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    Assignment 2

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    estesgadz

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    © All Rights Reserved
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    Assignment 2

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    estesgadz
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    Assignment 2

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    Prince John T.

    Guhiling BSA-3

    ASSIGNMENT

    STRATEGIC COST 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.

    Step 1

    In the differentiation strategy, a business aims to develop products and services that
    are different and special in certain respects in the minds of the consumer.

    The most common method of distinguishing one organization from another is by


    branding. With this approach, a brand name like Reebok or TAG Heuer takes on a position
    that is distinct from all other shoes or watches.

    Mr. J’s company specializes in designer women’s wear and is regarded as a high-end
    brand. The company’s clothes are brand new designs that appeal to a specific group of
    customers and are sold at a premium price. It is evident from this that the company follows a
    differentiation strategy.

    Step 2

    Since the company is regarded as an elite brand, selling goods to large department
    stores would have a negative effect on the company’s reputation. Accepting the large
    department’s orders would shift the company into a new strategy of making clothes available
    to a large number of customers, which would directly harm the company’s elite brand image.
    The company received the orders due to its current brand image, but in the long run, the
    company’s brand image could deteriorate, resulting in the loss of the existing contracts.

    Mr. J’s company using this differentiation strategy must look for core strength or skill
    that sets them apart from the competition.

    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?

    In order to execute flawlessly and establish Jim’s supposed new business plan he
    should first develop strategies to be able to stay consistently in the market. The following
    must be pondered and taken action in regards to starting his own business;

    a. Jim must choose whether he should compete using cost-leadership or differentiation and
    might as well determine the mission of his new business.

    b. Once a competitive strategy is chosen he then considers various means for implementing
    such competitive strategy

    i. SWOT ANALYSIS
    ii. FOCUS ON EXECUTION
    iii. VALUE CHAIN ANALYSIS
    iv. BALANCE SCORECARD AND STRATEGY MAP

    c. Identify the business’ strengths, weaknesses, opportunities and threats

    STRENGTHS

    i. Unique design in product line


    ii. The passion of owner when it comes to making racing sailboats
    WEAKNESSES

    i. Experience on starting and managing a business

    OPPORTUNITIES

    i. Bargaining power on customers and suppliers

    THREATS

    i. Availability of substitute products

    d. Clearly identifying the CSFs of his new business and then communicated and acted upon,
    and this will depend on the chosen strategy on letter a.

    e. In choosing the appropriate strategy it might be suitable for him to apply the differentiation
    because based on the SWOT above he works best in product engineering wherein he will be
    able to provide unique products unavailable from the market, has strong marketing capability
    and technological leadership and in having unique skills. Moreover, in order to execute this
    strategy there must be a strong coordination when it comes to research, product development,
    manufacturing and marketing.

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

    i. 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.
    ii. He can also use his favors when it comes to designing in order to give more value to
    the product.

    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.

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