Miafe B.

Almendralejo BSA 2 – Strategic Cos Management

Exercise 1
Joel De Castro, CEO of De Castro Enterprises, Inc. (DCEI), is considering a
special offer to manufacture a new line of women's clothing for a large
department store chain. DCEI has specialized in designer women's clothing
sold in small, upscale retail clothing stores throughout the country, in order to
protect the very elite brand image, De Castro has not sold clothing to the large
department stores. The current offer, however, may be too good to turn down.
The department store is willing to commit to a large order, which would be very
profitable to De Castro, and the order would be automatically renewed for two
more years, presumably to continue after that point.
Required: Analyze the choice Joel faces, based on competitive analysis.

Answer:
Joel's competitive strategy is differentiation. He is torn between sticking
to his current business strategy and agreeing to the business proposal of a
large retail store. A competitive analysis is the process of identifying and
researching competitors in your industry's various marketing strategies. You
can use this information to identify your company's strengths and weaknesses
in relation to each competitor. In addition, the information from the cost of
products can be used to develop, map out and identify strategies aiming to
create competitive advantage and guarantee improvements in the production
process (example the quality and accessible prices) to preserve the company’s
continuity. (Hansen & Mowen, 2001; Shank & Govindarajan, 1989) Joel sells to
high-end retail clothing stores rather than department stores in order to
distinguish his brand. He would have to change his strategy to cost leadership
because he will not be able to produce the amount the department stores
require unless he mass produces and finds a way to cut costs on his products.
He can increase his profit if he accepts the department store's offer, and he will
have a guaranteed high income for the next two years. If he leaves the retail
clothing store, he will almost certainly lose the title of being one-of-a-kind. In
either case, he will be at a loss. If he stays with retail clothing stores, he will
continue to be unique. If he chooses department stores, he will have to mass
produce and will lose the title of being unique. Therefore, Strategic Cost
Management should be based on Competitors' Cost Analysis in order to achieve
the goal of reducing costs while simultaneously strengthening the company's
competitiveness.
 Cost Analysis of Competitors "represents a strategic application of cost
modeling." At its most basic, it enables a direct comparison of a company and
one of its products or services with a direct competitor or competitive offering"
(Laseter, Heckel & Huang, 2017, p.1).
Here are a few ways that Joel can implement his new course strategy: the
title of being unique.
 Have tight cost control
 Have frequent, detailed control reports
 Have structured organization and policies
 Have incentives based on meeting strict quantitative targets

Exercise 2
Jim Castelo's lifelong hobby has been racing small sailboats. Jim has been
successful both at the sport and in the design of new pieces of equipment to be
used on small sailboats to make them easier to sail and more effective in
racing. Jim is now thinking about starting a mail-order business in his garage
to sell products he favors, as well as some he has designed himself. He plans to
contract out most of the manufacturing for the parts and equipment to
machine shops and other small manufacturers in his area.
Required: Develop a strategic analysis for Jim's new business plan. What
should be his competitive position; that is, how should be choose to compete in
the existing market for sailboat supplies and equipment? How is he likely to
use cost management information in building his business?

Answer:

The following strategies must be pondered and taken action by Jim in regards
to starting his own business:

A. Jim must decide whether to compete on price or on differentiation, and

 SWOT ANALYSIS
 FOCUS ON EXECUTION
 VALUE CHAIN ANALYSIS
 BALANCE SCORECARD AND STRATEGY MAP
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.
C. Identify the “SWOT” of the businesses.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats,
and so a SWOT analysis is a technique for assessing these four aspects of your
business.
SWOT Analysis is a tool that can help you to analyze what your company
does best right now, and to devise a successful strategy for the future. SWOT
can also uncover areas of the business that are holding you back, or that your
competitors could exploit if you don't protect yourself.

STRENGTHS
 Unique design in product line
 The passion of owner when it comes to making racing sailboats
WEAKNESSES
 Experience on starting and managing a business
OPPORTUNITIES
 Bargaining power on customers and suppliers
THREATS
 Availability of substitute products
 D. Clearly identifying the CSFs of his new business and then
communicating and acting on them, and this will depend on the strategy
chosen on letter a.
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.
E. In selecting the appropriate strategy, it may be appropriate for him to use
differentiation because, according to the SWOT analysis, he works best
in product engineering, where he will be able to provide unique products
unavailable in the market, has strong marketing capability, technological
leadership, and unique skills. Furthermore, in order to carry out this
strategy, there must be strong coordination in research, product
development, manufacturing, and marketing.

F. In doing so, Jim must also identify the value-chain activities and develop
a competitive advantage or reduce cost or in adding value. He may do the
following:

 With his strong connection gained from doing the sport, he can garner
suppliers that can give both high quality and low cost at the same time.
 He can also use his favors when it comes to designing in order to give
more value to the product.
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 firm’s critical success factors, which might include such non-financial
information as delivery speed and customer satisfaction.
G. Determine the balance scorecard and strategy map for the business,
which would require identifying and linking goals, management
techniques and critical success factors. When we speak of management,
Jim is likely to use cost management information in building his
business in order to supply funds from the right source, at the right cost
and at the right time. This is to maximize exploitation and utilization of
business resources, giving higher returns by the increased productivity
from the funds acquired.
References and Materials:

 https://mailchimp.com/resources/what-is-competitor-analysis/

 https://www.researchgate.net/publication/326610691_C

 https://www.coursehero.com/file/19142800/Chapter-2-HW/

 https://saylordotorg.github.io/text_international-business/the-five-
elements-of-strategy.htmlb.

 https://www.solutionsguides.com/uploads/scm__2__blocher_7

 https://www.mindtools.com/pages/article/SWOTsuccessfulstrategforthe
future.