Strategic Positioning
Increase customer value to create a sustainable competitive advantage is achieved through judicious selection of strategies. Cost information plays a critical role in this process through a process called strategic cost management Strategic cost management is the use of cost data to develop and identify superior strategic position that corresponds to one of two general strategies. (1) cost leadership and (2) superior products through differentiation. The objective of the cost leadership strategy is to provide the same or better value to customers at a lower cost than competitors; its objective is to increase customer value by reducing sacrifice. For example, reducing the cost of making a product by improving a process would allow the firm to reduce the product’s selling price, thus reducing customer sacrifice, A differentiation strategy, on the other hand, increase customer value by increasing realization. Providing customers with something not provided by competitors creates a competitive advantage. For example, a computer retailer could offer on-site repair service, a feature not offered by other rivals in the local market. Of cause a viable differentiation strategy must ensure that the value added to the customer by differentiation strategy must ensure that the value added to the customer by differentiation exceeds the firm’s cost of providing the differentiation. Typically, different strategies require different cost information, implying that cost systems may differ according to the strategy adopted by a firm.
Strategic Positioning
Increase customer value to create a sustainable competitive advantage is achieved through judicious selection of strategies. Cost information plays a critical role in this process through a process called strategic cost management Strategic cost management is the use of cost data to develop and identify superior strategic position that corresponds to one of two general strategies. (1) cost leadership and (2) superior products through differentiation. The objective of the cost leadership strategy is to provide the same or better value to customers at a lower cost than competitors; its objective is to increase customer value by reducing sacrifice. For example, reducing the cost of making a product by improving a process would allow the firm to reduce the product’s selling price, thus reducing customer sacrifice, A differentiation strategy, on the other hand, increase customer value by increasing realization. Providing customers with something not provided by competitors creates a competitive advantage. For example, a computer retailer could offer on-site repair service, a feature not offered by other rivals in the local market. Of cause a viable differentiation strategy must ensure that the value added to the customer by differentiation strategy must ensure that the value added to the customer by differentiation exceeds the firm’s cost of providing the differentiation. Typically, different strategies require different cost information, implying that cost systems may differ according to the strategy adopted by a firm.
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