Presentation on theme: "Strategy and Cost Management"— Presentation transcript:
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 managementStrategic managementPlanning and decision makingManagement and operational controlPreparation of financial statements
3 The Role of Resource Information Strategic managementSupports choice of products, manufacturing methods, marketing methods, etc.Planning and decision makingSupports recurring decisions such as equipment replacement, production scheduling, pricing, purchasing, etc.
4 The Role of Resource Information Management and operational controlProvides feedback on operational efficiency, performance evaluations, etc.Preparation of financial statementsProvides information on the value of inventory, cost of goods sold, etc.
5 Strategy DevelopmentStrategy determines the emphasis of cost managementStrategy determines what you must doWhat you do determines the costs you must incur
6 Strategy DevelopmentStrategy should be built around the company’s core competenciesWhat are we good at doing?Competitive advantagesWhat are we not good at doing?Competitive disadvantages
7 Strategy Development SWOT analysis Strengths Weaknesses Internal analysisStrengthsWeaknessesIncludes 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 industryLow production costEssential product featuresLimited product or service selectionQualityLow price for customersLarge market share
10 Strategy Development Differentiation Based on having unique product or serviceEmphasis on innovationWide product variety with different featuresDifferentiating features allow for premium priceNarrow market share
11 Strategy Development Confronting competition Developing a sustainable advantage is virtually impossibleRapid transfer of technologyChanging consumer desiresActions of competitorsCompany and its strategy must be flexible to stay in the lead, if just temporarily
12 Strategy Development Areas of competition Cost leadership Cost/priceDifferentiationFunctionalityFeaturesTimeStatusQuality
13 Strategy Development “Survival triplet” is constantly changing Must understand the customers’ desires for price, functionality and qualityPosition the company’s products or services within the survival zoneCost/priceQualityFunctionality
14 Strategy DevelopmentShape of the survival zone is determined by many factorsWhat determines the minimum and maximum values forCostPriceQualityFunctionality
15 Strategy Development Value chain Sequence of activities necessary to satisfy the customerAssemble materials into componentsWholesalingwarehousingdistributionDesign andengineeringMaterialacquisitionFinalassemblyRetailsalesCustomerservice
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 valuePerform the activities internallyActivities where the company is weak represent opportunities to reduce costOutsource to more efficient providers
17 Strategy DevelopmentAnalyze linkages in the value chain for opportunitiesHow does one activity relate to preceding or succeeding activities?For example, does providing repair service to customers help improve product development activities?