【正文】 s ?Assessing firm’ s COMPETITIVENESS requires knowledge of value chain system ?Firm’ s own value chain ?Value chains of suppliers ?Value chains of forward channel allies THE VALUE CHAIN SYSTEM ?SUPPLIERS?value chains matter ?Suppliers incur costs in creating delivering inputs used in firm’ s value chain ?Cost quality of inputs influence firm’ s cost and/or differentiation capabilities ?FORWARD CHANNEL value chains matter ?Costs margins of downstream firms are part of price paid by ultimate enduser ?Activities channel allies perform affect satisfaction of enduser EXAMPLE: KEY VALUE CHAIN ACTIVITIES ?PULP PAPER INDUSTRY ?Timber farming ?Logging ?Pulp mills ?Papermaking ?Printing publishing EXAMPLE: KEY VALUE CHAIN ACTIVITIES ?HOME APPLIANCE INDUSTRY ?Parts ponents manufacture ?Assembly ?Wholesale distribution ?Retail sales EXAMPLE: KEY VALUE CHAIN ACTIVITIES ?SOFT DRINK INDUSTRY ?Processing of basic ingredients ?Syrup manufacture ?Bottling can filling ?Wholesale distribution ?Retailing EXAMPLE: KEY VALUE CHAIN ACTIVITIES ?COMPUTER SOFTWARE INDUSTRY ?Programming ?Disk loading ?Marketing ?Distribution DEVELOPING DATA FOR STRATEGIC COST ANALYSIS ?Data requirements are formidable ?Requires breaking department cost accounting data out into cost of performing SPECIFIC ACTIVITIES ?ACTIVITYBASED COSTING ?New cost accounting methodology aimed at assigning costs to ?Specific tasks and ?Value chain activities WHAT IS STRATEGIC COST ANALYSIS? ?Cost disparities among rivals can stem from differences in ?Prices paid for raw materials, ponent parts, energy, other supplier resources ?Basic technology age of plant equipment ?Economies of scale experience curve effects ?Wage rates productivity levels ?Changes in inflation foreign exchange rates ?Marketing distribution costs ?Inbound outbound shipping costs WHAT DETERMINES COSTS OF VALUE CHAIN ACTIVITIES? ?Costs of performing each value chain activity can be DRIVEN UP or DOWN by two types of factors ?STRUCTURAL COST DRIVERS ?EXECUTIONAL COST DRIVERS STRUCTURAL COST DRIVERS ?Scale economies ?Experience curve effects ?Technology requirements ?Capital intensity ?Complexity of product line EXECUTIONAL COST DRIVERS ?Commitment of work force to continuous improvement ?Attitudes capabilities regarding quality ?Cycle time in getting new products to market ?Utilization of existing capacity ?Whether internal business processes are efficiently designed executed ?How efficiently firm works with suppliers and/or customers to reduce costs KEYS TO UNDERSTANDING A COMPANY’ S COST STRUCTURE ?Whether firm is trying to achieve a petitive advantage based on ?Lower costs or ?Differentiation ?How costs in one value chain activity spill over to affect costs of others ?Whether linkages among activities in value chain present opportunities for cost reduction Traditional Cost Accounting Vs. ActivityBased Costing ?Traditional Cost Accounting Categories in Department Budget ?Wages Salaries $350,000 ?Employee Benefits 115,000 ?Supplies 6,500 ?Travel 2,400 ?Depreciation 17,000 ?Other Fixed Charges 124,000 ?Miscellaneous ?Operating Expenses 25,520 ? $640,150 ?Departmental Activities Using ActivityBased Cost Accounting ?Evaluate Suppliers $135,750 ?Process Purchase Orders 82,100 ?Expedite Deliveries 23,500 ?Expedite Internal Process 15,840 ?Check Item Quality 94,300 ?Check Deliveries Against ?Purchase Orders 48,450 ?Resolve Problems 110,000 ?Internal Administration 130,210 ? $640,150 BENCHMARKING COSTS OF KEY ACTIVITIES ?Concept ?Benchmarking performance of a firm’ s activities against rivals best practice firms provides evidence of firm’ s cost petitiveness ?Benchmarking is an excellent tool to determine ?If costs are in line with petitors ?Which business processes need to be scrutinized for improvement ?Which firms perform a given activity best BENCHMARKING COSTS OF KEY ACTIVITIES ?Focuses on CROSSCOMPANY parisons of how well activities are performed ?Purchase of materials ?Payment of suppliers ?Management of inventories ?Training of employees ?Processing of payrolls ?Getting new products to market ?Performance of quality control ?Filling shipping of customer orders BENCHMARKING ETHICS ?BENCHMARKING involves discussions of petitively sensitive data ?ETHICAL guidelines ?Avoid talk about pricing or petitively sensitive costs ?Don’ t ask rivals for sensitive data ?Don’ t share proprietary data without clearance ?Have impartial third party assemble present petitive data without names attached ?Don’ t disparage a rival’ s business to outsiders based on data obtained ACHIEVING COST COMPETITIVENESS ?Key Point ?A firm’ s COMPETITIVENESS depends on how well it manages its VALUE CHAIN relative to petitors ?Examining a firm’ s value chain paring it to key rivals indicates ?Who has how much of a cost advantage or disadvantage ?Which cost ponents are responsible ACHIEVING COST COMPETITIVENESS ?Three areas in firm’ s value chain contributes to cost differences pared to rivals ?1. SUPPLIERS?activities ?2. Firm’ s INTERNAL activities ?3. FORWARD channel activities ?Strategic actions to eliminate a cost disadvantage need to be linked to where cost differences originate! OPTIONS: C