Accounting and Decisions
Dr. Jane Doe
December 11, 2011
Gaining a competitive advantage in today’s business world can be challenging for any organization. The success of an organization may be measured from its critical success factors. According to Blocher, Stout, & Cokins (2010), critical success factors (CSF), sometimes referred as value propositions, represents the critical process in an organization that delivers value to customers (p. 35). An executive committee responsible for developing the vision and mission statements of an organization must understand what value is. Value is the “worth in usefulness or importance to the possessor; utility or merit” (Camlek, 2010, p. 119). It is vital for an organization to have the ability to demonstrate value for their product or service. Camlek (2010) propose a value proposition: “…will state the measurable value or tangible customer benefits that a product or service will provide to its customers and will illustrate the return on the investment or other tangible positive outcomes of choosing a particular service provider over its competitors” (p. 119). In order for an organization to become successful, they must demonstrate one of the following three value approaches, such as operational excellence, customer intimacy, or product leadership (Camlek, 2010). For the purposes of this research project and referencing back to the Individual Learning Project One (ILP1), the author explores the value approach of operational excellence because it is based on cost leadership.
Remember, in ILP1, ACME, Inc , Inc. (ACME, Inc) strived to gain competitive advantage over other government contractors through cost leadership. Cost leadership is a competitive strategy in which an organization provides services, or develops products at the lowest possible cost (Blocher, Stout, & Cokins, 2010). When an organization accomplishes this type of strategy, like ACME, Inc, it limits the profitability of other competitors and their growth in that specific industry. The value here is ACME, Inc’s customer, such as National Aeronautics and Space Administration (NASA) or the United States Air Force (USAF), receives the contracted services at the lowest possible cost to them. ACME, Inc also receives value from its customers, and that is revenue, which eventually turns into profitability.
Contemporary Management Technique
Currently ACME, Inc utilizes the total quality management (TQM) technique and partially the activity-based costing technique (ABC). TQM requires developing policies in order to make sure customers expectations are being exceeded from the organizations services or products (Blocher, Stout, & Cokins, 2010). Part of TQM, ACME, Inc evaluates its job costing systems to track the costs related to each job through a generated work order number. For instance, when NASA issues a request for proposal (RFP), they have strict guidelines that must be followed by the contractor, which may be ACME, Inc. Every quarter NASA evaluates ACME, Inc through a metrics system, in which ACME, Inc must score a 95% in order to be considered satisfactory. This determines whether NASA’s, the customer, expectations are being exceeded.
ACME, Inc uses ABC technique in order “…to improve the accuracy of cost analysis by improving the tracing of costs to products…” (Blocher, Stout, & Cokins, 2010, p. 12). The same work order number used for the specific job, or RFP, can be used to track the direct materials ordered, and also the direct labor.
Although these two contemporary management techniques have proven to be successful for ACME, Inc, the balanced scorecard (BSC) technique could be more affective to implement since it is not currently being used. The primary goal of the balanced scorecard technique to “translate the strategies into actions by monitoring the performance of strategy implementation in four...