Management Under Market Constraint in the Hi tech Industry

The globalisation trend of the last few decades is clearly a threat to many firms, but it also offers them the opportunity to penetrate markets around the globe. Most firms have excess capacity in production, services and logistics, and conduct their business under a market constraint. If a firm does not conform to lead-time, price, quality, and performance requirements, it may not survive in the global buyers’ market. This paper addresses the issue of managing a market-constrained hi-tech firm, from the vantage point of the Theory of Constraints (TOC), first introduced by Goldratt and Cox (1992). Acknowledging the market as a severe and common constraint facing the organization, TOC-based methods and techniques are helpful in coping with this environment. Research and practice have produced methods to build better decisionmaking processes for costing and pricing, but no comprehensive method has yet emerged for addressing the issue of management in a market-constrained environment. We will present an integrative and consistent method to cope with the market constraint for a hi-tech firm, defined as one that uses technology as a key strategic component. Its competitive edge lies in the ability to apply innovation and technology in a way that will better satisfy customer needs. In this industry, time to market (TTM) is a key success factor. The Generic Resource Model It is usually easier to cope with an internal resource constraint where management has more control over its activities than with an external market constraint. A market constraint is defined as a situation in which the production/operations resource capacity exceeds market demand, and lack of profitable orders prevents the system from achieving higher value to its shareholders. Although the capacity of production/operations and logistics resources in a hi-tech firm may be higher than the pertinent market demand, it always has two internal Permanent Bottlenecks: the R&D and the Marketing and Sales (M&S) departments. Though these Permanent Bottlenecks exist whether or not a market constraint exists, the firm can control and improve its position in the market by managing them properly

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