Business Strategies: Continuous Improvement

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Questions and Answers

What is the primary philosophy companies should adopt to remain competitive in a changing business environment?

Aim for perfection in current operations.

Invest only when absolutely necessary.

Continuously seek improvements over established standards. (correct)

Focus solely on reducing costs.

What consequence can result from failing to leverage technology in business?

Same benefits over time.

Increased market share.

Loss of market share to competitors. (correct)

Enhanced customer loyalty.

Which of the following is a component of the value chain?

After Sales Customer Services. (correct)

Market Research Analysis.

Supply Chain Management.

Product Life Cycle Management.

During which phase of the value chain would idea generation occur?

Research and Development. Signup and view all the answers

What does the cost life cycle help managers determine?

True product costs across the entire value chain. Signup and view all the answers

What is a key message regarding progress in business strategy?

If you're not moving forward, you're moving backward. Signup and view all the answers

What is a primary focus of the Target Costing Approach?

Managing costs while maintaining quality Signup and view all the answers

Which activity is considered an upstream function in the value chain?

Engineering Design. Signup and view all the answers

Which of the following best describes continuous strategic goals?

Goals must be measured and evaluated using trends. Signup and view all the answers

What would be the estimated target cost if the estimated selling price is $100 and the estimated markup is $40?

$60 Signup and view all the answers

In the context of cost analysis, what does it indicate when the as-if cost is greater than the target cost without further improvement options?

Consider increasing the selling price or postponing production Signup and view all the answers

What is the first step in the Target Costing process?

Generating an idea for a customer-focused product Signup and view all the answers

What does value engineering aim to improve in order to meet the target cost?

Raw materials, engineering design, and manufacturing process Signup and view all the answers

Which cost analysis approach suggests starting production when the as-if cost is less than or equal to the target cost?

Four Cases for Cost Analysis Signup and view all the answers

What might be a plausible consequence of having an as-if cost approaching the target cost?

Start production, expecting to reduce costs through learning Signup and view all the answers

What is one method mentioned to analyze competitor products?

Reverse Engineering Signup and view all the answers

Study Notes

Continuous Improvements

Businesses need to constantly strive for improvement.
Continuous improvement should be a philosophy, not just a temporary goal.
Companies should aim for ongoing strategic goals, measured and evaluated using trends.
Investment in technology is crucial for maintaining a competitive edge.
If not investing in continuous improvement, companies may fall behind competitors and lose market share.

Value Chain

The value chain consists of activities that add value to products from the customer's perspective.
Activities include research and development, engineering design, production, marketing, sales and distribution, and after-sales customer service.
The value chain can be divided into three phases: before the fact, the fact, and after the fact.

The Cost Life Cycle

The cost life cycle focuses on product development from the perspective of costs incurred.
It aims to determine the true cost of a product, including all functions in the value chain.
It identifies areas for improvement, such as enhancing quality and reducing costs.

Target Costing Approach

An effective approach to reduce product costs while maintaining quality, function, and operational standards.
Starts with generating a product idea that meets customer needs.
Market surveys are conducted to assess product acceptability, estimated sales volume, and reasonable selling price.
The target cost is determined based on the estimated selling price and desired markup.
Value engineering is implemented to reduce costs by improving raw materials, engineering design, and manufacturing processes.

Cost Analysis Cases

As-if cost ≤ Target cost: Start production and introduce the product.
As-if cost approaching target cost: Start production, anticipating that the learning effect will reduce costs to the target.
As-if cost > Target cost (with room for improvement): Continue improvement efforts.
As-if cost > Target cost (without further improvement): Consider increasing the selling price, reducing the markup, or postponing production until the target cost can be met.

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Description

Test your knowledge on continuous improvement, the value chain, and the cost life cycle in business. Explore how these concepts interlink and shape effective strategies for success. Understand the importance of ongoing investment and evaluation in keeping a competitive edge.