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MANAGING PROJECTS

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Projects represent nonroutine business activities that often have long-term strategic ramifications for a firm. In this chapter, we examined how projects differ from routine business activities and discussed the major phases of projects. We noted how environmental changes have resulted in increased attention being paid to projects and project management over the past decade. In the second half of the chapter, we introduced some basic tools that businesses can use when planning for and controlling projects. Both Gantt charts and network diagrams give managers a visual picture of how a project is going. Network diagrams have the added advantage of showing the precedence between activities, as well as the critical path(s). We wrapped up the chapter by showing how these concepts are embedded in inexpensive yet powerful software packages such as Microsoft Project. If you want to learn more about project management, we encourage you to take a look at the Web site for the Proj...
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Business Strategy: Differentiation, Cost Leadership, and Integration

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This chapter discussed two generic business-level strategies (differentiation and cost leadership); some factors that companies can use to drive those strategies; integration strategy, the attempt to find a competitive advantage by reconciling the trade-offs between the two generic business strategies; and the dynamics of competitive positioning.
Definition business-level strategy and how it determines a firm’s strategic position.
Business-level strategy determines a firm’s strategic position in its quest for competitive advantage when competing in a single industry or product market.
Strategic positioning requires that managers address strategic trade-offs that arise between value and cost, because higher value tends to go along with higher cost.
Differentiation and cost leadership are distinct strategic positions.
Besides selecting an appropriate strategic position, managers must also define the scope of competition—whether to pursue a specific market niche or go after the broader market.
The relationship between value drivers and differentiation strategy.
The goal of a differentiation strategy is to increase the perceived value of goods and services so that customers will pay a higher price for additional features.
In a differentiation strategy, the focus of competition is on value-enhancing attributes and features, while controlling costs.
Some of the unique value drivers managers can manipulate are product features, customer service, customization, and complements.
Value drivers contribute to competitive advantage only if their increase in value creation (ΔV) exceeds the increase in costs (ΔC).
The relationship between cost drivers and the cost-leadership strategy.
The goal of a cost-leadership strategy is to reduce the firm’s cost below that of its competitors.
In a cost-leadership strategy, the focus of competition is achieving the lowest possible cost position, which allows the firm to offer the lowest price while maintaining acceptable value.
Some of the unique cost drivers that managers can manipulate are the cost of input factors, economies of scale, and learning- and experience-curve effects.
No matter how low the price, if there is no acceptable value proposition, the product or service will not sell.
Assess the benefits and risks of cost-leadership and differentiation business strategies vis-à-vis the five forces that shape competition.
The five forces model helps managers use generic business strategies to protect themselves against the industry forces that drive down profitability.
Differentiation and cost-leadership strategies allow firms to carve out strong strategic positions, not only to protect themselves against the five forces, but also to benefit from them in their quest for competitive advantage.
Exhibit 6.7 details the benefits and risks of each business strategy.
Evaluate value and cost drivers that may allow a firm to pursue an integration strategy.
To address the trade-offs between differentiation and cost leadership at the business level, managers may leverage quality, economies of scope, innovation, and the firm’s structure, culture, and routines.
The trade-offs between differentiation and low cost can be addressed either at the business level or at the corporate level.
Why it is difficult to succeed at an integration strategy.
A successful integration strategy requires that trade-offs between differentiation and low cost be reconciled.
Integration strategy often is difficult because the two distinct strategic positions require internal value chain activities that are fundamentally different from one another.
When firms fail to resolve strategic trade-offs between differentiation and cost, they end up being “stuck in the middle.” They then succeed at neither strategy, leading to a competitive disadvantage.
Evaluate the dynamics of competitive positioning.
The productivity frontier represents a set of best-in-class strategic positions the firm can take relating to value creation and low cost at a given point in time.
Reaching the productivity frontier enhances the likelihood of obtaining a competitive advantage.
Not reaching the productivity frontier implies competitive disadvantage if other firms are positioned at the productivity frontier.
Strategic positions need to change over time as the environment changes.

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