Free Firm's Internal Cost Disadvantage Essay Sample
Most companies employ analytical techniques and strategic approaches to restore cost parity. More significantly, the analytical tools assist management in ensuring that it achieves cost parities for its products. These tools include the strengths, weaknesses, opportunities, and threats (SWOT) analysis, Value chain analysis, competitive strength assessment and the strategic cost analysis. Considerably, these tools help a company to evaluate the cost parity strategy it uses to control the firm’s internal cost disadvantage.
Companies like Exxon have eliminated cost-producing activities through revamping its value chain. In addition, a company like Black and Decker restructured the operation of high-cost activities, as it ventured into low cost operations. Some companies like CocaCola, relocated its high-cost activities to areas where they can perform more cheaply. Nonetheless, Dell computers and AT&T company used contracts from outside vendors for internally performed activities that could be more cheaply outsourced. Companies like Honda invested in cost saving technology improvements. Alternatively, companies like Sony, redesigned its products to ensure that the manufacturing process is fast and more economical. On the other hand, a company like McDonald innovated on the cost components as new investments in plant and equipment are tried out. Most technological companies like Microsoft, reengineered its work practices and business processes. Finally, some companies like Ford Motors made back and forward portions of value chains through savings on cost disadvantages.
In conclusion, companies that implement cost parity strategies achieve much success. In most cases, managers implement the strategies when a ﬁrm’s cost disadvantage arises from in within the company. As a result, they reduce on the cost of the production and achieve high margins of profits on their sales. Therefore, companies can control high costs of internally performed activities.