Customer Value, Strategic Positioning

Adriana Alvarado has decided to purchase a personal computer. She has narrowed the choices to two: Drantex and Confiar. Both brands have the same processing speed, 6.4 gigabytes of hard-disk capacity, two USB ports, and a DVDRW drive, and each comes with the same basic software support package. Both come from mail-order companies with good reputations. The selling price for each is identical. After some review, Adriana discovers that the cost of operating and maintaining Drantex over a 3-year period is estimated to be $300. For Confiar, the operating and maintenance cost is $600. The sales agent for Drantex emphasized the lower operating and maintenance costs. The agent for Confiar, however, emphasized the service reputation of the product and the faster delivery time (Confiar can be purchased and delivered 1 week sooner than Drantex). Based on all the information, Adriana has decided to buy Confiar.

Required:

1. What is the total product purchased by Adriana?

A. The product and its features

B. The product only

C. The services and delivery speed

D. The product, its features, services and delivery speed

2. CONCEPTUAL CONNECTION How does the strategic positioning differ for the two companies?

A. DANTEX

B. CONFIAR

is emphasizing low costs, and (A. DANTEX B. CONFIAR) is attempting to differentiate its PC by offering faster delivery and higher-quality service.

3.CONCEPTUAL CONNECTION When asked why she decided to buy Confiar, Adriana responded, I think that Confiar offers more value than Drantex. What are the possible sources of this greater value? What implications does this have for the managerial accounting information system?

The (A. DANTEX B. CONFIAR) service component and its delivery time appear to be better than (A. Confiar's B. Dantex's). Thus, the realization of these features appears to outweigh the additional sacrifice (the additional operating and maintenance cost) associated with the Confiar PC. The implications for management accounting are straightforward. The management accounting (A. information system B. manager) should collect and report information about customer realization and sacrifice. Much of this information is external to the firm but clearly needed by management.

4. CONCEPTUAL CONNECTION Suppose that Adrianas decision was prompted mostly by the desire to receive the computer quickly. Informed that it was losing sales because of the longer time to produce and deliver its products, the management of the company producing Drantex decided to improve delivery performance by improving its internal processes. These improvements decreased the number of defective units and the time required to produce its product. Consequently, delivery time and costs both decreased, and the company was able to lower its prices on Drantex. Explain how these actions translate into strengthening the competitive position of the Drantex PC relative to the Confiar PC. Also discuss the implications for the managerial accounting information system.

Better quality and shorter delivery time increase the (A. Value B. Price) of what the customer receives, while lowering the (A. Value B. Price) decreases the amount paid. In total, customer value has increased, and presumably, this should make the (A. Dranfex, B. Confiar) PC much more competitive. This example illustrates how quality, time, and costs are essential competitive weapons. It also illustrates how critical it is for the management accounting system to collect and report data concerning these three dimensions.