Hidden in this article from The Wall Street Journal is that Ford is taking a target costing approach to sell more cars in Asia.
Last year, Ford began building the $7,600 Figo at a plant in Chennai, India. It developed the car by starting with an older version of the Fiesta originally designed for the European market. Ford modified the vehicle and stripped out about $1,000 in cost to sell it at a much lower price in India, Mr. Hinrichs said.
Rather than trying to sell the same model everywhere, Ford is looking at what local markets will bear and what consumers value and finding ways to modify its existing models to fit.
Corporate News: Ford Ramps Asian Car Plans — U.S. Auto Maker Bets Small, Inexpensive Cars Will Fuel Projected 50% Gain in Global Sales by 2020. Jeff Bennett. Wall Street Journal. (Eastern edition). New York, N.Y.: Jun 17, 2011. pg. B.7
From the book, Killing Giants, here is an excerpt of how a small player, Krackel, took on the mighty Nestle Crunch bar and scored a significant blow by being strategic with pricing. Krackel (owned by Hershey) utilized the vending machine retail channel as a battlefront to take on Crunch since most vending machine operators would only stock one of the two similar candy bars.
Mullen’s proposal to management was to give the vending distributors a 30 percent trade discount on Krackel where other brands hovered in the 5 to 10 percent range. This was understandably a bold move. “I originally took it to my boss and he choked on it. He said we couldn’t afford it. Giving away thirty points was a big deal. I said, ‘Think of the options. If Nestlé tries to match us, the dollar cost to them is huge. That, or we blow Krackel out in every vending machine in the country.’” With nothing to lose — and aiming at the brand that paid for so many of its chief competitor’s other brands — Krackel could play the role of spoiler. “My boss balked at it at first, but the more he looked at it, the more he got this smile on his face. He said this is a pretty evil plot. The big guy can’t win on this and we can’t lose.”
Read more at: A Sweet Victory
We often talk about things in class and fail to relate them to what happens in reality. Here is a great post about the usefulness of SWOT analysis that highlights the fact that people learn about these things in school and even remember them in great detail, but they often fail to put them in to practice.
When was the last time you did a SWOT analysis for your business? “Uhm, I’m not really sure.”
So how did you learn what SWOT analysis is about? “Oh that’s easy, we covered it when I was getting my MBA.”
I have conducted this informal survey on a regular basis, the results are always the same and yet it still surprises me. If SWOT analysis was important enough to teach in b-school, and important enough for you to remember, why isn’t it important enough for you to implement??? Staying ahead of the curve can be as simple as using the SWOT’s technique.
This particular site focuses on the Triple Bottom Line that I’ve mentioned elsewhere (people, planet, profits) but the lesson is pertinent for areas outside sustainability.
Check it out at the link below:
It seems that sustainability is the hot buzzword these days in marketing and accounting circles. Locally-based giant, General Mills, is taking the sustainability push beyond its legal borders and using a scorecard to track its suppliers:
General Mills has been pushing on green issues since about 2005, Lynch explained, and is steadily seeking to expand its reach on sustainability. The company began its sustainability initiatives with a focus on its manufacturing plants, simply because that was the area where the company has the most control over its operations.But in tracking its internal and supply-chain emissions, Lynch said that GM has come to a few realizations about where its impacts come from.
“The vast majority of our inputs come in through suppliers who provide value to us here in sorting or milling or roasting or adding flavor and it’s in very few situations that we’re buying directly from farmers,” Lynch said.
Read more at:
Like arch-rival Target, Walmart is seeing investment in environmentally friendly practices flow to the bottom line. It has long been my position that companies will embrace “green” when it results in “green” to their income. That seems to be the case here as well. Through some tweaking, Walmart has turned expenses into revenues:
A seemingly unrealistic goal of zero waste to landfills is suddenly looking attainable; the company cut its waste 81% in California, a pilot program now going nationwide. The trick to it was finding new uses for former trash: turning plastic waste into dog beds, food waste into compost sold in its stores, expired but still healthful foods into food bank donations. The waste Wal-Mart once paid to have hauled away is now earning the company more than $100 million a year.
On Monday, The Wall Street Journal ran a special section about transportation in the future. The thing that caught my eye, though, wasn’t the predictions about futuristic high-speed rail networks or the fact that new fuels would replace oil-based products. What I found interesting was that as charging networks are built-out across the country for electric cars there is a high-likelihood that a subscription-based model will take hold. Similar to mobile phones or health-clubs, the price someone pays will be the same each month regardless of how much they use the service. In the context of what we’ve been talking about with regard to variable and fixed costs this is an important idea. To be sure, it is a huge investment to install the equipment at very high fixed cost before many people need the equipment, but companies that do so are hoping for a payoff in the future. Signing up customers at fixed prices (via a subscription model) will allow them to lock-in revenues rather than be subject to changing volumes over time. I guess we’ll have to wait and see if the subscription model is really the one that comes to be, but it is interesting that it is the leading candidate right now.
Tomorrow’s Transport (A Special Report) — Charge It!: If electric cars take off,they will need a network of charging stations; but how will people pay? Mike Ramsey. Wall Street Journal. (Eastern edition). New York, N.Y.: May 23, 2011. pg. R.7
The American Institute of Public Accountants (AICPA) announced today that its governing body has approved a joint venture with the Chartered Institute of Management Accountants (CIMA) to manage a new accounting credential aimed at management accountants worldwide. This accounting credential will be known as CGMA and stands for Chartered Global Management Accountant. Certain members of both organizations will automatically be eligible for the new credential beginning in 2012 and there will eventually be paths to gain the credential for others as well.
“This is truly an historic moment for management accounting and the accounting profession worldwide,” AICPA Chairman Paul Stahlin said. “Our joint venture with CIMA creates long-term strategic value for our members and literally opens up the world for U.S. CPAs in management accounting.”
CIMA President George Glass said: “We are delighted that management accountancy is to be given a strong new global impetus by this joint venture. This advances our strategic aims and will ensure management accountants, committed to strict ethical standards, will receive world-class support in a fast-globalizing world.”
CIMA is the largest professional body in the world focused exclusively on management accounting and the AICPA is the world’s largest professional accounting organization with members in a wide range of accounting and financial executive roles. Together, the new venture will cover more than 550,000 members and students worldwide.
Given that the Institute of Management Accountants in the United States already offers the CMA (Certified Management Accountant) credential, it is at least a bit interesting that CIMA chose the AICPA as their American partner. Is the CMA credential headed for extinction? Hard to say at this point. It may take a while for things to shake out and in the end both credentials may be held in high esteem. Time will tell…
- Press release – http://www.aicpa.org/Press/PressReleases/2011/Pages/AICPAandCIMAAgreetoNewCGMADesignation.aspx
- Video details of CGMA credential: http://www.aicpa.org/News/AICPATV/BusinessIndustry/Pages/AdvcngScienceMgmtAcctng.aspx
- Journal of Accountancy article: http://www.journalofaccountancy.com/Web/20114174.htm
As mentioned in class, companies are taking a close look at environmentally-friendly initiatives and sustainability. Management accountants can help with this by identifying opportunities and measuring performance against environmental criteria. In a local example, Minnesota-based Target was featured in a Star Tribune piece this week as testing a new refrigerant at 11 stores with the idea that it could be expanded to other stores if it is successful. This new material is supposed to result in fewer leaks and, ultimately, reduce operating costs though I’m sure Target will play up the fact that it is using “green” chemicals and processes as well.
The bottom line is that the gas is a “high temperature” refrigerant less prone to leakage and more energy efficient. It is also used in automobile air conditioners.
“These are very complex systems,” said Target’s Dan Riley of the coolers and freezers in the chain’s “PFresh” food sections. “In each Target store there are many, many miles of coils. At every junction there is an opportunity for a leak. These [existing] gases are very leak prone. They are under pressure.”
In December, Target announced its commitment to sustainability and the GreenChill program fit into the chain’s intention to use resources responsibly and reduce the company’s carbon footprint.
Ultimately I don’t think many companies will do things like this if they don’t see a benefit in terms of reduced costs or marketing opportunities, but those opportunities exist and the planet and society can benefit as a result. Management accountants need to be prepared for this role and to seize the opportunities.
Target tests green chillin'; The retailer is trying a new, more energy-efficient refrigerant in 11 stores around the country as it tries to go green. By David Phelps. Star Tribune. Minneapolis, Minn.: May 15, 2011. pg. D.4
Even during the recession, the accounting profession has fared rather well. This trend will continue and certain areas of the profession will be in high demand as companies enter the hiring mode and baby-boomers that have held off retiring leave the workforce.
Jobs in accounting and finance may not be recession proof, but they canopy a range of careers that come pretty close to the mark. That’s what recruiters and experts in the field are saying, and the outlook only gets better going forward.
“Even through the recession, accounting and finance has stayed strong and stable,” says Toby Coffey, director of permanent services for Robert Half Finance & Accounting in Chicago, adding that, while salaries haven’t grown overall in recent years, they maintained their levels. “There are certain skill sets that will be in very high demand coming out of the recession,” he says.