COST LEADERSHIP
Group 9
Group 9 • Asha Nachi • Kritika Prabhakar • Nitesh Kumar • Raunaq Chawla • Seshu Pinnamaneni • Vijay Pal Singh
Cost Leadership
• Cost leadership is one of the 3 viable basic types of competitive advantages according to Michael Porter. • Others Being Differentiation and Market Segmentation.
Cost Control
• Effective Budgeting • Standard costing. • Balanced Scorecard
Cost Leadership as a Strategy • process engineering skills • products designed for ease of manufacture • sustained access to inexpensive capital • close supervision of labour • tight cost control • incentives based on quantitative targets.
Cost Leadership as a Strategy
• Success of Cost Leadership depends on: • RARE • COSTLY TO IMITATE • CONSIDERABLE MARKET SHARE ADVANT ADVANTAGE AGE
TATA Steel
FACT FILE: TATA STEEL • Established in 1907 under the vision of JRD TATA
• Formerly known as TISCO now India’s largest steel company
• World’s 6th largest steel company by capacity after Tata-Corus deal
•
One of the least cost makers of steel in the world- COST LEADER
• Caters to sectors like Auto, consumer durables, construction and capital goods.
•
Won various awards like:
•
Deming Application prize, 2008- Excellence in Total Quality Management
• Prime Minister of India’s Trophy- Best integrated steel plant (5 times)
MAJOR COMPETITORS • ARCELOR MITTAL • NIPPON STEEL • JFE • POSCO • BAO STEEL • In addition to this there are various domestic competitors including SAIL, Jindal steel. •
Essar Steel
FACTORS CONTRIBUTING TO TATA STEEL’S COST LEADERSHIP • Strict Cost Control Program
• Cost Reduction- Total Operating Performance
• Use of modern technology, Benefit of Innovation, Continuing Modernization &
• Modern Infrastructure
• Low raw material material cost as it owns coal/limestone mines mines in Australia, Oman, Mozambique Mozambique
• Low operating costs, Ongoing cost cutting, high domestic market growth rate,
• Domestic sales promotion
TATA Steel • India is among the least cost producers of rolled Steel. • TATA is able to tap the low production cots in India. • Cost Of raw materials amongst the lowest in India. • The nearest competition comes from SA, Brazil and Russia.
Cost Factors: TATA • Labour costs • But productivity is a concern. • Comparative costs.
Cost Factors: TATA • Freight and Transportation costs come into play in Global compani companies es like TAT TATA Steel. • It sources Raw Material from Australia, Mozambique(Africa) and Europe. • Margins are decreasing due to the recessionary conditions. • Good news is that profits are still intact.
Reliance Industries Ltd.
Polyester Industry
• Introduction • Polyester & India • Reliance’s Contribution • Present Scenario
e ance: os Leader in Polyester •Strategies Employed • T Targeting argeting masses • Efficient Production • Economies of scale • Innovation • Low cost labor • Raw material
Current Scenario • RSCM-Reduced and Sustained Cost Management.
• Category:
• Winners
• Mediocre
• Losers
• Dual focus:
• Strategic advantage
• Operational Advantage
Winner’s Strategy • Carry out cost reductions that aim to be optimal & Sustainable. • Reduce cost diagnostically, not indiscriminately, through an end to end process driven approach. • Identfy cost drivers with the goal of optimising cost value relationship and minimising negative impacts to the growth of the business as a whole.
Methodology • Secondary sources of information like D&B, Edelweiss, Annual reports.
• Other literature on cost and management accounting
• Webster, Williams. CPA. Accounting for Managers, Mc Graw Hill, 2005
• Porter,. E. Michael. Competit ive Strategy, Free Press, 1980
• Grant,.M. Robert. Contemporary Strategy Analysis, Blackwell publishing, (wiley), Fifth Edition, 2007
• Homgren, Charles. Datar, Srikanth. Foster, George. Cost Accounting. Pearson Prentice Hall, 2005
Thank You
