Mass_Customization

MASS CUSTOMIZATION Describe the basic principles of “mass customization. Many companies are faced today by an unprecedented trend towards individualization of demand. Mass customization is the new paradigm that replaces mass production which is no longer suitable for today’s turbulent markets, increasing product variety, and infinite opportunities for e-commerce that demand adaptability. Manufacturers are forced to build production systems that require additional variants that must proactively manage product variety in this environment of rapidly evolving products, niche markets, and individually customized products sold through stores or over the internet. Mass customizers can customize products quickly for individual customers or for niche markets at better than mass production efficiency and speed. When customers are built into the value model of Mass Customization by defining and building a specific individualized solution or model, this is called Co-design. Co-design is the main difference between mass customization and other versions of agile development strategies which establish an interaction between the manufacturer and customer and increase loyalty. This principle also co-creates a customer’s experience and a sense of design ownership that aligns the customer with the company’s goals. Once a customer has purchased an individual item, the knowledge aquired by the manufacterer can be used to erect a huge barrier against switching suppliers. To match the level of customization offered by a manufacturer with the customers' needs becomes a major success factor. Additionally, mass customization practice shows that consumers are frequently willing to pay a price premium for customization to reflect the increment of utility they gain from a product that better fits to their needs than the best standard product attainable. Indicate how this method of strategic analysis fundamentally differs from Porter’s traditional model. Porter’s traditional “Five Forces” Model describes the strategical analysis a company takes into account when understanding its position in a certain market structure. As we studied before, this includes barriers to entry, threats of substitutes, threats of new entrants, and supplier activity and the threat of suppliers not being able to or wanting to assist a company based upon its relationships. Mass Customization is different than Porter’s forces as it argues that when a customer or a competitor makes its first move, they have the advantage and are strategically better placed. Porter argues that because of the development of Internet, companies can easily make quick adjustments and become on top and better position themselves strategically. Porter argues in the “Strategy and the Internet” that because of the constant adoption necessary for users with software tools, it doesn’t matter who makes the first move, there’s always time before that tool can be really powerful and that gives the other competitors time to build their tool better than the other firms. Ways in which firms may avoid unprofitable customers include:        Avoiding their acquisition in the first place Find potential rescue operations Have a cost benefit analysis in place Is there any way to add substantial value to the company without first adding value to the customer' Can field sales add 'permanent' value to the company by pushing customers harder and harder to buy products that deliver less utility and value to customers than competing products' Can customer service management add permanent value by pushing resistant customers onto the web for order-entry and 'self-service' Can companies reap permanent value by raising prices past the point of customer satisfaction in markets where customers temporarily have limited choice' As is often the case, a very small percentage of a firm’s best customers will account for a large portion of the firms’ profit. Although this is a natural consequence of variability in profitability, firms greatly benefit from identifying precisely who their best customers are and how much they contribute to the profit. However, at the other end of the distribution, firms sometimes find that their worst customers actually cost more to serve than the revenue they deliver. These unprofitable customers actually detract from overall firm profitability. The firm would be better off if they had never acquired these customers in the first place. I would venture to say that I strongly agree with the theory and method for identifying unprofitable clients, especially in today’s economic environment as the pricing pressures that we’ve witnessed in the last few years has added to the number of non-profitable customers. Nevertheless, even in these economic times a bad customer is valued because they help support fixed costs. In turn, this puts additional pressure on your profitable customers at a risk that you can hardly afford to continue and if you do, you may begin to see a decrease in your profitable customers. The question is; when should a firm replace or remove these unprofitable customers' Is this a sound and prudent strategy in these economic times' Before you cut the cord with a profitable a client, you’ll need to do the math to be sure you can survive the financial hit. The first step is to calculate the annual revenue from each customer and the cost of serving them, adding such factors as the costs of materials, the cost of returned or rejected products and the amount of time you and your staff put into a customer relationship or making a product. Once you've identified unprofitable clients, however, it's worth trying to restore the relationship as the cost of acquiring new clients is often high and often means making up for lost sales by redoubling efforts to being in new business. A suggestion would be to conduct a face-to-face meeting with your unprofitable customers and encourage them to buy additional products or services in greater bulk, lengthen your lead time or even propose that they find alternate suppliers for the lower-margin products or services that you provide them. I would also encourage my firm to build a marketing inventory value steam, segment and rate customers by profitability levels. This is often an eye-opening experience as it will illustrate which customers to value as well as what the customers’ value about your organization. I would encourage my firm to build a marketing value stream tracking customers by profitability levels Do you find this method useful and relevant in today’s economy' Why' Customer value helps identify the top tier customers we need to focus retention activity on, but what about the other 80% of customers who generate nominal or even negative contribution' Depending on your goals and what you are measuring, customer value can suggest different actions. Customer profitability is imperative to measure customer values using a model appropriate to the decisions you want to make. Negotiated discounts in fees and rates certainly need to be taken into account when assessing customer value, however pricing anomalies driven by market conditions or strategic discounting have little to do with the customer, and should not be included in customer value. The extreme case of this is when the market prices entire business lines at negative spreads, which happens from time to time in periods of crisis. Whole segments of customer values can turn from gold to brass in a matter of months when this happens. Obviously one cannot switch customer relationship strategies with these shifting winds of chance. You need to look past the numbers to manage customer strategy effectively. Clearly we need to reprice relationships where excessive discounting is negotiated. It is equally clear we should not penalize customers for aberrations in market or strategic conditions. There is no substitute for wisdom and understanding when working with customer value! The influence of cell phones and mobile devices is one of many trends likely to influence the future of global markets. Handset vendors and component suppliers are finding opportunities to reshape consumers' understanding of mobile devices, mobile computing, and mobile connectivity by adding to the virtuous cycle that expands the number of users and usage of mobile networks. Predicting the make-up of future mobile phones requires an understanding of the factors having the greatest influence on customer demand and operator requirements. The key factors that are expected to reshape handsets in the coming five years include the Apple iPhone, alternative networks such as Wi-Fi and WiMAX, mobile video and television as well as increasing corporate-liable subscriptions. These influences will have a powerful effect on the design of mobile devices, as well as the semiconductors and applications used in them. Indeed, a nation’s level of technological achievement generally will be defined in terms of its investment in integrating and applying the new, globally available technologies—whether the technologies are acquired through a country’s own basic research or from technology leaders. The growing two-way flow of high-tech brain power between the developing world and the West, the increasing size of the information computer-literate work force in some developing countries, and efforts by global corporations to diversify their high-tech operations will foster the spread of new technologies. High-tech breakthroughs—such as in genetically modified organisms and increased food production—could provide a safety net eliminating the threat of starvation and ameliorating basic quality of life issues for poor countries. But the gap between the “haves” and “have-nots” will widen unless the “have-not” countries pursue policies that support application of new technologies—such as good governance, universal education, and market reforms. Those countries that pursue such policies could leapfrog stages of development, skipping over phases that other high-tech leaders such as the United States and Europe had to traverse in order to advance. China and India are well positioned to become technology leaders, and even the poorest countries will be able to leverage prolific, cheap technologies to fuel—although at a slower rate—their own development. Another future trend that will influence the global market includes a shift to emerging markets. Globally, emerging markets are likely to represent at least 80 percent of growth by 2015. That figure could go even higher if commodity prices rise and if India and China were to make it easier to import goods, use the internet shrewdly, create inviting stores, respond to social concerns and to sell a sense of tradition. Increasing the number of global firms facilitate spread of new technologies will depend on the extent to which connectivity challenges governments. Rise of Asia and advent of possible new economic middle-weights will depend on whether rise of China/India occurs smoothly. Because of the sheer size of China’s and India’s populations— projected by the US Census Bureau to be 1.4 billion and almost 1.3 billion respectively by 2020—their standard of living need not approach Western levels for these countries to become important economic powers. Photovoltaic production is another influence of future global trends. It has been doubling every two years, increasing by an average of 48% each year since 2002, making it the world's fastestgrowing energy technology. Roughly 90% of this generating capacity consists of grid-tied electrical systems. Such installations may be ground-mounted (and sometimes integrated with farming and grazing) or built into the roof or walls of a building, known as Building Integrated Photovoltaic or BIPV for short. Financial incentives, such as preferential feed-in tariffs for solargenerated electricity, and net metering, have supported solar PV installations in many countries including Germany, Japan, and the United States. Due to the growing demand for clean sources of energy, the manufacture of solar cells and photovoltaic arrays has expanded dramatically in recent years. While solar cells have been around for many years now, it is only recently that the advances made in technology have made it possible for researchers to make solar cells more efficient.