cost12eppt_13.pptVIP

CHAPTER 13 Strategy, Balanced Scorecard and Strategic Profitability Analysis Strategy Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives A thorough understanding of the industry is critical to implementing a successful strategy Five Aspects of Industry Analysis Number and strength of competitors Potential entrants to the market Availability of equivalent products Bargaining power of customers Bargaining power of input suppliers Basic Business Strategies Product Differentiation – an organization’s ability to offer products or services perceived by its customers to be superior and unique relative to the products or services of its competitors Leads to brand loyalty and the willingness of customers to pay high prices Cost Leadership – an organization’s ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control Leads to lower selling prices Implementation of Strategy Many companies have introduced a Balanced Scorecard to manage the implementation of their strategies The Balanced Scorecard The balanced scorecard translates an organization’s mission and strategy into a set of performance measures that provides the framework for implementing its strategy It is called the balanced scorecard because it balances the use of financial and nonfinancial performance measures to evaluate performance Balanced Scorecard Perspectives Financial Customer Internal Business Perspective Learning and Growth The Financial Perspective Evaluates the profitability of the strategy Uses the most objective measures in the scorecard The other three perspectives eventually feed back into this dimension The Customer Perspective Identifies targeted customer and market segments and measures the company’s success in these segments The Internal Business Prospective Focuses on internal operations that create value for customers