Cost Management: A Strategic Emphasis

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Unformatted text preview: CHAPTER 2: IMPLEMENTING STRATEGY: THE VALUE CHAIN, THE BALANCED SCORECARD, AND THE STRATEGY MAP QUESTIONS 2-1 The two types of competitive strategy (per Michael Porter, as explained in chapter one) are cost leadership and differentiation. Cost leadership is the competitive strategy in which the firm succeeds by producing at the lowest cost in the industry. Differentiation is the competitive strategy in which a firm succeeds by developing and maintaining a unique value for the product, as perceived by consumers. 2-2 Many possible examples would be correct here. Examples offered in the chapter include Wal-Mart, Texas Instruments, Du Pont, and Compaq. 2-3 Many possible examples would be correct here. Examples offered in the chapter include Tiffany, Bentley and Mercedes automobiles, Rolex, and Maytag. 2-4 The four strategic resources are used as follows. First the firm determines the critical success factors using SWOT analysis, and then uses execution to excel on these CSFs. The value chain is used to provide a more detailed understanding of the strategy and CSFs, by activity. Finally, the balanced scorecard is used to monitor and reward achievement of the CSFs and to provide a means for continual feedback to SWOT analysis, for desired changes in the overall strategy. 2-5 A strategy map is a framework for showing the relationships among the perspectives of the balanced scorecard. Typically, the scorecard has the following relationships; first, achievement in the learning and innovation perspective contributes to successful performance in the internal processing perspective, which in turn leads to success at the customer perspective, and then finally the desired performance on the financial perspective. 2-6 SWOT analysis is a systematic procedure for identifying a firm's critical success factors: its internal strengths and weaknesses, and its external opportunities and threats. It is used in the first of the three steps of identifying a competitive strategy. See Question 2-4. 2-7 A management accountant is not focused on or limited to financial information only, as in the traditional view of cost and management accounting. In contrast, a strategic cost manager includes a consideration of the firms critical success factors, which might include such non-financial information as delivery speed and customer satisfaction. 1 2-8 Critical success factors are strategic financial and non-financial measures of success. Critical success factors are used to define and measure the means by which a firm achieves a competitive advantage. Strategic cost management involves the development, understanding, and use of critical success factors to manage business firms and other organizations. Examples of CSFs are shown in Exhibit 2-1....
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