Part 1:

Competitive & Supply Chain Strategies

A company's competitive strategy defines, relative to its competitors, the set of customer needs
that it seeks to satisfy through its products and services. For example, Wal-Mart aims to provide
high availability of a variety of products of reasonable quality at low prices. Most products sold
at Wal-Mart are commonplace (everything from home appliances to clothing) and can be
purchased elsewhere. What Wal-Mart provides is a low price and product availability. McMaster-
Carr sells maintenance, repair, and operations (MRO) products. It offers more than 400,000
different products through both a catalog and a Web site. Its competitive strategy is built around
providing the customer with convenience, availability, and responsiveness. With this focus on
responsiveness, McMaster does not compete based on low price. Clearly, the competitive
strategy at Wal-Mart is different from that at McMaster.

Strategic Fit
Strategic fit expresses the degree to which an organization is matching its resources and
capabilities with the opportunities in the external environment. The matching takes place
through strategy and it is therefore vital that the company has the actual resources and
capabilities to execute and support the strategy. Strategic fit can be used actively to evaluate the
current strategic situation of a company as well as opportunities such as M&A and divestitures of
organizational divisions. Strategic fit is related to the Resource-based view of the firm which
suggests that the key to profitability is not only through positioning and industry selection but
rather through an internal focus which seeks to utilize the unique characteristics of the
companys portfolio of resources and capabilities.[1]A unique combination of resources and
capabilities can eventually be developed into a competitive advantage which the company can
profit from. However, it is important to differentiate between resources and capabilities.
Resources relate to the inputs to production owned by the company, whereas capabilities
describe the accumulation of learning the company possesses.
 How Strategic Fit Can Be Achieved
Strategic fit can be achieved by following steps:

Understanding the customer and supply chain uncertainty

Understanding the supply chain capabilities
Achieving strategic fit.

Understanding the Customer and Supply Chain Uncertainty:

First, a company must understand the customer needs for each targeted segment and the
uncertainty the supply chain faces in satisfying these needs. These needs help the company
define the desired cost and service requirements. The supply chain uncertainty helps the
company identify the extent of the unpredictability of demand, disruption, and delay that the
supply chain must be prepared for.

Understanding the Supply Chain Capabilities:

There are many types of supply chains, each of which is designed to perform different tasks well. A
company must understand what its supply chain is designed to do well.

Achieving Strategic Fit:

If a mismatch exists between what the supply chain does particularly well and the desired customer
needs, the company will either need to restructure the supply chain to support the competitive strategy or
alter its competitive strategy.

Issues affecting strategic fit

Most companies produce and sell multiple products to multiple customer segments, each
with different characteristics. A department store may sell seasonal products with high
implied demand uncertainty, such as ski jackets, along with products with low implied
demand uncertainty, such as black socks. The demand in each case maps to a different
part of the uncertainty spectrum. W.W. Grainger sells MRO products to both large firms,
such as Ford and Boeing, and small manufacturers and contractors. The customer needs
in the two cases are very different. A large firm is much more likely to be concerned with
price, given the large volumes they generate from W.W. Grainger, whereas a smaller
company is apt to go to W.W. Grainger because it is responsive. The two segments that
are served map to different positions along the implied uncertainty spectrum. Another
example is Levi Strauss, which sells both customized.

Product Life Cycle

As products go through their life cycle, the demand characteristics and the needs of the
customer segments being served change. Supply characteristics also change as the
product and production technologies mature. High-tech products are particularly prone to
these life-cycle swings over a very short time span. A product goes through its life cycle
from the introductory phase, when only the leading edge of customers is interested and
supply is uncertain, all the way to the point at which the product becomes a commodity,
the market is saturated, and supply is predictable. Thus, if a company is to maintain
strategic fit, its supply chain strategy must evolve as its products enter different phases.
Let us consider changes in demand and supply characteristics over the life cycle of a
product. Toward the beginning stages of a product's life cycle:
1. Demand is very uncertain and supply may be unpredictable.
2. Margins are often high, and time is crucial to gaining sales.
3. Product availability is crucial to capturing the market.
4. Cost is often a secondary consideration

Globalization and Competitive Changes over Time

A final dimension to consider when matching supply chain and competitive strategy is
the change in competitor behavior resulting from changes in the marketplace or increased
globalization. Like product life cycles, competitors can change the landscape, thereby
requiring a change in the firm's competitive strategy. An example is the growth of mass
customization in various industries since the last decade of the twentieth century. As
competitors flood the marketplace with product variety, customers are becoming
accustomed to having their individual needs satisfied. Thus, the competitive focus today
is on producing sufficient variety at a reasonable price.
 PART: 2

Major drivers of Supply Chain:

To understand how a company can improve supply chain performance in terms of responsiveness
and efficiency, we must examine the logistical and cross functional drivers of supply chain
performance: facilities, inventory, transportation, information, sourcing, and pricing. These
drivers interact with each other to determine the supply chain's performance in terms of
responsiveness and efficiency. As a result, the structure of these drivers determines if and how
strategic fit is achieved across the supply chain.

Facilities are the actual physical locations in the supply chain network where I_:lroduct i~d,
assembled, or fabricated. The two major types of facilities are pro- ~~s and s~s. Qecisions regarding the
role, location, c~and flexibility of facilities have a significant impact on the supply chain's performance.

Inventory encompasses all raw materials, work in process, and finished goods within a supply chain.
Changing inventory policies can dramatically alter the supply cham's efficiency and responsiveness.

Transportation entails moving inventory from point to point in the supply chain. Transportation
can take the form of many combinations of modes and routes, each with its own performance
characteristics. Transportation choices have a large impact on supply chain responsiveness and efficiency.

Information consists of data and analysis concerning facilities, inventory, transportation, costs,
prices, and customers throughout the supply chain. Information is potentially the biggest driver of
performance in the supply chain because it directly affects each of the other drivers. Information presents
management with the opportunity to make supply chains more responsive and more efficient.

Sourcing is the choice of who will perform a particular supply chain activity such as production,
storage, transportation, or the management of information. At the strategic level, these decisions
determine what functions a firm performs and what functions the firm outsources. Sourcing decisions
affect both the responsiveness and efficiency of a supply chain.
Pricing determines how much a firm will charge for goods and services that it makes available in the
supply chain. Pricing affects the behavior of the buyer of the good or service, thus affecting supply chain
performance.

Obstacles in Strategic Fit:

1. Increasing variety of products
2. Decreasing product life cycles
3. Increasingly demanding customers
4. Fragmentation of supply chain ownership
5. Globalization
6. Difficulty executing new strategies