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Relative Cost Analysis on Automobile Industry

•Cost-leadership strategy is difficult to employ. It helps the business achieve competitive advantage by lowering operation costs, and maintaining good quality simultaneously.

•Relative cost analysis help identify the “secret” of low cost leaders, and is critical for businesses pursuing this strategy.

•This analysis includes two stages:

1.identify the key cost driver (s) in each value chain activity.

2.identify the linkages across different stages in the value chain.

•Key points for relative cost analysis include:

•Focus on differences in individual activities, not just differences in total cost.

•A subset of all of a firm’s activities

•Thicker costs deserve deeper treatment in terms of cost drivers.

•Driver should vary across competitors.

•Cost analysis should not crowd out consideration of WtP.

•Based on the firm value chain provided in Slide 2:

1. Please identify the key cost driver (s) in each value chain activity

Products Inventory -

Sales & Market

2. Then please identify the linkages across different stages in the value chain.

(please note that I only give examples of some linkages, your team needs to continue this, identifying as many linkages as you could find)

Products Inventory -

Sales & Market -