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Competition in the industrial marketplace is growing steadily more intense. Consequently, managers are beginning to take a close look at the logistics systems of their companies as a means of gaining competitive advantage. A well-designed system can help advance a company's strategic goals - and a poorly designed system can lead a company to disaster.

Most companies are able to forge a marketing strategy, but have difficulty implementing it. Marketing practice has two components: structural and human. There are four levels in the structural hierarchy--functions, programs, systems, and policy directives--and each has its pitfalls. Of 32 companies sampled, those best at marketing practice have a strong sense of identity and direction, appeal to customers (including distributors) in unusual ways, have marketing managers who are willing to substitute skills for the formal structure, and see the executives as more important than the execution structure.

An appropriations committee's job is often complicated by the conflict between managers who favor hard quantitative techniques and those who prefer a softer qualitative analysis when evaluating investment opportunities. Reliance on quantitative analysis--usually involving discounted cash flow--can lead an organization to invest in projects that have little risk but that are also unexciting to strategists. The answer does not lie in favoring either side over the other. Instead, executives need to adopt a new way of thinking that gives a hard analytic edge to the soft side of the argument. They need to think of investment opportunities as future growth options for the company.

To improve the performance of American corporations, we must improve the effectiveness of corporate boards of directors. Corporate governance is just as important as corporate management. Corporations need personnel who can take the long-term view and make long-term commitments. They also need stockholders who are willing to hold onto their shares for long periods so that they become owners rather than speculators.

Small new businesses have in recent years increasingly provided the bulk of new jobs, a trend that has accelerated during the recession. In fact, these businesses have replaced older established companies as the primary driving force behind the growth of the U.S. economy. Technological advances, capital availability, and demographic shifts have encouraged these new entrepreneurs to challenge conventional wisdom and to experiment with new approaches to the market. The author explains why the entrepreneurial economy is a cultural and psychological event as well as an economic and a technological one.

Examination of the interaction among inflation, capital costs, profitability, growth, and the market value of a company's common stock can determine whether growth adds value for a company's shareholders. Analysis of the expected excess returns, figured on a net present value basis, of Tandy Corp., Xerox, and National Steel illustrates how the gap between market and book value of common stock can widen and illustrates that growth will add value if ROE is expected to exceed the cost of equity capital. But inadequate profitability coupled with the need to finance inflation-induced sales growth can be disastrous for the company's valuation.

The root of most service problems is a lack of systematic design and control. The use of a blueprint can help a service developer not only to identify problems ahead of time but also to see the potential for new market opportunities. A service company that relies on ad hoc management is not equipped to react quickly to market needs and opportunities.

Managers of smaller companies should pay close attention to the image their companies project to the business world. The impression conveyed to bankers, financial analysts, venture capitalists, and others is important because these people assign company valuations. Managers seeking to improve their companies' images should concentrate on four major factors: management, company name and trademark, annual report, and financial public relations.

Raising prices to cover rising costs and defend profit margins is a strategy that ceases to work in a recession, for that is when other companies start lowering their prices to increase their competitiveness. To avoid this competitive pricing trap, a company needs a method for seeing the unique way in which inflation is affecting it. Such a method is the value chain, a diagram that shows the value added at each step in the market process, from the raw materials stage to the final prices paid by consumers, exposing shifting cost components.

Interviews with nearly 150 executives in 13 companies show that transfer pricing schemes are a means of generating information and control for implementing corporate, business unit, and product strategy. A company's transfer pricing policy, which includes whether to source inside or out, and the way it is administered depend on the situation and the direction of the organization. Companies can be categorized into four "pure" types: competitive, cooperative, collaborative, and collective. Each type has its own set of problems and characteristics. Problems common to all types include performance problems, interpersonal disputes, power imbalances, demand fluctuations, and product pricing. Regardless of the approach used to set the transfer price, unit managers will agree to it if they feel that top management is treating them fairly.

Changes in the application of computers have altered the manufacturing process. New capabilities include flexibility in product design and mix; rapid response to changes in market demand, output rates, and equipment scheduling; greater control, accuracy, and repeatability of processes; reduced waste, lower training and maintenance costs; greater predictability in all manufacturing operations; faster throughput; and distributed processing capability. Economies of scope exist where the same equipment can produce multiple products more cheaply in combination than separately. As the economic order quantity (EOQ) approaches 1 and as making the proper trade-off between changeover costs and inventory costs becomes a trivial problem, producers will find it as economical to manufacture one unit as to manufacture many. Computer-based technology reverses the trend toward specialized hardware by placing emphasis on specialized software instead.

The retail point of purchase (POP) is the time and place at which all the elements of a sale--the consumer, the money, and the product--converge. Marketers must make the most of the communications possibilities at this point to increase their sales. By making effective displays, designing appropriate, easily identifiable packaging, making shopping exciting, and focusing in-store advertising media on the POP, marketers can address the various interests of the manufacturer, the retailer, and the consumer.

A sales task is clear if sales result from a salesperson's efforts to sell, if performance feedback is timely, and if that feedback is accurate. Management has four areas in which it must try to be clear--deployment, account management, information systems, and field sales management. The more specific the account coverage, the better. Hence, limiting the number of accounts for each salesperson is recommended. Field sales managers can use management by objectives, performance appraisal, and monthly reviews to encourage their salespeople to do their work effectively.

Business is an institution to which our society assigns a certain sphere of activity--to secure the social good of economic efficiency. The values that govern the conduct of business must be conditioned by the purpose of the business institution. Business leaders therefore have the responsibility of running their companies in such a way as to realize their most economic performance. That means taking the needs and the concepts of purpose of each of the system's members into account. It does not mean making profit the primary goal.

A multi-year study of production operations of virtually all the producers of room air conditioners in the United States and in Japan reveals a failure rate of products from the lowest quality manufacturers some 500 to 1000 times greater than that of products from the highest quality manufacturers. Quality is measured by the incidence of internal and external failures. Internal failures include all defects observed, either during fabrication or along the assembly line, before the product leaves the factory. External failures include all problems incurred in the field after the unit has been installed. Measured by either criterion, Japanese companies were far superior to the U.S. counterparts.

Management has the power and the responsibility to achieve a high-quality product by improving the manufacturing process. Managers can distinguish between normal and abnormal variation statistically by constructing a control chart that shows the process average and the upper and lower control limits. Top management should stop expecting inspection to solve the quality problem; stop awarding business to the lowest bidder; eliminate targets, numerical goals, slogans, and posters that urge people who lack the power to make changes to increase productivity; eliminate work quotas; and institute training programs in statistics for managers and supervisors.

The theory that success is commensurate with effort is an enduring belief in our society. So is the idea that hard work builds character. What becomes of men and women in large corporations in which success is not necessarily connected with hard work? Interviews with managers and executives in several big companies reveal that bureaucracy, the prevailing organizational form of our society and economy, breaks apart the old connection between work and salvation and erodes all standards of morality except its own. McKinsey Award Winner.

Threats of resource depletion and raw materials scarcity, political turbulence and government intervention in supply markets, intensified competition, and accelerating technological change can upset supply and demand patterns suddenly. Companies must shift their perspective from purchasing (an operating function) to supply management (a strategic one) to ensure continued supply of materials. Companies must integrate purchasing with other elements of the business system.

Buyers no longer purchase products and services but sets of expectations. Thus, the relationship between buyer and seller often intensifies when the sale is made. How selling companies manage buyer-seller relationships increasingly affects their reputations and repeat sales. The seller can maintain a healthy relationship with the buyer after the purchase by regularly considering whether the relationship has been improving or deteriorating. To effectively manage relationships, managers must understand both the problems and the opportunities.

Under some circumstances, the informal, unwritten plans of an owner-CEO are appropriate for a business. Under others, the formal, written plans of a CEO and board are what a company needs to operate well. But sometimes neither the minimal nor the full-blown approach to planning works. They may even be harmful. A company can decide whether one of these approaches is appropriate for itself by looking at nine variables: the administrative style and ability of its CEO, the ability of its officers, the complexity of the business, the strength of its competition, the gain that its managers expect planning to bring, the leadership of its CEO, the degree of uncertainty the company faces, how well its managers understand formal planning, and how well it is currently planning its actions.