Strategic cost management case study Example | Topics and Well Written Essays - 1250 words

Strategic cost management - Case Study Example It is not surprising that the plant manager describe their process as â€Å"better than anyone else† because it is guaranteed with speed and high quality, as well as reduced cost. To compete with such companies, it is important to have enough capital reserves to also engage in strategies like promotion. The paper will therefore look at how with the cost reduction strategy, the company is offered sufficient funds that were cut down from actual production cost to gain competitiveness and profitability. Firm’s competitive strategy Much of the emphasis of competitive strategy for California-Illini (CI) is placed on the ability of the company to produce high quality products at a speed that meet consumer demand and cost that meet consumer pocket. In effect, a consumer determinant strategy on demand and cost reduction is used as competitive strategy. Generally, this is a strategy that identifies the scarcity of consumers on the target market due to the number of competitors a mong which existing consumers may choose from (Bernanke, 2006). Knowing that the consumers are not many in number, a consumer determinant strategy generally aims at presenting the consumer with exactly what the consumer requires from the manufacturers in terms of production and cost. The question of whether the strategy used by CI seems appropriate will be answered from several perspectives. The first is to take a quick competitive analysis, based on which a question of the viability of the strategy against other competitors will be asked. Generally, CI is in the same market as other multinational horticulture companies like Simpson and Simpson Inc, and Garages Ltd. These are companies who base their competitive advantage on brand equity and high inflow of cash from other sectors of their business, making it possible for them to run expensive promotions and publicities. What is more, the strategy to add quality and speed to production is highly appropriate even that when supply from customers does not meet their demand, they would switch to other competitors. It is always important to note that the industry in which CI finds its self is one that is based primarily on seasonal production. In effect, one must not wait for seasons to pass before orders made can be honored (Fairlie, 2009). Cost reduction strategy at CI From the above, the cost reduction strategy can be said to have been generated by the need to be competitive and also increase the revenue of the company through reduced internal speeding. When calculating revenue or profit that companies like CI make, emphasis is not only placed on income but on expenditure as well. The fact that CI has been found to make an average annual sale of $13 million alone cannot be accounted in judging the company as a very profitable one. Rather, it would be important to balance this income with expenditure. Commonly, manufacturing companies like CI spend most of their expenses on the production aspect of the supply chai n (Gartner, 1985). In effect, a cost reduction strategy that will ensure that production takes place at a more reduced cost always becomes beneficial. The need to be customer focused was also another motivation for opting for the cost reduction strategy. This is because when cost of production is lower, manufacturers always have the luxury of pegging the prices of their products lower because of a reduced