Cost Management Blocher answer

SOAL 1

Calvin Klein products are clearly differentiated on the basis of high fashion and cost. What remains at issue is whether whether some differentiated products products can be sold in discount retail stores. Thinking that the presence presence of so much of his products in discount retail stores could hurt his brand, Calvin Klein sued Warnaco to stop this practice. The suit was settled out out of court in January 2! and and Warnaco Warnaco was allowed to retain the lucrative Calvin Klein contract. SOAL 2

The risk factors in the "#$ %"nited #ealth $roup& '() appear to be relatively comprehensive. * manufacturer will have different different risk factors than a service service firm such as "#$, so the '() of the auto parts manufacturer would recogni+e these differences. or e-ample, e-ample, while the auto manufacturer will will likely have have a risk category for the e-ternal environment, under this category it would have a risk factor of, for e-ample, trend in input prices or in auto demand instead of trend in medical lossutili+ation.  *lso, an auto manufacturer manufacturer will likely place much more emphasis emphasis on risk factors in the category, business process e-ecution. *s a manufacturer, most of the cost and risk lies in this category / manufacturing costs, warranty liability, raw materials costs and availability, etc, will be important risk factors in this category.  *nother difference is in the the analysis and reporting category. category. 0t is much more likely that a manufacturer will also have a sustainability report as part of its reporting process. 0nvestors and regulators are likely to e-pect e-pect this. "#$1s operations operations do not not have the environmental impact of an auto manufacturer. The risk category, business strategies and policies, is likely to look somewhat similar for a manufacturer. While the strategies and and policies will be different, different, the types of risks listed by "#$ are likely to be similar to those faced by a manufacturer. The risk category, people, will likely differ somewhat for a manufacturer. (ather than a focus on fraud and abuse and leadership, the manufacturer will likely be more focused on productivity and people who are able to adapt and perform in in a very cost leadership type of competition that is common to this type of manufacturing. The category, technology and data, is also likely to be different for a manufacturer. While data management management is critical for a health insurance and health services company like "#$ that has many customers, the data management issues will likely be less challenging challenging for the manufacturer. The manufacturer needs needs effective systems to track production costs, operating performance, sustainability measures, and financial performance this is likely to be a simpler technology than for "#$. SOAL 3

!. ull rame rame employs employs the cost cost leadershi leadership p strategy strategy by focusing focusing primarily primarily on on low price and profitability through through growth. This is consistent with Clyde1s description of the business as one that is difficult to differentiate. 2. Clyde1s Clyde1s pricing pricing and employe employee3inc e3incentiv entive e policies policies are consistent consistent with the cost cost leadership strategy. strategy. The fact that the business business has grown from one one to five stores in the past seven years is i s an indication that the strategy is working.

4otential problems5 1

a. While the growth strategy should work for a time, there is likely to be a limit to the total demand, within Clyde1s community for the framing type of service that ull rame provides. Clyde may have to franchise the business or e-pand it beyond his current family / adding stores in other communities or perhaps other cities and states. This will re6uire a professional level of management that Clyde will have to adopt if he wants the business to continue to grow. b. )anaging a company with the help of family members has its own set of rewards and potential problems. 0t may be more difficult to resolve disputes and to effectively employ performance management. c. Clyde1s current incentive plan rewards all employees for stores where efficiency has improved. The incentive might be more fair and effective if it could be targeted to each employee however, there might be difficulty in measuring performance at the individual employee level. SOAL 4

!. *cer and #TC understand that they can increase margins and profits considerably by achieving brand recognition. *s contract manufacturers only, their profits are limited to what can be negotiated with the manufacturer or retailer / a cost leadership competitive situation. 7ut as a brand, they can differentiate their product %on 6uality, innovation, 8& and sell for higher prices to the ultimate consumer. This seems to be a solid strategy for *cer and #TC if they can achieve the brand image they desire. *s of 9ctober 2:, shareholders appeared to have supported the strategy by supporting an increase in the firms1 stock price. 2. The problem for contract manufacturing can be that different retailers and manufacturers who purchase the same product but who sell the product in different brands at different prices may find it harder to support the price differences. *s noted by Jack Trout, president of a marketing strategy firm in Connecticut, ; 0f the public begins to get the perception that there1s not much difference , then you can1t hold your prices / that1s the bottom line of the whole pet food scandal.< #e added, ;Commoditi+ation is the real enemy of branding.< 3. =era Wang started with one of the world1s best known bridal fashion producers, and now has branched out into a variety of high3end fashion clothing and accessories. 0n 2: she branched out into a low cost line of dresses starting at >?@ and handbags starting at >AB for the retailer, Kohl1s, under the name, ;imply =era< by =era Wang. )s. Wang distinguishes her lines by noting that her high fashion line is very risky, ;fashion3forward< and intended for the very few who want and can afford that lu-ury. The Kohl1s line is intended to be comfortable, but also ;edgy,< differentiated from the other Kohl1s lines in terms of fashion appeal, but also affordable. )s Wang acknowledged she was nervous about the launch of the Kohl1s line. *s of January 2!2, ;imply =era< is still part of the Kohl1s line of clothing. 0t appears that the new line has not affected the overall Wang brand nor her ability to differentiate.

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