Competitive Strategies Case Study Example | Topics and Well Written Essays - 3250 words

Competitive Strategies - Case Study Example Strategy can moderate the link between competitive environment and the decision to adopt TC. So, the choice if to adopt TC often depends on firm's strategy. "The competitive strategy (1) a corporation chooses to pursue identifies the manner with which management intends to compete successfully in its product markets and provide superior value to customers" (Susman 1992, p. 114). The firm's competitive environment affects its capacity to implement a defiinite strategy productively. "For example, a low-cost provider strategy works best when price competition among rival firms is especially intense and when the industry's product is standardized. Alternative competitive forces allow a product differentiation strategy to be effective. Examples include diverse needs or uses for the item or service, or relatively few competitors pursuing a similar differentiation approach" (Wolburg 2003, p. 340). The firm's planned vision is put into action by means of different tools, methods, and corporate policies. One such tool that is being adopted by firms all opver the world is the cost management system of TC. As Trebilcock et al. (1990) explain, the link between a firm's competitive strategy and use of TC exists primarily because TC provides the means for achieving the firm's goals of satisfying market demands at an acceptable level of profitability. A TC system provides a means for managing a company's future profits by integrating strategic variables to simultaneously plan how to satisfy customers, capture market share, generate profits, and plan and control costs (Kean, 1998, p. 47). Several large international corporations have been identified as TC adopters, including Coca-Cola and Pepsi-Cola; however, U.S. companies have been slower to adopt the technique. Reasons for this include TC being "not well known in Corporate America" and the existence of both cultural and organizational barriers to developing a broad team-oriented strategy TC requires (Hope & Maeleng, 1998, p. 130). The concept of TC ("Genkakikaku" in Japanese) originated in Japan at Toyota Motor Corporation in the 1960s. Since that time it has become recognized as a dynamic, comprehensive system for cost reduction and strategic profit planning. TC is not a costing system such as activity-based costing (ABC) or absorption costing. Rather, it is a program aimed at reducing the life-cycle costs of new products, while ensuring customer requirements of quality and reliability are met. "For controlling costs of new products, TC takes place at the design stage of new product development and considers all ideas for cost reduction during the product planning and research and development process" (Eckhouse 1999, p. 218). Several researchers (e.g., Covin & Morgan, 1999, p. 47) have noted changes in current economic and competitive conditions that create a need for a market-oriented cost management system. External powerful factors that have led to this need involve a growing number of competitors, high standards of competitors, globalization in the present economic situation, aggressive price competition, and shorter product life cycles. Coupled with a high rate of technology diffusion and innovation, these factors indicate the market must accept new products at a price that will generate an acceptable rate of return to the company. Thus, processes must be efficient, effective, and optimized to produce the