Value chain analysis as a cost reduction tool. Value chain analysis

Introduction

1. Theoretical aspects analysis

1.3 SWOT analysis

2. Production costs

2.1 Concept of costs

2.2 Determination of production costs

Conclusion

List of used literature

Introduction

This topic considered relevant, because one of the clearest indicators of a company's situation is its price position in relation to competitors. This is especially true for industries with poorly differentiated products, but even if not, companies are forced to keep up with rivals, otherwise they risk losing their competitive position. Differences in the costs of rivals can be caused by:

the difference in prices for raw materials, materials, components, energy, etc.

differences in basic technologies, equipment age, - differences in internal costs due to different sizes of production units, cumulative effect of output, levels of productivity, different tax conditions, levels of organization of production, etc.

the difference in sensitivity to inflation and changes in exchange rates, - the difference in transport costs,

the difference in costs in the distribution channels.

Strategic cost analysis focuses on the relative value position of the firm in relation to its competitors. The primary analytical approach for such analysis is the construction of a value chain for individual actions, showing a picture of the cost from raw materials to the price of end users. If a firm loses competitiveness at the back or front of the chain, it may change its internal actions in order to restore competitiveness.

In order to determine the strategy of the organization's behavior and to implement this strategy in life, management must have an in-depth understanding of not only internal environment organization, its potential and development trends, but also about the external environment, its development trends and the place the organization occupies in it. At the same time, the external environment is studied by strategic management primarily in order to reveal the threats and opportunities that the organization must take into account when defining its goals and in achieving them.

The objectives of this term paper is the study of value chains using SWOT analysis, functional cost analysis, production costs, their essence and ways to reduce them, the impact of costs on profit. Production costs are now quite serious and urgent problem today, because in the conditions of market relations, the center economic activity moves to the main link of the entire economy - the enterprise. It is at this level that the products necessary for society are created, necessary services... The most qualified personnel are concentrated at the enterprise. Here the issues of economical use of resources, the use of high-performance equipment and technology are resolved. The enterprise is trying to reduce to a minimum the costs (costs) of production and sales of products.

... Theoretical aspects of the analysis

1.1 Value Chain Analysis

The policy of selective business expansion implies a serious analysis of what production and commercial operations bring to the organization in the current market segments and how effective its existing production and commercial chains are. If both are indeed the most effective option, then the organization should focus its efforts on development in the direction from E to B, i.e. towards the development of their internal capacity to carry out their arbitrary commercial transactions.

If the analysis shows that the organization can achieve great success in other market segments or in a different organization of value chains, the organization should focus its efforts on development. This can be achieved through cooperation with other industry participants. Using networks of cooperation instead of competition allows not only to significantly increase the presence of an organization in the market and in the industry, but also to free up resources for building internal capacity.

Several methods are used to assess the strategic position of an enterprise.

SWOT analysis - the abbreviation of the English words strengths, weaknesses, opportunities, threats strong, weak means the sides of the enterprise, opportunities, dangers. Based on the analysis of the internal and external environment, identification of key success factors, social aspects, a four-cell matrix is \u200b\u200bbuilt. Its cells are filled with the appropriate data. The data obtained allows you to form an enterprise strategy, which is laid down in plans, executed, the results are subjected to the next stage of analysis.

BCG matrix (Boston Advisory Group). A similar approach. Analytical results are presented in the same way. The position of the company in the market is determined in comparison with the leading company in this segment market, all areas of activity are divided into four groups. Appropriate strategies are being developed in relation to them. Typical recommendations have been worked out, the essence of which is to support promising, liquidate hopeless areas of activity.

The McKinsey matrix is \u200b\u200ba development of the BCG matrix. This technique involves the use of formalized indicators of market attractiveness and competitive status. The initial data uses expert assessments forecast indicators.

Value chain analysis and competitive analysis by Porter . They were asked to represent the set of functions performed by the enterprise in the form of chains of value creation processes. At the beginning and end of the chain, the activities of the enterprise are integrated (consistent) with the activities of business partners.

Competitive analysis is carried out on the "field of forces" acting on the enterprise. The author identified five main ones, among which: the influence of buyers, the influence of suppliers; the possibility of the emergence of new competitors, the existence of substitute products, the actions of competitors within the industry. The factors determining these forces are investigated, their ratio is estimated. Based on the analysis, an optimal strategy is developed. The technique does not give specific recommendations and is limited qualitative analysis.

Value chain analysis encourages a firm to adopt a strategic cost analysis that allows a comparative view of all the value creation activities that deliver it to the customer. In addition, this analysis includes many more economic cost drivers that affect buyer's value equity, such as structural drives (scale, experience, technology, complexity) and executive drives (total quality management style, plant planning, capacity utilization, technological approaches in the production of high-quality products, vertical relations with suppliers and buyers).

It became necessary to use the accumulated experience in planning, analyzing and controlling costs in a relatively stable business environment to use it to achieve the goals and implement the strategies of the organization in a rapidly and unpredictably changing environment. It was necessary to move from outdated methods of allocation and analysis of costs "after the fact" to the modern concept of strategic cost management.

Strategic cost management refers to the analytical system for correlating relevant accounting information with the firm's strategy. Cost data is used to develop strategies to create and realize sustainable competitive advantage. And modern accounting acts as an information system serving the process of making management decisions (fig. 1).

Fig. 1 Accounting as an information system for making management decisions

Accounting, thus, provides quantitative information to the process of making and implementing management decisions. Information communication between financial and management accounting, no legislative norms and standards are regulated. However, management accounting information must be consistent and comparable to financial accounting information. To ensure such comparability, one should carefully consider the process of developing the accounting policy of the enterprise, which should be formed by the joint efforts of the chief accountant and cFO... Otherwise, the collection and processing of accounting information used for making management decisions will have to be dealt with by a special accounting service, which, in the face of heightened price competition, will not help to reduce or optimize costs.

The process of conducting value chain analysis begins with an internal analysis of the firm and then leads to an external competitive analysis of the industry's cost system. It ends with the integration of the two analyzes to define, create and potentially maintain a competitive advantage.

1.2 Functional cost analysis

Functional-cost analysis is understood as a method of complex systemic study of the functions of an object (product, process, structure), aimed at optimizing the relationship between the quality, utility of the object's functions and the costs of their implementation at all stages of the life cycle.

2.1 Concept of costs

Each enterprise, a firm, before starting to manufacture products, determines what profit, what income it can receive. The profit of an enterprise, a firm depends on two indicators:

product prices and production costs. The price of products on the market is a consequence of the interaction of supply and demand. Under the influence of the laws of market pricing in conditions of free competition, the price of products cannot be higher or lower at the request of the manufacturer or the buyer, it is automatically equalized. Another thing is costs production factorsused for production and sale activities, called "production costs". They can increase or decrease depending on the volume of consumed labor or material resources, the level of technology, the organization of production and other factors. Consequently, the manufacturer has a variety of cost-cutting levers that can be put into action with skillful leadership. What is meant by production costs, profits and gross income?

IN general view production and sales costs (the cost of products, works, services) represent a cost estimate of natural resources, raw materials, materials, fuel, energy, fixed assets used in the production process of products (works, services), labor resources, as well as other costs for its production and sale.

The costs of production and sales of products include:

costs associated with direct production of products due to technology and organization of production;

using natural raw materials;

preparation and mastering of production;

improving the technology and organization of production, as well as improving the quality of products, increasing its reliability, durability and other operational properties (non-capital costs);

invention and rationalization, carrying out experimental works, manufacturing and testing models and samples, payment of royalties, etc .;

service production process: provision of production with raw materials, materials, fuel, energy, tools and other means and objects of labor, maintenance of fixed assets in working order, compliance with sanitary and hygienic requirements;

ensuring normal working conditions and safety measures;

production management: the maintenance of employees of the management apparatus of the enterprise, firm and their structural units, business trips, maintenance and service technical means management, payment for consulting, information and audit services, hospitality expenses associated with commercial activities enterprises, firms, etc .;

training and retraining of personnel;

deductions for state and non-state social insurance and pensions, in the State Employment Fund;

deduction for compulsory health insurance, etc.

The specific composition of costs that can be attributed to production costs are regulated by law in almost all countries. This is due to the peculiarities of the tax system and the need to distinguish the costs of the firm by the sources of their reimbursement (included in the cost of production and, therefore, reimbursed from the prices for it and reimbursed from the profit remaining at the disposal of the firm after taxes and other mandatory payments).

In Russia, there is a decree on the composition of costs for the production and sale of products (works, services) included in their prime cost, and on the procedure for generating financial results taken into account when taxing profits.

There are two approaches to cost estimation: accounting and economic. Both accountants and economists agree that the costs of a firm in any given period are equal to the value of the resources used to produce the goods and services sold during that period. In the financial statements of the company, the actual ("explicit") costs are recorded, which represent the cash costs of paying for the used production resources (raw materials, materials, depreciation, labor, etc.). However, economists, in addition to explicit, take into account and "implicit" costs. Let us explain this with the following example.

Suppose that the firm invests in the production of goods borrowed capital, which it took from the bank; then the costs would also include funds to pay off the bank interest. Therefore, provided that the attracted capital is invested, it is necessary to exclude implicit costs in the amount of bank interest from the firm's income.

However, even the notion of "implicit costs" does not give a complete picture of the true costs of production. This is due to the fact that out of many possible options for using resources, we make one definite choice, the uniqueness of which is forced by the limited resources.

So, for example, being carried away by TV, you miss the opportunity to read a book, having entered the institute, we lose the opportunity to receive wagesif they were doing this or that work.

Therefore, making this or that production decision and assessing the actual costs, economists consider them as costs of missed (lost) opportunities.

The "cost of lost opportunities" is understood as the costs and loss of income that arise when choosing one of the options for production or sales activities, which means rejection of other possible options.

Analysis of planning and accounting of logistic products on the example of LLC "Logistic"

In general terms, costs are monetary costs associated with spending different types economic resources in the supply of raw materials, materials, components; production ...

By economic elements, costs are divided into: wages fund, deductions for social needs, depreciation (the share of the cost attributed to the cost of production in reporting period), material and other costs ...

Logistic concepts of Tolmachevo Catering LLC work

transport logistics consumer goods The main task facing logistics is to reduce the costs associated with bringing material flow from the primary source of raw materials to the final consumer ...

Marketing research for the production and sale of services cellular operator "Beeline"

The estimates of any enterprise can be constant and variable. For Beeline, the costs of selling SIM cards include material costs, labor costs, depreciation and other costs ...

Marketing research of the implementation of digital cameras

The estimates of any enterprise can be constant and variable. Eldorado has sales costs digital camera NIKON COOLPIX L810 Black includes material costs, labor costs, depreciation and other costs ...

Models of formation of costs in management accounting

This work focuses on management cost accounting. The concept of "costs" (they are also costs, costs) is quite capacious, requiring separate consideration. In general, when it comes to costs ...

General strategies competition

4. Focused strategy, or niche market strategy based on low costs. 5. Formulated strategy, or market niche strategy based on product differentiation 2 ...

Optimization of costs in the process of purchasing goods for industrial purposes

3. Consideration of cost reduction in the procurement process. one. Theoretical basis reducing costs in the process of purchasing goods 1 ...

Organization and technology of trade in the trade and production communal unitary enterprise "Slutsktorg"

Next, we will analyze the structure of expenses for the sale of goods of the Slutsktorg Municipal Unitary Enterprise for 2007-2008. (table 3.6.1). Table 3.6.1. Analysis of the structure of expenses for the sale of goods of the KUP "Slutsktorg" for 2007-2008 ....

Development of a marketing complex for a product

Regardless of how product prices are formed, some general economic criteria are taken into account that determine the deviations of the price level up or down from the consumer value of the product ...

The role of logistics in enhancing the competitiveness of structures

The first and most important stage of the program is to reduce costs to an effective level. It was important to establish the service process and the corresponding control mechanisms in this way ...

The role of marketing in the pricing process

Typically, demand determines the maximum price that a company can charge for its product, while the minimum price is set by the company's costs. The firm seeks to set such a price ...

Price policy enterprise (firm) and its goals

Pricing for different types markets, setting pricing objectives

Costs are usually divided into two types: fixed and variable. Fixed (overhead) - costs, the size of which does not depend on the usual fluctuations in the volume of output and revenue from turnover. So, the company must pay monthly rent for the premises ...

Strategic Cost Analysis -comparison of the costs of the company and its competitors along the entire value chain. This analysis is an essential part of the analysis of the company's strategic position.

The term "strategic cost analysis" allows you to focus on the features of this cost analysis, its differences from the traditional one: Firstly, this is an analysis by which we propose to identify or create competitive advantages, and therefore, this is a comparative analysis, including the comparison of the costs of competing goods , brands, etc. Secondly, this analysis is based on the calculation, which is done not by calculation items or cost elements, but by the elements of the value chain, that is, by types of activity. The objection may arise here - is it not possible with the help of a calculation or cost estimate to identify losses and outline ways to reduce costs? But as tools for analyzing costs, these calculations can only be used within the framework of current activities, when solving operational, and not strategic objectives... A strategic cost analysis - This is a cost analysis that involves comparison with the costs of competitors. Differences in competitor costs can be attributed to factors such as:

Supplier prices;

Technology and equipment;

Economies of scale, learning curve effect;

Inflation and changes in exchange rates;

Marketing expenses;

Transportation costs;

Marketing expenses.

You can analyze costs in different ways. This can be done in the context of costing items, cost elements, etc. Strategic cost analysis uses the concept of a value chain when comparing the costs of a firm and its competitors. Value chain - a strategic cost analysis tool that demonstrates the addition of value to a product when performing main and auxiliary activities. Sometimes the term “value chain” is used as a synonym. This so-called chain gives an idea of \u200b\u200bthe strategically related activities of the firm and allows you to trace the movement of costs, as well as highlight potential sources of increasing the company's competitiveness. Among the nine strategically related activities include primary and secondary activities (Fig. 2).

Figure: 2. Value chain

By decomposing the total costs of production and sales of products into strategically related actions, one can better understand the cost structure and determine the main elements. The value chain simultaneously allows analysis of the relationship between activities, and therefore the analysis of the relationship between the costs of these activities. The first is important for developing a strategy. The second has to do with setting and achieving financial goals. Example. Linking sales, product manufacturing and purchasing processes allows you to reduce stocks of raw materials and finished products. Example. The purchase of more expensive, but more modern equipment leads to lower costs and improved product quality.

The value chain can be used to:

1) ensuring competitive advantages by:

a) cost reduction (the entire value chain is involved in the analysis).

In the first case, the analysis can be carried out autonomously for each type of activity.

b) differentiation (more effort can be consciously spent to develop the areas of activity necessary for differentiation).

When carrying out differentiation, managers may deliberately go to increase the costs of certain activities, which, ultimately, should ensure an increase in profits;

2) analysis of the formation of costs in each link of the chain and the impact of the costs of performing one type of activity on the costs in the remaining links.

3) assessing the possibility of reducing prices based on an analysis of the relationship between types of production activities. In most cases, the company's activities are not autonomous, but are included in the system of large-scale activities, which means at the same time the inclusion of the company's value chain in value chain system. Such a system can include value chains of suppliers, manufacturers, distributors, and end users. Understanding the structure of such a system makes it easier for company managers to assess its competitiveness. Strategic cost analysis involves comparing the composition and structure of costs both along the value chain of the firm and its competitors, and on the value chain systems, which include the activities of the firm and its competitors.

Value chain management - analysis of the value chain, comparison with competitors, identification and elimination of disadvantages associated with high costs, identification of activities in which competitive advantages are potentially hidden.

Each enterprise, a firm, before starting to manufacture products, determines what profit, what income it can receive. The profit of an enterprise, a firm depends on two indicators:

product prices and production costs. The price of products on the market is a consequence of the interaction of supply and demand. Under the influence of the laws of market pricing in conditions of free competition, the price of products cannot be higher or lower at the request of the manufacturer or the buyer, it is automatically equalized. Another thing is the cost of production factors used for production and marketing activities, called "production costs". They can increase or decrease depending on the volume of consumed labor or material resources, the level of technology, the organization of production and other factors. Consequently, the manufacturer has a variety of cost-cutting levers that can be put into action with skillful leadership. What is meant by production costs, profits and gross income?

In general, the costs of production and sale (the cost of products, works, services) represent a cost estimate of natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources, and other costs used in the production process of products (works, services) for its production and sale.

The costs of production and sales of products include:

costs associated with direct production of products due to technology and organization of production;

using natural raw materials;

preparation and mastering of production;

improving the technology and organization of production, as well as improving the quality of products, increasing its reliability, durability and other operational properties (non-capital costs);

invention and rationalization, carrying out experimental works, manufacturing and testing models and samples, payment of royalties, etc .;

maintenance of the production process: provision of production with raw materials, materials, fuel, energy, tools and other means and objects of labor, maintenance of fixed assets in working order, fulfillment of sanitary and hygienic requirements;

ensuring normal working conditions and safety measures;

production management: the maintenance of employees of the management apparatus of an enterprise, a firm and their structural units, business trips, the maintenance and maintenance of technical means of management, payment for consulting, information and audit services, representation expenses related to the commercial activities of enterprises, firms, etc .;

training and retraining of personnel;

deductions for state and non-state social insurance and pensions, in the State Employment Fund;

deduction for compulsory health insurance, etc.

So, for example, being carried away by TV, you miss the opportunity to read a book, having entered college, we lose the opportunity to receive a salary if we were engaged in this or that job.

Therefore, making this or that production decision and assessing the actual costs, economists consider them as costs of missed (lost) opportunities.

In a general sense, cost chain analysis is a systematic approach to cost accounting of business processes from the very beginning to the very end. Within the decision-making process, the determining factor is the cost of products and services; making products with low cost can generate high profits. The nature of the enterprise in terms of their size is different. For example, a non-profitable group of goods in a large enterprise will not cause an immediate crisis, while in a small enterprise the situation will be completely different. In a small business, if the business is not profitable, it simply cannot survive.

Given the many factors that contribute to cost differentials, a company must always be aware of how its costs compare to those of major competitors. This requires a strategic cost analysis that captures the company's cost position relative to its closest competitors.

Cost chain concept. The initial analytical tool for strategic cost analysis is the concept of a cost chain, which defines the activities, functions and processes to be carried out in the development, manufacture, marketing, supply and support of products or services. The chain of cost-generating activities begins with the purchase of raw materials, continues with the manufacture of parts and assemblies, their assembly, wholesale distribution and ends retail sale the final consumer of finished products or services.

A company's cost chain demonstrates a sequential set of activities and functions performed within it (Figure 4-1). This chain includes profits because the premium to the cost of running the company's value-creating units is usually part of the price (or total cost) paid by the buyer. Creating value that exceeds the cost of generating it is a fundamental business goal.

Dividing the company's activities into strategic stages and processes allows you to better understand the company's cost structure and determine what the main cost elements are. Each job in the cost chain creates costs and links assets. Accrual of operating costs of the company and its assets for each separate species activity allows you to estimate the costs associated with this work. The company's costs in the implementation of each type of work can be increased or decreased under the influence of two types of factors: structural (scale effects and the development curve, technological requirements, capital intensity and complexity of the product range) and managerial (stimulating employees to continuous improvement of labor, creating organizational capabilities, etc. employee relations that would promote high quality both the work itself and the products, reducing the time between the start of development new products and offering it to the market, maximum use of production capacity, qualified development and rational use of internal technological processes, effective work with suppliers and consumers in order to reduce the costs of these activities). A value chain is a tool for analyzing potential sources of providing more value to consumers and identifying synergies. The value chain includes all activities of the organization (chain links) aimed at creating value for the consumer. In the classical organization model, these activities include the development, production, marketing, sales and support of its products. These activities are grouped into main activities (input logistics - providing production operations with everything necessary; manufacturing operations - releasing finished products; output logistics - handling finished products; marketing, including sales and services) and supporting activities (organization infrastructure - providing effective management, finance, human resources management, technological development, procurement, involving the acquisition of everything necessary for conducting core activities). Supporting activities concern the conduct of all core activities. In a more detailed model of the organization, each of the nine types of its activities, in turn, can be concretized - for example, marketing - according to its individual functions: conducting marketing research, promoting a product, marketing development new product, etc. The challenge is to check the costs and outputs of each of the nine activities and find ways to improve them. By comparing this data with competitors' data, ways of gaining a competitive advantage are identified.

Primary activity

1. Inbound logistics - acceptance, storage and sorting of suppliers' products; the control; inventory management.

2. Production activities - activities, costs and assets aimed at converting the flow of raw materials into the final product (production, assembly, packaging, equipment operation, installation, product quality certification, protection environment)

3. Outbound logistics (delivery of goods to the consumer) - activities, costs and assets associated with the physical delivery of goods to the buyer (warehousing of the final product, order processing, scheduling, shipping, transportation).

4. Sales and Marketing - activities, costs and assets related to efforts to sell, advertise and market products, marketing research and planning, support for dealers and distributors.

5. Service (service) - activities, costs and assets designed to provide assistance to customers in installation, delivery of spare parts, maintenance and repair, for technical assistance, informing customers and resolving complaints.

Supporting activities

Technology development (know-how, technological innovations used in each link of the value chain) - activities, costs and assets related to the process of research and development of the product, the process itself, improvement of the design process, development necessary equipment, development of software, telecommunication systems, computer developments, new database capabilities, development of a computer support system.

2. Personnel management - activities, costs and assets related to the recruitment of employees, training, development and social security of personnel, relations between employees, professionalism (skill).

Infrastructure of the firm - activities, costs and assets related to general management, accounting and finance, legal issues, security and privacy protection, information system management, and other functions of senior management.

Value chain analysis as a cost reduction tool. Value chain analysis

Introduction

... Theoretical aspects of the analysis

1.1 Value Chain Analysis

1.2 Functional cost analysis

2.1 Concept of costs

The last

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