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Test bank for cost management a strategic emphasis 7th edition by blocher
1. TEST BANK for Cost Management A Strategic Emphasis 7th Edition by
Blocher
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SOLUTIONS MANUAL for Cost Management A Strategic Emphasis 7th
Edition by Blocher
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Chap ter 02
Impl eme nti ng Strateg y: The Valu e Ch ai n, the Bala nc ed Scor ec
ard a nd the Stra
tegy Map
M ul tip le Choi ce Ques tio ns
1. In SWOT analys is, strengths and we aknesses are most easily identified by looking:
A. At the firm as a potential cus tomer.
B. Inside the firm at its specific resources.
C. At the firm's competition.
D. At the firm's product.
E. Outside the firm fro m a cons ultant's persp ective.
2. In SWOT analys is, oppor tunities and threats are identified by :
2. A. Co nsu ltation with middle
management. B. Talk ing with the ra nk
and file workers. C. Lookin g outside the
firm.
D. Brainstor ming tec hniques.
E. Reviewing our corpora te stra tegy.
3. 3. Which of the follow ing does not re present a pos sible oppor tunity for a manufactur ing firm as
a par t of SWOT analysis?
A. De mographic trends .
B. Tec hnological advances in the industry .
C. A patent developed by another firm for manufactur ing a pr oduc
t. D. Ch anges in regula tion of the industry.
E. Ch anges in the economic env iro nment facing all industries.
4. The balanced sc orecard :
A. Is not co mpr ehensive, since it does n't inclu de all the critica l success fac tors wh ich co
ntribute to co mpetitive success .
B. He lps focus managers' attention to bottom line profits.
C. Is for war d lookin g, stress ing nonfinanc ial meas ures that ca n lead to benefits in the
future. D. Fails to re flect envir onmental and social effects of the firm's operations.
E. Is heavily we ighted toward the financial critical success fac tors .
5. The balanced sc orecard can be made mor e effective by deve loping it at a detail lev el so
that employe es:
A. Ca n se e how it is put together.
B. Apprecia te all the effor t that goes into its pr epara tion.
C. Respect management for including them in its formulation.
D. Ca n se e how their actions co ntribute to the success of the
firm. E. Do not feel left out.
4. 6. The Eur o is:
A. A co mbination of European nations that co oper ate on economic and tra de
matters . B. A ve rsio n of Disney World located near Paris .
C. A cu rre ncy used in many European co
untries . D. A cu rre ncy used in all European co
untries.
7. The main objec tive of value cha in analysis is to identify stages of the va lue chain where the firm
ca n:
A. Justify increases in the pr ice of the produc t or se rvice.
B. Incr ease va lue to the cu stomer or re duce cost in some
way. C. Outsource production to other pro ducers.
D. Impr ove efficiency.
8. It is beco ming more co mmon to see manufac turing firms use the value chain to take stra
tegic steps to improv e the overall pr ofitability of the firm by :
A. Placing greater emphasis on the va lue ch ain.
B. Mov ing to an emphasis on ups tream activities in the value chain.
C. Mov ing to an emphasis on downstream ac tivities in the value
chain. D. Identifyin g mos t pr ofitable customers .
E. Mov ing to an emphasis on both the upstream and downstream activities in the va lue chain.
9. With regard to cr itical success factors , whic h one of the following would not be considered a
financial measu re of success?
A. Cash flow.
B. Growth in indus try
productivity. C. Sales growth.
6. 10. Which one of the follow ing customer critical success fac tors is bes t meas ured by wa rra
nty ex pense ?
A. Quality.
B. De aler and distrib utor efficiency and
effectiveness . C. Timeliness of delivery .
D. Customer sa tisfac tion.
11. Which one of the follow ing is not usually inc luded as a perspective of the balan ced scorecard?
A. Financia l Per for
mance. B. Tax Re porting.
C. Learning and Growth.
D. Customer Satisfac
tion.
E. Inter nal Business Processes.
12. Which of the follow ing best descr ibes the typ e of information that cost management mus t
provide that is mos t impor tant for the success of the org aniza tion?
A. Short term infor mation for decision mak
ing. B. Re por ted financ ial information.
C. Re por ted nonfinancial information.
D. Infor mation that addr esses the strategic objectives of the organiza
tion. E. Long- term planning information.
7. 13. After cr itical success factors (CSFs) have been identified, the nex t step in deve loping a co
mpetitive stra tegy is to dev elop relevant and re liable measure for thes e CSFs. These measures
ar e impor tant to help the organiza tion:
A. Mak e pro fit for any extended period.
B. Incr ease sa les above previous ye ar(s) .
C. Develop policies to enhance customer profitability.
D. Impr ove produc tivity in selec ted pro duc t areas.
E. Monitor pro gress tow ard ach ieving stra tegic goals.
14. A firm has decid ed to use the balanced scor ecard. Whic h of the following is not an adva ntage
the co mpany will gain by us ing the balance d sc orecard ?
A. It link s the firm's CSFs to its strategy .
B. It helps the firm monitor progr ess to achiev ement of its strategic goals .
C. It can provide a bas is for implementing stra tegic ch anges desir ed by the
firm. D. It prov ides a co mprehensive financia l ove rview of the firm.
E. It helps to coordinate ac tivities in the firm.
15. Du ring which step of va lue ch ain analysis will the company discover whether or not it has a
cost advantage, and why?
A. Du ring the first step, when the va lue- chain activities ar e
identified. B. Du ring the first step, when the co st driver(s) are
identified.
C. Du ring the seco nd step, when the firm dev elops a competitive advantage by either
reducing cost or adding value.
D. The entire purp ose of value cha in analysis is to determine if the company has a
cost advantage ; therefore , it oc curs in all steps.
E. In the third step, wh en the co mpany adopts and implements the balanced scorecard.
8. 16. A loc al pharmac eutical firm has just announce d its discove ry of a revo lutionary new drug for
dieting. Howeve r, due to its deteriora ting re lationsh ip with its union, the unioniz ed por tions of
the co mpany's employees have thr eatened to strik e. In addition, the company's stock has star
ted to dr op due to the firm's difficulty in payin g off some of its debt. In this ex ample, what was
the firm's co re competency( ies)?
A. Its re search and deve
lopment. B. Its human resources
abilities. C. Its financ ing
activities.
D. Its ope rating activities.
17. Du ring the strengths and weaknesses por tion of a firm's SWOT analysis, which of the
following wo uld not be discove red?
A. The firm's method of product distribution was not very efficien t.
B. Through co ntinued research and deve lopment, the firm's pro ducts we re state- of-the- art.
C. Du e to a lack of bar riers to entry into the industry , se veral new c ompetitor s were
beginning to enter the marke t.
D. The production process needed to be reengineered to reduce unnecessary scrap.
E. The firm's employees ar e trained in new manufactur ing methods each month.
18. When a firm is determining its opp or tunities and thr eats, which of the follow ing would not
be mentioned?
A. An intense rivalry with a local co mpetitor was beginning to start a price war
. B. The firm just rec eived a patent on its main product.
C. The success of the firm's latest marketing ca mpaign.
D. In sp ite of its patent, ther e ar e several subs titute produc ts co nsu mer s co
uld use. E. Incr eased competition in some of its key pr oduct lines.
9. 19. The declining value of the U.S. dollar re lative to other cu rrencies in re cent years means that:
A. U.S. exporters will face a gre ater challenge in expor ting U.S. - made pr
oduc ts. B. U.S. firms will be eager to buy foreign products .
C. U.S. firms will be less profitable.
D. U.S. ex porters will have a tempora ry advantage over other countries in for eign
trade. E. The U.S. trade balance will worsen .
20. The cause and effect re lationships among cr itica l success factors ar e best captured in:
A. The balanced sc orecard
. B. Business intelligence .
C. The value chain.
D. The strategy map.
E. SWOT analysis.
21. Which of the follow ing typ es of or ganizations ca n most benefit fro m va lue chain analysis?
A. Serv ice firms.
B. No t- for - pro fit
organizations. C. Manufactur
ing firms .
D. All typ es of organiza tions can benefit fro m va lue ch ain analys is.
22. Which of the follow ing would not likely be a per spective of a balanced scorecard for a
consumer pr oduc ts re tailer?
A. Learning and innova
tion. B. Inter nal processes
.
10. C. Financia l perfor
mance. D. Customer sa
tisfac tion.
E. Research and development.
11. 23. Which of the follow ing statements co ncerning value chain analysis is false?
A. The goal of value chain analysis is to find ar eas where a co mpany c an either add value
or re duce cost.
B. The value chain foc uses on the entire pro duction process , as we ll as the sale of the pro
duct and service after the sa le.
C. If a co mpany ca nnot co mpete in a sp ecific area of the value ch ain, it might co nsid er the
option of outso urc ing that por tion of the va lue chain to so meone who can per form it better.
D. Throughout mos t industries , the most successful firms are the ones that opera te within
the entire value chain, ther eby ov erseeing eve ry as pect of the va lue chain for the
customer.
24. Which of the follow ing would likely not be consid ere d par t of the va lue cha in in a ser vice firm?
A. Inspection of pr oduc
t. B. Advertising.
C. Employee tra ining.
D. Customer service.
E. Materials handling.
25. When per forming value chain analysis, which of the following should a firm take into account?
A. The firm's c ompetitive
position. B. Opportunities to re
duce cost.
C. Poss ible oppor tunities where value ca n be added.
D. The decis ion to enter or leav e an activity in the va lue
chain. E. All of thes e answer ch oices are correct.
12. 26. Both cost leadership and differ entiated firms ca n improv e on execution through:
A. Impr ove d automation and a higher output of pr
oducts. B. Benchmarking and total quality management.
C. Cost cu tting and downsizing of personnel.
D. Emphasis on research and pr oduc t deve
lopment. E. No ne of these answer choices are
correct.
27. To incre ase pro fitability, companies such as IBM and General Electric have sh ifted their stra
tegic focus toward :
A. Incr eas ing equipment sales.
B. Impr ovin g so ftwar e applications .
C. Prov iding new and enhance d customer
services. D. No ne of these answer choices are
correct.
28. Which of the follow ing is not a key benefit of the balan ce d scor ecard (BSC)?
A. It prov ides a means for implementing stra tegy.
B. It prov ides an objective basis for determining each manager's c ompensation
and advance ment.
C. It prov ides a fra mework for the firm to achieve a desired organiza tional change in strategy
. D. It prov ides a baseline for how a firm's financ ial opera tions co mpare to co mpetition
within the
industry .
13. 29. A stra tegy map is:
A. A detailed flowchar t outlining wh ich firm manag ers are re sponsib le for each
implementation of a firm's stra tegy and when these implementations ar e to take place .
B. A ca use and effec t diagram of the re lationships among the balanced sco recard persp
ectives to sh ow how the achieve ment of cr itica l success factors in each perspec tive affects
the ac hievement of goals in other persp ectives and the ove rall financial per formance of the
firm.
C. A framew ork for the firm to ach ieve a desir ed organizational change in stra tegy wh ile
mapping th e successes of other firms within the indus try.
D. No ne of these answer choices are correct.
30. Sustainability is the balancing of sh ort and long ter m goals in all three dimensions of
the co mpany's performance. Those three areas are :
A. Economic, socia l, and env iro
nmental. B. Economic, socia l, and
financ ial.
C. Economic, envir onmental, and politica
l. D. Social, environmental, and financial.
31. Ov er the past several ye ars it has become increasingly important for firms to impr ove ac
hievement towards their social and envir onmental res ponsib ilities. What is the best way the
management accountant can help the firm improve on sus tainability?
A. Participate in progra ms of env iro nmental organiza tions.
B. Develop and implement a legal staff and public relations staff for dealing with sustainability
issues that may affect the firm.
C. Develop and implement a sus tainability
scorecard. D. Risk management.
14. 32. In terms of strategic cost management for not- for - pro fit organ iza tions, which of the follow
ing is false?
A. No t- for - pro fit organizations ca n benefit fro m stra tegic cost management since they must
prove their effectiveness and efficiency to a number of differ ent stake holders.
B. The balanced sc orecard can be used to measure the or ganization's per formance.
C. Value chain analysis c an be used for analyzing the organiza tion's pro duct desig n, pr
oduct testing, adve rtising, and production processes.
D. SWOT analysis is most helpful for non- pro fit organizations wh en it deals with
the or ganization's co mpetitive thr eats, opportunities , and cr itical success
factors.
33. In or der to remain competitive in the contempora ry bus iness environment, several firms have
star ted training their employe es to stop viewing pro blems as s trictly functional - that is, as only
a marke ting problem, or an accounting problem, for example. Wha t does this trend illus trate
about stra tegic management?
A. There has been a renewed emphasis on integr ative t hink ing and so lvin g pro blem cr
oss - functionally.
B. Func tional barr iers are an inherent part of a co mpany's value
chain. C. Firms ar e increas ingly s eeing the va lue of bus iness
intelligence .
D. SWOT analysis is desig ned to break down functional barriers.
34. Which of the follow ing organiz ations presents awards to firms that excel at execution of strategy
, based on cr iter ia such as leadership, mar keting, strategic planning and process manage
ment?
A. Inter national Organization for Standardiza
tion. B. Malco lm Baldrige National Quality
Program.
15. C. Global Re porting Initiative
. D. World Resources Ins
titute.
E. American Ins titute of Cer tified Public Accountants.
16. 35. The financia l cr itical success factor of profitability can be measured by :
A. Co mmunity serv ice activities .
B. Customer retur ns and co
mplaints. C. Nu mber of product
defects.
D. Nu mber of desig n ch
anges. E. Earnings from
operations.
36. Us ing value- chain analysis, a firm ca n deve lop a co mpetitive adva ntage by s pec ifica lly
lookin g for ways to:
A. Add va lue and reduce cost.
B. Impr ove manufacturing
productivity. C. Impr ove cus tomer se
rvice .
D. Impr ove produc t quality.
E. Re duce or ganiz ational risk.
37. Value activities can best be defined as:
A. Activities that firms in the industry mus t per form to improve a pro duc t.
B. Activities that firms in the industry mus t per form in the process of pr oduc ing the or pr ovid
ing the se rvice .
C. Activities that firms in the industry mus t per form in the process of closing dow n a product
line, inc luding cu stomer se rvice .
D. Activities that firms in the industry mus t per form to cons ider ways of mark eting a pr oduc t.
E. Activities that firms in the industry mus t per form in the process of co nsidering new
products , inc luding cu stomer se rvice .
17. 38. The Wor ld Res ources Institute has defined:
A. Typ es of cost manag ement.
B. Ca tegor ies for env ironmental per formance
indicators. C. Methods for ach ieving sustainab ility.
D. Ca tegor ies for ec onomic per formance indic
ators .
39. A firm su cceeds on its ability to deliver products to customers more quickly than riva l
companies in its industry . This skill is an exa mple of the firm's:
A. Co re competency.
B. Research effectiveness.
C. Production efficiency .
D. Cost co ntro l effectiveness
.
E. Value-chain analysis.
40. SWOT analysis, a valuable analys is tool, stand s for:
A. Stre ngths - Wor kability - Oppor tunities - Threats.
B. Stra tegies - Weaknesses - Opportunities - Thre ats.
C. Stre ngths - Weaknesses - Observa tions - Threats.
D. Stre ngths - Weaknesses - Opportunities - Threats.
E. Stra tegies - Weaknesses - Obse rva tions - Thre
ats.
41. Which of the follow ing perspec tives of a Balanced Scorecard would most likely be the
ultimate goal in a strategy map for a public co mpany?
18. A. Learning and innova
tion. B. Inter nal processes
.
C. Financia l perfor
mance. D. Customer
service.
E. Employees and co mmunity.
19. 42. Some of the indicators of a gr ow ing conce rn for sus tainability include:
A. The liquidity crisis and su b-pr ime loan
scandals. B. The global economic recession.
C. The increased use of value cha in analysis.
D. The increased concern about climate change.
E. The increased use of the balance d scorecard
.
43. Patagon ia, mak er of clo thing and gear for outdoor enthusiasts , is very co nscious of su
stainability issues. The company chose not to pr oduc e a pro duc t because:
A. The cost of manufactur ing the product exce eded its target cost.
B. There was not su fficien t demand for the pr oduc t at the planned
price. C. The environmental impact of tox ic was te was unacceptable.
D. The environmental impact of producing the product in terms of carbon emissions and ener
gy co nsu mptions was unacceptable.
E. The company co uld not justify adding another pro duc t when there we re acceptable alter
natives alre ady in the company's pro duct offeri ngs .
44. The increase of the U.S. dollar relative to other currencies has c aused firms in the U.S.to:
A. Experience incr eas ing sales in the
U.S. B. Experience incr eas ing sales
worldwide .
C. Co nsider strategic ally beneficial inves tments ove rseas.
D. Re quire bus iness partners to mak e payments in advance.
45. NAFTA and WTO refer to:
20. A. Org anizations with exp ertise in business pr ocess impr ove
ment. B. Laws and organizations which regulate interna tional
trade.
C. Laws and regulations re garding sustainability.
D. Org anizations and trade gro ups that work for global eco nomic development.
21. 46. The five steps of stra tegic dec ision - mak ing include all of the following steps except:
A. Obtain information and co nduc t
analyses. B. De termine the organization's
stra tegy.
C. Identify the alternative actions .
D. Co ntinue an on - going eva luation of the pro
blem. E. Ch oose and implement the des ired
action.
47. A final step in the SWOT analysis is to identify quantitative measures for the:
A. Value propositions.
B. Co mpetitor analyses.
C. Cr itical success factors.
D. Value propositions and also cr itical success factors .
E. Co mpetitor analyses and also cr itical success factors.
48. Which of the follow ing is leas t likely to be a cr itica l success fac tor for a cost leader ship firm?
A. Financia l meas ure of
performance. B. Learning and gr owth
indicator .
C. Measure of opera tional
efficiency. D. Brand recognition.
49. All of the follo wing are required resources for differentiation except:
A. Product engineer ing.
22. B. Co rpora te reputation for
quality. C. Intens e su pervision of
labor.
D. Stro ng marketing ca pability.
23. 50. All of the follo wing are required resources for cos t leadership except:
A. Substantial capital inves
tment. B. Stro ng marketing ca
pability.
C. Products des igned for ease of manufac
turing . D. Process engineer ing skills.
51. Which of the follow ing is not a ter m us ed for a phase of the va lue chain?
A. Operations.
B. Upstream.
C. Downstre am.
D. Sustainability.
52. Which of the follow ing measu res wo uld likely be found on the financial persp ective section of
a balanced scorecard?
A. Sales growth.
B. Customer retention.
C. Efficiency of manufactur ing.
D. Incr ease in number of sa les s taff.
53. A meas ure of res earch and deve lopment on the balance d scor ecard cou ld include:
A. Marke t share.
B. Nu mber of new pr
oducts . C. Sales growth.
D. Cash flows.
24. 54. Which of the follow ing is not a reason why global companies choose to re port on cor
porate re sponsib ility?
A. Ethic al cons ider ations
. B. Innovation and
learning. C. Risk
management.
D. Marke t
share. E. Saves
time.
55. Which of the follow ing is not an env ironmental performance indica tor?
A. Fossil fuel use.
B. Ca rbon emissio
ns. C. Fresh water
usa ge.
D. Percentage of employ ees with flu vacc inations.
56. The Global Repor ting Initiative is an independent group that par tners with other gro ups
to address the measurement of sus tainability, inc luding a partnersh ip with:
A. The U.S. government.
B. The U.S. De par tment of Defens
e. C. The United Nations.
D. The Eur opean Commission.
57. Michael Porter's five competitive for ces inclu de which one of the following?
A. Global co mpetition.
25. B. Intens ity of demand by customers
. C. Bargaining pow er of co mpetitor
s.
D. Intens ity of riva lry among co mpetitors.
26. 58. Effective execution of the cost leadership strategy requir es all of the follow ing except:
A. Incen tives base d on meeting strict quantitative
goals. B. Frequent, detailed control repor ts.
C. Tight cost contro l.
D. Stru cture d organiza tion and policies .
E. Stro ng coordination among func tions: rese arch, pr oduct development, manufac turing ,
and marke ting.
59. The differentiation strategy re quires all of the following res ources, except:
A. Stro ng marketing ca pability.
B. Long tradition in the indus try or unique
skills. C. Product engineer ing.
D. Products des igned for ease of manufac ture .
E. Co rpora te reputation for quality or technology leadership.
Ess ay Ques tio ns
27. 60. Automobile engines have become more co mplex over the past twenty y ears, partly as a result
of env iro nmental conce rns about ex haust contaminants. Engineers have deve loped two basic
approach es to so lvin g the co ntaminant pr oblem. The firs t emphasize d th e ca talytic conve
rter, a modification of the automobile exhaust sys tem desig ned to break dow n pollutants. The
second emphasize d redesig n of the automobile engine's co mbus tion process , which adds
more than twice the cost of the ca talytic conver ter alone. However, redesigning the co
mbustion process us ually results in improved full efficiency.
Re quire d:
(a ) Co mment on the strategic adva ntage of re desig ning the co mbustion process ve rsus
simply adding a catalytic conve rter.
(b ) Wha t are the ethical ques tions, if any, that sh ould be addressed in the above decision?
28. 61. Studeb aker Cor pora tion, one of the ear lies t auto manufacturers, prosper ed in the late 1940 's
and into the 1950 's. Its advertising after Wor ld War II emphas ized quality of des ign an d
production. The corporation also used the stability of its wo rk force in its advertise ments, often
featuring pic tures of father and son working side by side in its fac tories .
Re quir ed:
(a ) From just this brief description of Studebaker Corporation, which type of competitive stra tegy
- cost leadership or differentiation,- would yo u guess Studebaker was us ing? Explain your
choice . (b ) Give n your answer in Part (a ), speculate on what mar ket factors might have ca
used the co rpora tion to go into bankruptcy and cease pro duc tion in the mid - 1960s.
29. 62. Many products in the marketplace today ar e built fro m components des igned and manufac
tured by sub -contractors. While the ex tent of t his prac tice is not well known to consumers,
manufactur e and sale of multi- component units that us e parts from many differe nt co mpanies
co ntinues to gr ow.
Re quire d:
If the as se mbling company is us ing value - chain analysis in its stra tegic planning, co mme nt
on the following:
(a ) The cos t jus tifica tion for subcontracting.
(b ) The willingness of consu mers to buy pr oducts they know contain subcontracted
parts. (c) The pro blems of quality c ontrol facin g the assembling company.
30. 63. Exeter Indus tries produces and markets s eve ral lines of food and bev era ge produc ts. The co
mpany plans to expand its market to cover a new geographical ar ea, and the firs t pr oduc ts to
be introduced into this new marke t ar e thre e of Exe ter's c offees. A meeting of t he marke ting
co mmittee has been ca lled to determine the pr icing and promotional strategy for the introduc
tion of these coffees . Exeter has adopted the differentiation strategy and is using the mar keting
co mmittee to co me up with the pro per way to execute this strategy in the firm's pric ing and pr
omotional policy.
Mark Williams, vice president of marketing, has su gges ted that Exeter continue its policy of pr
emium pricing for Rich Roas t Coffee in the new mark et. "Rich Roas t is a superior blend of
Braz ilian coffees and should have little difficu lty gaining customer acceptance . The use of
other pr omotional stra tegies doesn't appear nec essary at this time."
Ca ro l Ra ndolph, general sales manager, agree d with this strategy for Rich Roast but
re commended a differ e nt appr oach for Vitality Co ffee, Exeter's bra nd of deca ffeinated coffee.
"Vitality is an unknown name in this region and will requir e a determined pro motional effor t to
gain marke t share from other very co mpetitive products. We could try pene tration pric in g or
packaging options c ombined with either manufacture r's co upons or rebates. Wha tever strategy
we select,
we should hit the marke t hard if we want to be successful."
Da n Felton has been appointed regional sales manager for the new geographica l area and is
co ncerned about the acceptance of Mellow Roast Coffee, a blend of re gular and decaffeinated
co ffees. "This is a brand new type of coffee in this region and may jus t sit on the sh elf unless
we develop an effective advertising ca mpaign." Pric ing or packag ing options will be wor thless
unless the pr oduc t gains so me visibility and the targeted customer base is made aware of the
bene fits of Mellow Ro ast. We nee d a good slo gan like "A gentle wakeup without ca ffeine
stress!"
Re quir ed:
Mark Williams has s ug gested the co ntinuance of premium pr icin g for Rich Roast Co ffee.
Explain the stra tegic role of pr emium pr icing, and describe the economic c irc umstances in the
marke tplace that wo uld enco ura ge the use of this pric ing strategy . (CMA adapted)
31. 64. Williams Instruments manufactures sp ecialized surgical equip ment for hospitals and c linics
throughout the wor ld. One of Williams' mos t popular products , compris ing 40% of its reve
nues and 35% of its profits, is a blood pressure measur ing dev ice . Avera ge production and
sales are
400 units per month. Williams has ach ieve d its success in the market through excellent
customer se rvice and pro duct reliability. The manufacturing process c ons ists pr imarily of
assembly of co mponents purchased from va rious elect ro nic firms, plus a sma ll amount of
metalwork ing and finishing. The manufac turing operations c ost $600 per unit. The purchased
par ts c ost Williams
$800 , of wh ich $300 is for parts wh ich Williams c ould manufacture in its ex isting fac ility for
$100
in mater i als for each unit, plus an inves tment in labor and equipment wh ich would cost
$175,000 per month.
Also, Williams is consid ering outsourcing to another firm, Matrix Concepts, Inc., the marke ting,
dis tribution, and servicing for its units. This would save Wi lliams $75,000 in monthly materials
and labor costs. The cost of the co ntract would be $125 per product.
Re quire d:
(1 ) Prepare a value ch ain analys is for Williams to as sist in the decis ion whether to manufactur
e or buy the par ts, and whether to co ntrac t out the mark eting, dis tribution, and s erv icing of
the units. (2 ) Should Williams continue to: (a ) purchase the par ts or manufactur e them? (b) prov
ide the marke ting, distrib ution and service, or outsource this ac tivity to Matrix? Exp lain your
answers .
32. 65. Lev is Stra uss and Co, maker of Levi' s familiar 501 and Made and Cr afted brands of jeans, also
mak es a bra nd that wa s intro duced for discount retailers such as Walmart and Kmart. Lev i's
stra tegy with the new jeans (the Signature bra nd) was to se ll a competitive ly pr ice d pair of
jeans . The jeans are abou t one- half or less the pric e of the familiar 501 and Made and Cr afted
jeans. To get costs down Lev i's:
• Us es c heaper fabr ics and materials.
• Shuns costly mass - market adv ertising.
• Stric tly limits the number of fits, styles , and
colors. Re quire d:
1. Ass ess the new stra tegy at Lev i. Wha t do yo u think ar e the potential bene fits and risks?
2. Ho w will the firm's va lue ch ain and balanced scorecard change as a resu lt of the new stra
tegy ?
33. 66. Gor don Manufacturing produc es high - end fur niture products for the luxury hotel industry . Gor
don has succeeded thr ough excellence in desig n, careful attention to quality in manufacturing
and in customer service, and through continuous product innovation. The manufac turing process
at Gor don begins with a close consu ltation with each customer so that the finished pro duct
exac tly meets the customer's s pecifica tions. This commonly means unique des igns, spec ial
fabrics, and high leve ls of manufactu ring quality. In addition, Gordon believes that a key c
ompetitive edge it has over other co mpetitors is that it has an outstanding des ign staff that is
able to wo rk with customers to co me up with product designs that go bey ond the customer's
expec tations. Anticipa ting a grow th in the demand for lux ury hotel rooms, Gord on has
expanded its ope rations to inc lude one new manufac turing plant, and by refitting so me of the
older plants with newer,
more efficient equipment. The ins tallation of the new equipment has ca use d so me delays in
filling so me customer orders, and Gordon has sh ifted production fro m those plants with the
delays to other manufactur ing plants. The re sult has been an incr ease in some processing
costs, transportation cos ts, and delays in meeting customer or der deadlines . Also, the
introduction of
the new equipment has created some tens ions with employe es who see the new, mor e efficient
equip ment as a potential thr eat to their job secu rity. Ther e is also some dis agreement
among managers as to wh ether the new equipment will improv e or reduce quality.
Re quire d:
Develop a SWOT analys is for Gord on Manufactur ing. Lis t one or more items in each ca tegory.
34. 67. Gor don Manufacturing produc es high - end fur niture products for the luxury hotel industry . Gor
don has succeeded thr ough excellence in desig n, careful attention to quality in manufacturing
and in customer service, and through continuous product innovation. The manufac turing process
at Gor don begins with a close consu ltation with each cu stomer so that the finished pro duct
exac tly meets the customer's s pecifica tions. This commonly means unique des igns, spec ial
fabrics, and high leve ls of manufactur ing quality. In addition, Gordon believes that a key c
ompetitive edge it has over other co mpe titors is that it has an outstanding des ign staff that is
able to wo rk with customers to co me up with product designs that go bey ond the customer's
expec tations.
Re quire d:
Present a value chain for Gor don Manufacturing with at least five activities and e xp lain the role
of each activity in the va lue chain.
35. 68. Gor don Manufacturing produc es high - end fur niture products for the luxury hotel industry . Gor
don has succeeded thr ough excellence in desig n, careful attention to quality in manufacturing
and in customer service, and through continuous product innovation. The manufac turing process
at Gor don begins with a close consu ltation with each customer so that the finished pro duct
exac tly meets the customer's s pecifica tions. This commonly means unique des igns, spec ial
fabrics, and high leve ls of manufactur ing quality. In addition, Gordon believes that a key c
ompetitive edge it has over other co mpetitors is that it has an outstanding des ign staff that is
able to wo rk with customers to co me up with product designs that go bey ond the customer's
expec tations.
Re quire d:
Present a balanced scorecard for Gordon Manufactur ing with four per spectives and at leas t
three quan titative critical success fac tors in eac h perspective .
36. 69. The tire business is beco ming incre asingly co mpetitive as new manufacturers from Southeast
Asia and elsewhere enter the global marke tplace . At the sa me time, cu stomer expectations
for per formance, tre ad life, and s afety co ntinue to increase . An increasin g va riety of ve hic
les , from the sma ll and innovative gas /electric v ehic les to the larg e SUVs , plac e more
demands on tire des igners and on tire manufacturing flexib ility. Establish ed brands s uch as
Goody ear and Firestone must look to new ways to compete and maintain profitability.
Re quir ed:
1. Is the co mpetitive stra tegy of a global tire mak er cost leadership or differentiation?
Explain yo ur answer.
2. Wha t ar e the ethical issues, if any , for tire manufactur ers?
37. 70. In the late 1990 s, the bicycle maker Cannondale Corp. faced a variety of key strategic issues.
One was the firm's co ntinued dependence on Shimano Inc . of Ja pan to sup ply many par ts for
its bik es, particu lar ly the derailleur , brakes , and crankset. A particularly troubleso me a spect of
this situation was that Shimano's high- quality and highly innovative par ts were relatively exp ens
ive. Ca nnondale wished to reduc e its dependency on these outso urced parts. A second issue
was the inc reasin g competition from Trek Bicycle Corp. and S pec ialized Bicycle Co mponents
Inc. for bicyc les in the upper -end range of the mar ket where Ca nnondale co mpeted.
Cannondale had
built a successful busin ess on the basis of high quality and innova tive products . Its c us
tomers we re bicyclists who expected the highest quality and mos t adva nced featur es.
Industry analysts pr edicted co nso lidation in the industry for manufacturers that use Shimano
par ts but cannot differ entiate their pro duc ts effec tively ; these bicycle makers will likely be
force d to compete on pr i ce.
Re quir ed:
1. Co ns ider the use of Shimano parts as one aspect of the va lue chain for Cannonda le.
Describe Ca nnondale's cu rre nt stra tegy . How sh ould this stra tegy change, if at all, to co
mpete effec tively with Trek and Spec ialize d?
2. Should Cannondale co ntinue to outsour ce Shimano parts? Why or why not?
38. Chap ter 02 Imp lement in g Stra teg y: The Valu e Ch ai n, the Bala
nced
Scor ec ard a nd the Stra teg y Map Answe r
Key
M ul tip le Choi ce Ques tio ns
1. In SWOT analys is, strengths and we aknesses are most easily identified by looking:
A. At the firm as a potential cus tomer.
B. Inside the firm at its specific resources.
C. At the firm's competition.
D. At the firm's product.
E. Outside the firm fro m a cons ultant's persp ective.
AA CSB : Refl ec ti v e
Think i ng AICP A: B B Cri ti c al
Think i ngAICP A: FN Ri s k Ana l
y s isAc c es si bi li ty : Key board
Nav i gati o nBl ooms : Remem
ber
Di ffi c ul ty : 1 E asy
Learnin g Obj ec ti v e: 02 -01 E x pl ai n how to i mpl em ent a c ompeti ti v e s trategy by us i ng s trengths -we ak nes s
es -opportuni ti es threats
(SW OT) anal y s i s .
Topic : SW OT An al y s is
2. In SWOT analys is, oppor tunities and threats are identified by :
A. Co nsu ltation with middle
management. B. Talk ing with the ra nk
39. and file workers. C. Lookin g outside the
firm.
D. Brainstor ming tec hniques.
E. Reviewing our corpora te stra tegy.
AA CSB : Refl ec ti v e
Think i ng AICP A: B B Cri ti c al
Think i ngAICP A: FN Ri s k Ana l
y s isAc c es si bi li ty : Key board
Nav i gati o n