【正文】 Author: Laird ReedCost PositionRelativeMarch 19981Relative Cost PositionAgenda ?The relative cost position (RCP) concept?Applications?RCP Steps?Client example?Challenges?Key takeaways2Relative Cost PositionContext ?Relative Cost Position?Experience Curve?Cost Sharing Analysis?Best Demonstrated Practice?Value Chain Analysis?Profit Hunt?Product Line Profitability / Cost Allocation / Activity Based Costing?Overhead Analysis?Fixed/Variable Analysis?Direct/Indirect AnalysisCosts Customers Competitors CapabilitiesRelative cost position (RCP) is a key analytical tool used for cost analysis.3Relative Cost PositionFull Potential Bain uses RCP to determine a pany’s practical full potential cost position based on a parison of its unit costs with those of its petitors and an understanding of the client’s business.Lowest costPractical cost4Relative Cost PositionQuestions RCP Can Help Answer RCP analysis helps answer both strategic and tactical questions.Strategic questions Tactical questions?In what areas do our petitors have the biggest cost advantage??What is driving petitors’ profitability??How much flexibility would our petitors have in a price war??What is the client’s market position??What are the strategic implications of the full potential cost position??Where should we focus our cost reduction efforts? (., wage rates, amounts of raw material inputs)?Which cost elements would decrease significantly with an increase in scale??Which cost elements might benefit from different business practices?5Relative Cost PositionAgenda ?The relative cost position (RCP) concept?Applications?RCP Steps?Client example?Challenges?Key takeaways6Relative Cost PositionApplications ?Bain identified $29MM in annual savings for a chewing gum manufacturer. An RCP analysis led to a decrease in raw materials usage, better raw materials purchasing, process improvements, and more efficient inventory management.?Bain helped a client in the diaper business take back market share it had lost。 its share increased by 10%– the client had a scaledriven cost advantage, but was maintaining a significant price umbrella– Bain used an RCP to identify a price above the client’s breakeven but below the petitor’s breakeven– this strategy had a substantial positive impact on the client’s sales and profits?Bain prevented a client from making a poor acquisition decision in the bakery products market. The RCP showed that one petitor of the target had a 30% cost advantage and that the target would not be able to close that gap.Bain has used RCP effectively for many clients. Examples of Bain work include:7Relative Cost PositionAgenda ?The relative cost position (RCP) concept?Applications?RCP Steps?Client example?Challenges?Key takeaways8Relative Cost PositionApproaches There are two ways to approach an RCP: detailed bottomup analysis or topdown analysis.Detailed bottomup analysis Topdown analysis?Build up each major cost element for key petitors based on primary data?Triangulate using cost data from multiple sourcesLess accurate, less time intensive?Compare petitors’ cost structures to client’s cost structure at macro level– define key process/business practice differences for major cost elements– make assumptions about the cost impact of differences?Test assumptions vs. overall financial dataMore accurate, more time intensiveOftentimes we use a bination of these two approaches9Relative Cost PositionRCP Steps Map the business value chainIdentify cost elements and driversScour information sources for cost data on clients and petitorsBuild, pare, and reality check cost barsCalculate practical full potential cost position and savingsDraw strategic implicationsProcess Steps Key Success Factors? Map value chain from end to end (., raw materials to finished product or delivery) ? Tie costs to operations not accounting categories? Build up cost bars category by category? Reality check results against similar panies? Focus on areas with the greatest potential for cost savings? Adjust for client’s situation (., different strategy (high quality vs. low quality), different equipment, different plant locations)? Determine how to take advantage of the improved cost position? Be persistent and creative, but ethicalDoing an RCP involves several steps:10Relative Cost PositionAgenda ?The relative cost position (RCP) concept?Applications?RCP Steps?Client