ELLESO, KATE ANGEL

MORADOS, KIMBERLY

MODULE 4 ACTIVITY 2

1. Jim Castelo’s lifelong hobby has been racing small sailboats. Jim has been successful both at
the sport and in the design of new pieces of equipment to be used on small sailboats to make
them easier to sail and more effective in racing. Jim is now thinking about starting a mail-
order business in his garage to sell products he favors, as well as some he has designed
himself. He plans to contract out most of the manufacturing for the parts and equipment to
machine shops and other small manufacturers in his area.

REQUIRED: Develop a strategic analysis for Jim’s new business plan. What should be his
competitive position; that is, how should he choose to compete in the existing market for sailboat
supplies and equipment? How is he likely to use cost management information in building his
business?

DISCUSSION:

  In order to execute flawlessly and establish Jim’s supposed new business plan he should
first develop strategies to be able to stay consistently in the market. The following must be
pondered and taken action in regards to starting his own business;

a. Jim must choose whether he should compete using cost-leadership or differentiation

and might as well determine the mission of his new business.
b. Once a competitive strategy is chosen he then considers various means for
implementing such competitive strategy
I. SWOT ANALYSIS
II. FOCUS ON EXECUTION
III. VALUE CHAIN ANALYSIS
IV. BALANCE SCORECARD AND STRATEGY MAP
c. Identify the business’ strengths, weaknesses, opportunities and threats
STRENGTHS
i. Unique design in product line
 ii. The passion of owner when it comes to making racing sailboats

WEAKNESSES

i. Experience on starting and managing a business

OPPORTUNITIES

i. Bargaining power on customers and suppliers

THREATS

i. Availability of substitute products

d. Clearly identifying the CSFs of his new business and then communicated and acted
upon, and this will depend on the chosen strategy on letter a.
e. In choosing the appropriate strategy it might be suitable for him to apply the
differentiation because based on the SWOT above he works best in product
engineering wherein he will be able to provide unique products unavailable from the
market, has strong marketing capability and technological leadership and in having
unique skills. Moreover, in order to execute this strategy there must be a strong
coordination when it comes to research, product development, manufacturing and
marketing.
f. In doing so, Jim must also identify the value-chain activities and develop a
competitive advantage or reduce cost or in adding value. He may do the following;
i. With his strong connection gained from doing the sport, he can garner
suppliers that can give both high quality and low cost at the same time.
ii. He can also use his favors when it comes to designing in order to give
more value to the product.
g. Determine the balance scorecard and strategy map for the business, which would
require identifying and linking goals, management techniques and critical success
factors. When we speak of management, Jim is likely to use cost management
information in building his business in order to supply funds from the right source, at
the right cost and at the right time. This is to maximize exploitation and utilization of
business resources, giving higher returns by the increased productivity from the funds
acquired.
2. In the mid-1970s a large retailer of auto parts, Best Parts, Inc. (BPI), was looking for ways to
invest an accumulation of excess cash. BPI’s success was built on a carefully developed
inventory control system that guaranteed a customer would be able to purchase a desired part
99 percent of the time on demand, and the remaining 1 percent of the time within one
business day. The speed and quality of service set BPI apart from other part dealers, and the
business continued to grow.

On the advice of close friends and consultants, the owner and CEO of BPI decided to invest a
significant portion of the excess cash in a small chain of gift and craft stores. The stores
would be placed in shopping malls.
REQUIRED: Determine the competitive advantage (cost leadership, or differentiation) of
BPI in the auto-parts business. Assess how this competitive advantage would or would not
facilitate success in the new venture.

DISCUSSION:

The large retailer of auto parts which is the Best Parts Inc. has already set a market
standard for its speed and quality of service. Based on the characteristics mentioned above,
the company can be considered a differentiator when it comes to its competitive strategy
because of how it has earned a special reputation when it comes to creating innovative
products and also in creating a benchmark in speed and quality of service. Moreover, the
company had develop a great inventory system that guaranteed the availability of desired part
on demand at a 99% of time. Thus, by itself it had made the business to continually grow.

The quality and time of delivery is the basic strategy of differentiation strategy from other
dealers. Since, it is much more distinguishing than the product or services offered by
competitors, it then looks attractive to the target market. . Research and development efforts
focus on innovation, customer service is excellent, and marketing bolsters the value of the
firm brand. These efforts guarantee that the successful differentiator can still profit even
though its production costs are higher than a cost leader’s. For example with the company
mentioned the quality and service offered by such entity can guarantee them to be successful
and with the potential to still profit despite higher prices, because they would like to give
more attention to quality of auto parts, the estimated delivery time that will satisfy customers
and the uniqueness of product itself will attract customers. Therefore, Auto Parts,
technological innovation can be utilized to build on competitive advantage through several
different ways. It can incorporate less expensive production, improved access to clients,
improved marketing, improvement in product quality, and increased levels of business
intelligence than the competition.