02
Modul ke:
Fakultas
EKONOMI
Program Studi
AKUNTANSI
Management Cost Strategic
Chapter 2 Implementing Strategy: The Balanced
Scorecard and the Value Chain
Ratih Puspa Dewi, SE, MM
Learning Objective
• Explain how to implement a competitive
strategy by using Strengths-WeaknessesOpportunities-Threats (SWOT) Analysis
• Explain how to implement a competitive
strategy by focusing on the execution of goals
• Explain how to implement a competitive
strategy using value-chain analysis
Learning Objective Continued
• Explain how to implement a competitive
strategy using the Balanced Scorecard (BSC)
• Explain how to expand a conventional
Balanced Scorecard (BSC) by integrating
“sustainability”
Implementing To Strategy
• There are two main competitive strategies:
– cost leadership
– differentiation
• Once a firm chooses which strategy to follow, there
are various means of implementation:
–
–
–
–
SWOT Analysis
Focus on execution
Value-chain analysis
Balanced scorecard (BSC)
SWOT Analysis
• Identification of critical success factors (CSFs) tied to
strategy—for example:
– Product innovation
– Quality
– Skill development
• Identification of quantitative measures for the
specified CSFs—for example:
– Number of design changes or new patents
– Number of defects or number of returns
– Number of training hours or amount of skill
performance improvement
6
SWOT Analysis
(continued)
• The SWOT analysis has four areas:
–
–
–
–
S – strengths/internal
W – weaknesses/internal
O – opportunities/external
T – threats/external
Look at product lines,
management, R&D,
manufacturing, marketing,
and strategy
Look at barriers to entry,
intensity of rivalry among
competitors, substitute
goods, and
customer/supplier
bargaining power
Execution
• The CSFs a manager executes depend on the chosen
strategy
– Cost leadership: operational performance and quality
– Differentiation: customer satisfaction and innovation
• Differentiated firms must pay close attention to
marketing and product development
– Management accountants assist by gathering,
analyzing, and reporting on relevant information
• Can be improved through benchmarking and total
quality improvement (e.g., Malcolm Baldrige Quality
Award)
Value Chain Analysis
• Means to reach the detail-level of analysis
– CSFs must be implemented in each and every phase of
operations
• Helps a firm better understand its competitive
advantage by analyzing what processes add value
(processes that do not add value can be deleted or
outsourced)
• Design to manufacturing to service after sale
– Not all areas will get the same attention (identification of
areas most important to the customer will determine the
firm’s focus)
– Goal = the most value at the lowest possible cost
Value Chain Analysis
• Value-chain analysis has two steps:
– Identify the value-chain activities at the smallest level
possible
– Develop a competitive advantage by reducing cost or
adding value
• To develop a competitive advantage, a firm must
consider the following:
–
–
–
–
What is our competitive advantage (strategy)?
Where can we add value for the customer?
Where can we reduce costs?
Are any of our processes linked (linkages exploited)?
Example: Value-Chain Analysis in
Computer Manufacturing
• Computer Intelligence Company (CIC)
manufactures computers for small businesses
• The company has an excellent reputation for
service and reliability as well as a growing
customer list
• Is there any way to add value for the customer
while reducing costs?
Example: Value-Chain Analysis in
Computer Manufacturing
• The company is considering two options:
– Option One is to continue functioning as is
– Option Two includes two separate outsourcing
decisions: (a) the purchase or manufacture of parts,
and (b) providing service internally or outsourcing it
• It is important to consider company strategy in
outsourcing decisions
Value-Chain Analysis in Computer
Manufacturing (continued)
Value Activity
Option One – Current
Option Two – Potential
Acquiring raw
materials
CIC is not involved at
this step
CIC is not involved at
this step
Manufacturing
computer chips and
other parts
CIC is not involved at
this step; cost is $200
CIC is not involved at
this step; cost is $200
Manufacturing
components, some of
which CIC can make
CIC purchases $300 of CIC manufactures these
parts for each unit
units for $190 per unit
plus $55,000 monthly
Assembling
CIC’s costs are $250
CIC’s costs are $250
Marketing,
distributing, and
servicing
CIC’s costs are
$175,000 per month
CIC contracts out these
services for $130 per
month
13
Results of
Value-Chain Analysis
Manufacturing
Option One
Option Two
Savings with
Option Two
600 x $300 =
$180,000
Marketing,
distributing, and
servicing
$175,000 per month
600 x 190 +
$55,000 =
$169,000
$78,000 per month
$11,000
$97,000 per month
Results of Value-Chain Analysis (continued)
• CIC can save $108,000 ($11,000 + $97,000) per month by
manufacturing the parts and contracting out marketing,
distributing, and servicing
• The main factor driving the decision is company strategy,
which in this case is quality and customer service
– For a firm pursuing a differentiation strategy, the best
option is not necessarily the one which provides the most
savings (savings is a secondary consideration)
– From a strategic viewpoint, Option One is preferred over
Option Two
The Balance Score Card ( BSC)
• A performance report based on a broad set of financial
and nonfinancial measures that is crucial to
understanding and implementing a strategy
• This report groups a firm’s CSFs into four areas:
– Financial perspective (financial measures)
– Customer perspective (customer satisfaction)
– Internal business process perspective (e.g., productivity
and speed)
– Learning and innovation (e.g., training and number of new
patents or products)
The Balance Score Card ( Cont)
• Benefits
– Means for implementing strategy
– Means to achieve a desired organizational change in
strategy
– Can be used to determine management’s compensation
and rewards
– Coordinates efforts within the firm to achieve CSFs
• Limitations
–
–
–
–
Nonfinancial information is subjective
Confidentiality must be insured for certain information
Must be adaptable and frequently updated
Costly and time-consuming to implement
The Balance Score Card ( Cont
• A properly constructed BSC can be used to infer a
company’s strategy
– BSC → Strategy, rather than Strategy → BSC
• The emphasis placed on each performance perspective
reflects the strategy of the firm
– For a cost leader, the operations perspective might be the
most important; for a differentiator, the customer
perspective…
Strategy Map
A strategy map is a cause-and-effect diagram of the
relationships embodied in a BSC:
– Shows how the achievement of CSFs in one perspective
should affect the achievement of goals in another
perspective
– The financial perspective is the target in the strategy map
because financial performance is the ultimate goal for most
profit-seeking organizations
– Success in the other perspectives leads directly to
improved financial performance and shareholder value
Sustainability
• The fifth perspective for many organizations
• The balancing of short-term and long-term goals in all
three dimensions of the company’s performance–
economic, social, and environmental:
– Environmental reports use environmental performance
indicators (EPIs) to measure sustainability
– These indicators are in three areas:
• Operational (measure stresses to the environment/regulatory
compliance issues)
• Management (try to reduce environmental effects)
• Environmental condition (measure environmental quality)
The BSC and Not-For-Profit (NFP)
Organizations
• Competitive strategy is different:
– Must satisfy funding authorities, political leaders, and the
general public
• The BSC can still be used to monitor CSFs related to
internal processes, customer satisfaction, financial
measures, and human resources measures
• Value-chain analysis can still be used to determine at
what points costs can be reduced or value added on
the value chain
The Role of Accounting
Three cost-management resources for implementing
strategy are discussed in this chapter:
– SWOT analysis provides a system and structure to identify
CSFs
– Value-chain analysis builds on the CSFs by breaking them
down into detailed activities
– The BSC provides a way to implement the detailed strategy
developed through the previous two analyses; it provides
the processes for evaluating the organization’s
achievement of CSFs
Chapter Summary
• Strengths-Weaknesses-Opportunities-Threats
(SWOT) Analysis provides a system and
structure in which to identify a firm’s critical
success factors (CSFs)
• Execution of goals is important in
implementing a strategy
• Execution depends on the competitive strategy
a firm is pursuing
Chapter Summary Continued
• Management accountants assist management
by gathering, analyzing, and reporting on
relevant information
• Value-chain analysis builds on the CSFs
identified in SWOT analysis by breaking them
into detailed activities
• The balanced scorecard (BSC) provides the
processes for evaluating a firm’s achievement
of CSFs
Chapter Summary Continued
• Value-chain analysis builds on the CSFs
identified in SWOT analysis by breaking them
into detailed activities
• The balanced scorecard (BSC) provides the
processes for evaluating a firm’s achievement
of CSFs
Chapter Summary Continued
• Sustainability builds on the conventional BSC
by balancing short-term and long-term goals
• Sustainability focuses on economic, social, and
environmental issues
Terima Kasih
Ratih Puspa Dewi, SE, MM