Strategic Value Chain Analysis

Decent Essays

The ability of strategic cost management to achieve the desired objectives depends on the realization of certain activities. In this respect, J.K. Shank emphasizes that there are 3 key tools of strategic cost management, referring to Strategic Management literature of Strategic Management Accounting. These are as following (Shank and Govindarajan 1993, 13);

• Value Chain Analysis,
• Strategic Positioning Analysis,
• Cost Driver Analysis,

4.1. Value Chain Analysis
Value chain analysis, which constitutes the basis of strategic cost management, includes the value creation chain for a corporation, composed of all activities that create value, from the supply of raw materials to the supply of the product to the final consumer. (Yüzbaşıoğlu 2006, 402) In other words, value chain analysis is defined as a strategic tool used to comprehend the competitive advantage of an enterprise, to determine which stage of the value chain may be improved or in which stage the costs may be reduced, and to better apprehend the relationship of the corporation with the suppliers, customers and other enterprises in the sector. . (Blocher et al. 2005, 40).

4.2. Strategic Positioning Analysis
The …show more content…

The strategy that the corporation adopts affects inevitably the costs of the corporation. For example, the main objective of a corporation adopting cost leadership strategy in the market will be to reduce the costs and produce the quality products that the consumers demand at the desired price. On the other hand, the corporation adopting differentiation strategy aims to produce unique products that would meet the expectations of its consumers. Thus, the Research & Development costs of the corporation adopting differentiation strategy will be higher than the other corporations. (Sağmanlı 2002,

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