1. Strategy and Cost Management
Controlling costs by focusing on core competencies

2. The Role of Resource Information
Resource information is needed to support the four functions of management
Strategic management
Planning and decision making
Management and operational control
Preparation of financial statements

3. The Role of Resource Information
Strategic management
Supports choice of products, manufacturing methods, marketing methods, etc.
Planning and decision making
Supports recurring decisions such as equipment replacement, production scheduling, pricing, purchasing, etc.

4. The Role of Resource Information
Management and operational control
Provides feedback on operational efficiency, performance evaluations, etc.
Preparation of financial statements
Provides information on the value of inventory, cost of goods sold, etc.

5. Strategy Development
Strategy determines the emphasis of cost management
Strategy determines what you must do
What you do determines the costs you must incur

6. Strategy Development
Strategy should be built around the company’s core competencies
What are we good at doing?
Competitive advantages
What are we not good at doing?
Competitive disadvantages

7. Strategy Development SWOT analysis Strengths Weaknesses
Internal analysis
Strengths
Weaknesses
Includes product lines, management, research and development, manufacturing, marketing, strategy, employees, brand recognition, etc.

8. Strategy Development Opportunities Threats External analysis
Includes barriers to entry, intensity of competition, substitute products, bargaining power of customers and suppliers, changing demographics, government regulation, technological change, world events, etc.

9. Strategy Development Basic strategies Cost leadership
Based on having lowest delivery costs in the industry
Low production cost
Essential product features
Limited product or service selection
Quality
Low price for customers
Large market share

10. Strategy Development Differentiation
Based on having unique product or service
Emphasis on innovation
Wide product variety with different features
Differentiating features allow for premium price
Narrow market share

11. Strategy Development Confronting competition
Developing a sustainable advantage is virtually impossible
Rapid transfer of technology
Changing consumer desires
Actions of competitors
Company and its strategy must be flexible to stay in the lead, if just temporarily

12. Strategy Development Areas of competition Cost leadership
Cost/price
Differentiation
Functionality
Features
Time
Status
Quality

13. Strategy Development “Survival triplet” is constantly changing
Must understand the customers’ desires for price, functionality and quality
Position the company’s products or services within the survival zone
Cost/price
Quality
Functionality

14. Strategy Development
Shape of the survival zone is determined by many factors
What determines the minimum and maximum values for
Cost
Price
Quality
Functionality

15. Strategy Development Value chain
Sequence of activities necessary to satisfy the customer
Assemble materials into components
Wholesaling
warehousing
distribution
Design and
engineering
Material
acquisition
Final
assembly
Retail
sales
Customer
service

16. Strategy Development Value chain analysis
Which activities present opportunities to add value or reduce costs?
Activities where the company has strengths represent opportunities to add value
Perform the activities internally
Activities where the company is weak represent opportunities to reduce cost
Outsource to more efficient providers

17. Strategy Development
Analyze linkages in the value chain for opportunities
How does one activity relate to preceding or succeeding activities?
For example, does providing repair service to customers help improve product development activities?