Strategic Cost Management Seatwork

1. Explain the following strategies for increasing customer value to achieve competitive
advantage in relation to Strategic Cost Management. You can cite example(s) to expound your
responses.
a. Cost Leadership Strategy (5) pts
- Cost Leadership Strategy is a strategy that gives advantage for one company to the
others by having the lowest cost of production for them to be able to charge lower prices for its
products.
- McDonalds is one of the examples that uses cost leadership strategy. McDonald’s
practices a division of labor by employing and training inexperienced staff instead of skilled
cooks and thus manages to cut huge amounts of costs from the salaries of its employees.
b. Product Differentiation Strategy (5) pts
- Product Differentiation Strategy is a strategy that differentiate a products or services
from others in the market to make it more appealing to the target audience. It involves defining
the products or services unique position in the market by explaining the unique benefit it
provides to the target group. This may also be referred to pinpointing a unique selling
proposition of the product to make it stand out from the crowd.
- Example of product differentiation strategy is choosing an iPhone over an Android as
the customer considers iPhone to be a status symbol and believes that it has an easier interface
as compared to Android.
c. Focusing (5) pts
- Focusing strategy is a strategy that focuses on a narrow and specific segment in the
market. The idea behind the focus strategy is to develop, market, and sell a specific product to a
specific group of customers.
- Rolls Royce is one of a company that uses focus strategy because the company
specifically follows a focus strategy as they only deal in making luxury cars.

2. Enumerate at least 5 major improvement tools used by modern managers in strategic cost
management.  Brief explanation for each tool. (10) pts

 Target Costing
- Target costing is a new attempt in which cost is the difference between the price
expectation of the customers and margin expectations of the corporation entities.
 Activity Based Costing
- Activity Based Costing provides a closer approximation of the cost of a product than
that provided by the traditional volume based costing method. The main principle of
Activity Based Costing states that activities cause costs and to control costs, the
activities must be controlled.
 Benchmarking
- Benchmarking refers to the search for the best practices that yields the benchmark
performance, with emphasis on how you can apply the process to achieve superior
results.
 Total Quality Management
- Total Quality is a people-focused management system that aims at continual increase
in customer satisfaction at continually lower real cost. In a TQM effort, all members of
an organization participate in improving processes, products, services and the culture in
which they work.
 Balanced Score Card
- The balanced score card is a strategic cost management technique for communicating
and evaluating the achievement of the strategy of the organization.