in the management team, but it subordinates the entire hard block based on prospective and competitive analysis and conducts business even without holding the hard apparatus captive, replacing it with the purchase of parts and pieces, with the rental of molds and matrices, with license, royalty, franchising contracts, etc. (table 5)
Analysis of the models.
In model 1, the key element to generate competitive advantages is the factory. In the table the white surfaces indicate the hard conception while the gray ones show the soft conception.
Production technology will be factory-based and the possibility of seeking technology abroad will not be considered.
The hard block conditions the soft block, which in reality for the entrepreneur does not exist, since elements of this nature are treated as hard. Marketing is a function of production: you have to sell what is produced: service is based on fixing the failures of what is produced and not on providing customer service: and the role of management is to prevent the operational wheel from stopping You must manage and control what is manufactured.
For an entrepreneur with this thought, the most important thing is efficiency, producing at the lowest cost and time possible, he will never speak of competitive advantages
The attitude presented by model 2 is practically the same as the previous one, the factory remains as a key element, hard conditions soft, and the main thing remains efficiency. The production technology becomes independent in part from the factory and can be searched abroad. As for soft, the area of marketing and sales and management begins to be a little less hard, without signifying a relevant change.
In model 3, what is hard differs from what is soft. Without the latter becoming totally soft, since management still does not take on the real importance that it should have, because the perception of opportunities continues to be linked to production.
Production technology and manufacturing infrastructure are more dynamic elements with the possibility of searching abroad. Marketing is becoming more important, but you still have to sell what you make.
There is a change in strategic thinking here. The soft block passes to condition the hard. The perception of opportunities slides completely from the hard, begins with the management of the company and becomes the key element that generates dynamic competitive advantages. What is sold is manufactured and the way the consumer wants it.
The production technology becomes totally soft, looking for licenses abroad and is put at the service of the client.
Practically the factory is the only thing that remains as hard, being the same more and more dynamic.
The objective of the entrepreneur whose thinking is represented in this model is to obtain dynamic competitive advantages through soft investments.
Model 5 is totally dynamic and soft. The hard block is handled in a totally soft way. First, opportunities are perceived and based on them, different ways are sought for their best use, thus giving rise to the possibility of a joint venture (a form of cooperative strategy), which implies association with another company that contributes, for example, everything hard, while we provide the soft part.
Strategic Options.
The strategic options that companies have must be analyzed based on their current strategy, in relation to their ability to generate barriers to entry and the way of strategically thinking that their culture possesses.
Then two groups of companies can follow.
The first group has a strategy based on hard investments, with a form of strategic thinking set in the factory (hard), which generates static entry barriers.
The second group is the one that has a dynamic strategy based on soft investments, with a very flexible type of strategic thinking, placed on opportunities and soft, and therefore dynamic competitive advantages.
The recommended options for the first group is to change the way of thinking strategically. Do not invest more than what is essential in hard and invest in improving the soft level.
The strategic options for companies with high investments in soft are more varied.
Achieve joint venture by delivering the soft and getting the hard. Another option is to agree licenses and franchises, or reach manufacturing agreements.
Strategic options menu
- AlliancesJoin VenturesFlexible AssociationsHoldingsPoolConsortiumsRoyaltiesLicensesFranchisingTechnology AgreementsBrand AgreementsDistribution AgreementsCounter tradeBinational companiesVenture capital / associationSharing Technology / ExportImport / Cosmetics / Assembly
