In order to maintain its competitive advantage over time, an organization needs
ID: 388843 • Letter: I
Question
In order to maintain its competitive advantage over time, an organization needs to make a number of strategic decisions. This competitive strategy influences and modifies many activities, including those related to its network of value-creating activities, also known as its value chain. Suppose that Nebulon Inc., a manufacturer of lighting fixtures, has decided to change its competitive strategy from high-quality differentiation to cost leadership. In an essay, describe how this decision would affect Nebulon’s value chain activities. What would Nebulon do differently after adopting a cost leadership strategy?
Explanation / Answer
Value chain analysis helps a firm to identify its activities that give support or add value to its product or services. This further helps the firm reduce the costs and increase the differentiation and gain a competitive advantage over others.
Nebulon Inc., a manufacturer of lighting fixtures, has decided to change its competitive strategy from high-quality differentiation to cost leadership. The decision taken by the company will affect Nebulon's value chain activities as mentioned below:
1) Procurement of the activities like purchase of materials in bulk, control over the administrative costs, etc will be more cost saving. Management of the costs in the long-term is required. Strategic management and supplier outsourcing will play a crucial role in this regard.
2) The production process would have to be re-examined for lowering the costs through the use of advanced technology, etc.
3) Minimizing the inventory and the warehousing costs and the re-examination of the logistics and distribution activities for lowering the costs. This is important.
Nebulon would do the following differently after adopting a cost leadership strategy.
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