Segmental, Productivity & Ratio Analysis
SEGMENTAL , PRODUCTIVITY & RATIO ANALYSIS
Learning Objectives :
1) Understand how cost analysis can be applied to market segments 2) Appreciate role of marketing experimentation in improving the allocation of marketing effort 3) Recognize the value of segmental productivity analysis 4) Critically perceive how ratio analysis can be used to understand the current position 5) Appreciate the relevance of strategic benchmarking
How are resources utilized and with what returns needs to be understood by all companies – “Where are we now ?”
For doing this consider the company as a bundle of projects or activities , for example
▪ Reformulation and relaunch of product X ▪ Continued market service Y ▪ Successful development and launch of project Z
Projects and activities can be further defined in terms of missions and this mix of projects and missions will be constantly changing with resource implications and profit consequences.
Which to add and which to delete ? Ration available resources among competing activities. Establish the cost of each activity of the company to start with.
Cost Categories need to be defined. Traditional focus puts product costing as the centre of costing systems. This could impede the ability to recognize the patterns of consumer preference and competitive positioning by market segment.
Attributes of market segments are different from attributes of production processes – Direct costs are traceable to Labor, Material, and salary but Indirect Costs cannot be directly traced to cost objects. The assigning of a ‘fair share’ of indirect costs, along with direct costs, is the heart of Absorption Costing (Full Costing). Deciding the full cost of a cost object in every company is thus worked out by adding an allowance usually on hourly rate for use of all indirect factors (power, equipment, rent, insurance, salaries of reception/supervisory/staff etc.)
MARKETING COST ANALYSIS
Most companies do not know what
Learning Objectives :
1) Understand how cost analysis can be applied to market segments 2) Appreciate role of marketing experimentation in improving the allocation of marketing effort 3) Recognize the value of segmental productivity analysis 4) Critically perceive how ratio analysis can be used to understand the current position 5) Appreciate the relevance of strategic benchmarking
How are resources utilized and with what returns needs to be understood by all companies – “Where are we now ?”
For doing this consider the company as a bundle of projects or activities , for example
▪ Reformulation and relaunch of product X ▪ Continued market service Y ▪ Successful development and launch of project Z
Projects and activities can be further defined in terms of missions and this mix of projects and missions will be constantly changing with resource implications and profit consequences.
Which to add and which to delete ? Ration available resources among competing activities. Establish the cost of each activity of the company to start with.
Cost Categories need to be defined. Traditional focus puts product costing as the centre of costing systems. This could impede the ability to recognize the patterns of consumer preference and competitive positioning by market segment.
Attributes of market segments are different from attributes of production processes – Direct costs are traceable to Labor, Material, and salary but Indirect Costs cannot be directly traced to cost objects. The assigning of a ‘fair share’ of indirect costs, along with direct costs, is the heart of Absorption Costing (Full Costing). Deciding the full cost of a cost object in every company is thus worked out by adding an allowance usually on hourly rate for use of all indirect factors (power, equipment, rent, insurance, salaries of reception/supervisory/staff etc.)
MARKETING COST ANALYSIS
Most companies do not know what