Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 46

Strategic Analysis, the Balanced Scorecard, and Value-Chain Analysis; the Packaging Industry Dana Packaging Company is a large producer of paper and coated-paper containers with sales worldwide. The market for Dana’s products has become very competitive in recent years because of the entrance of two large European competitors. In response, Dana has decided to enter new markets where the competition is less severe. The new markets are principally the high end of the packaging business for products that require more technological sophistication and better materials. Food and consumer products companies use these more advanced products to enhance the appeal of their high-end products. In particular, more sturdy, more colorful, more attractive, and better-sealing packaging has some appeal in the gourmet food business, especially in coffees, baked goods, and some dairy products. As a consequence of the shift, Dana has had to reorient its factory to produce the smaller batches of product associated with this new line of business. This change has required additional training for plant personnel and some upgrading of factory equipment to reduce setup time.

Dana’s manufacturing process begins with pulp paper, which it produces in its own mills around the world. Some of the pulp material is purchased from recycling operators when price and availabil­ity are favorable. The pulp paper is then converted into paperboard, which is produced at Dana’s own plants or purchased at times from outside vendors. In most cases, the paperboard plants are located near the pulp mills. At this point in the manufacturing process, the paperboard might be coated with a plastic material, a special embossing, or some other feature. This process is done at separate plants owned by Dana. On occasion, but infrequently when Dana’s plants are very busy, the coating and embossing process is outsourced to other manufacturers. The final step in the process is filling the containers with the food product or consumer product. This step is done exclusively at Dana-owned plants. Dana has tried to maintain a high reputation for the quality of the filling process, stressing safety, cleanliness, and low cost to its customers.

Required

1. Describe Dana Company’s new strategic competitive position.

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2. Develop a value chain for Dana. What are its opportunities for cost reduction and/or value enhancement?

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3. Dana’s management is considering the use of a balanced scorecard for the firm. For each of the four areas within the balanced scorecard, list two or three examples of measurable critical success factors that should be included.

Step 1 of 3

1.?Dana’s strategy had previously been primarily a cost-leadership strategy, but with the new focus on high-end markets, the strategy has changed to differentiation. Can Dana compete as effectively as a differentiator as it can as a cost-leader?  The change has required a change in operations, to accommodate the smaller batches and greater number of features added to the product, as noted in the case. The likelihood of success for the strategy depends on the firm’s ability to make the changes effectively. Can the plant be re-oriented to small batch production quickly and efficiently, so that Dana can compete effectively on cost and quality in the new markets?  Has Dana done a careful strategic analysis of the new competitors in the new markets?  How is competition in these new markets likely to change over the coming months?