Strategic Cost Management and the Value Chain
2.1 Strategic Cost Management and the Value Chain
Introduction
This article by John K. Shank and Vijay Govindarajan discuss in depth on the Strategic Cost Management (SCG) and the Value Chain concept applied in real world situation from the airline industry. The Value Chain concept is divided into two (2) main strategies which are the Low-Cost Strategy and Differentiation Strategy. From the article also, Shank and Govindasamy stated that the primary focus of a low cost strategy is to achieve the lowest cost comparative to competitors while the main focus of the differentiation strategy is to create something that customers perceive as being unique. Furthermore, the framework of the value chain is for breaking down the chain into strategically relevant activities.
Methodology
There are two (2) main steps involved in the Value Chain which are to identify the value chain in the industry’s value chain, while the second step in constructing and using a value chain is to diagnose the cost drivers that explain variations in costs in each value activity. It is an interrelated chain of activities production line.
A B C D E
In the value of chain framework, multiple cost drivers are usually at work, where output per se is seen to capture little of the richness of cost behavior. Two (2) categories of cost drivers are the Structural and Executional Cost Drivers. Structural Cost Drivers derive from a company’s choices about its underlying economic structure; whereas Executional Cost Drivers are those determinants of a firm’s cost position that is the turning point on its ability to ‘execute’ successfully.
Life-cycle costing is a costing concept that argues for including all the costs incurred for a product as part of the product cost. It deals explicitly with the relationship between what a customer pays for a product and the total cost that the customer incurs over the life of the product. The power of the value chain
Introduction
This article by John K. Shank and Vijay Govindarajan discuss in depth on the Strategic Cost Management (SCG) and the Value Chain concept applied in real world situation from the airline industry. The Value Chain concept is divided into two (2) main strategies which are the Low-Cost Strategy and Differentiation Strategy. From the article also, Shank and Govindasamy stated that the primary focus of a low cost strategy is to achieve the lowest cost comparative to competitors while the main focus of the differentiation strategy is to create something that customers perceive as being unique. Furthermore, the framework of the value chain is for breaking down the chain into strategically relevant activities.
Methodology
There are two (2) main steps involved in the Value Chain which are to identify the value chain in the industry’s value chain, while the second step in constructing and using a value chain is to diagnose the cost drivers that explain variations in costs in each value activity. It is an interrelated chain of activities production line.
A B C D E
In the value of chain framework, multiple cost drivers are usually at work, where output per se is seen to capture little of the richness of cost behavior. Two (2) categories of cost drivers are the Structural and Executional Cost Drivers. Structural Cost Drivers derive from a company’s choices about its underlying economic structure; whereas Executional Cost Drivers are those determinants of a firm’s cost position that is the turning point on its ability to ‘execute’ successfully.
Life-cycle costing is a costing concept that argues for including all the costs incurred for a product as part of the product cost. It deals explicitly with the relationship between what a customer pays for a product and the total cost that the customer incurs over the life of the product. The power of the value chain