Executive Summary The aim of this report is to analyse the strengths and weaknesses in the current business strategy adopted by SWC. The main objectives involved finding problems in need of addressing and offering recommendations to the management team about how these could be minimised. Our consultant team found that these problems were evident in the firms existing and proposed costing system, choice of production line and pricing policies.
The report recommends the use of (practical) Capacity-based costing system, producing only customized lines of product and pricing the customized lines at a greater mark up which accurately incorporates the cost of excess capacity. 1. Introduction The purpose of this report is to analysis the competitive environment and the different cost accounting systems put forward by the Company. This report will also advise on the strategic management decision for improving and maintaining the position of the Company in the industry. The Company is experiencing difficulties in competing with rivals.
The competitive disadvantage arises from not being able to lead in prices and not utilizing their full potential. This is in relation to an issue concerning the undesirable level of costs in manufacturing their products. This report will discuss these issues and give an opinion on the Company’s strategy and provide advice on how to place itself in a less vulnerable position that is maintainable for the Company. An assumption is made that this report is written based on the year 1987. 2. Conclusion SWC’s strategy is currently not focusing on the product lines which maximises revenue for the firm.
This is due to the fact that they are needlessly producing stock print containers which are not justified in terms of profit (given the analysis of the competitive environment and Porters 5 forces). Furthermore the firm is faced with problems regarding the costing system it adopts which has caused conflict between the marketing team and management. The difference in views creates conflict when determining the marketing decisions such as pricing of products and how these are reflected on the face of the firms statements. . Recommendation Adopt capacity costing which allows for seasonal trends. This should involve the allocation of excess capacity to be charged mostly to customized lines during the months March to August. Focus on improving customer service and work on differentiating low-volume products more. Discontinue stock-print production line and convert that line to produce customised products as Exhibit A and B clearly demonstrates that stock-print products do not do as well as customised.