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Alliances Core Services/
Products Customers 16 n KPMG/University of Illinois
Business Measurement Case Development and Research Program July 1999o Part II
Business Process Analysis
Mary Lou and her staff have tentatively concluded that Loblaw has adopted a business strategy
whereby it is a low cost provider of groceries and related goods and services. Loblaw combines
this low cost strategy with an attention to product differentiation (e.g., private labels such as
President’s Choice™) and process differentiation (i.e., store layouts). Because the grocery
industry is a commodity industry in which it is difficult to sustain differentiation cost leadership
is critical. During the discussion between Mary Lou and her team members they consider the link
between the entity’s strategy, related business objectives, and the actions that need to be taken
inside the business processes that make up the business and its interaction with outsiders. They
employ in this analysis a KPMG training document which provides a starting point for thinking
about the links between a cost leadership strategy and its effects on various functional areas. (See
Box 5 Implications of a Cost Leadership Strategy for Selected
Functional Area Strategy Description
Purchase at low cost through quantity discounts.
Purchasing and materials management
Operate storage and warehouse facilities and
control inventory efficiently.
Emphasize operation efficiencies through
learning, economies of scale, and capital-labor
Research and development
Emphasize process R&D aimed at reducing
costs of operations and distribution.
Emphasize timely and pertinent information on
costs of operations.
Emphasize low-cost distribution and low-cost
advertising and promotion.
Human resource management
Emphasize reward systems that encourage
lowering of costs.
* An extract from a KPMG corporate strategy training document. Mary Lou and her team also summarized the core and resource management processes that
comprise a retail grocer (see Figure 2 and Appendix I for a description of those processes). Mary 17 n KPMG/University of Illinois
Business Measurement Case Development and Research Program July 1999o Lou reminds her team that they need to focus their attention on those processes with significant
business risk, because it is those processes that are the most likely sources of audit risk. These
processes, known as key business processes, are determined by assessing the following criteria in
the context of the client’s objectives and strategy:
• Strategic relevance of the process: Assess the importance of the process given management’s
Inherent risk of the process: Consider the complexity of the process, the extent of managerial
judgment involved in the process, and prior auditor experience with auditing the process or
related financial statement ite...
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- Fall '08
- Supermarket, LOBLAW COMPANIES LIMITED, Measurement Case Development, Business Measurement Case