Question

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, a DVD 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 three-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 one 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?

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

3. 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?

4 Suppose that Adriana's 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.

Answer 1

1. The total product purchased by Adriana is the personal computer and its features processing speed, hard disc capacity, USB ports, DVD drive, software support package etc., operating and maintenance requirements, delivery speed, and the service.

2. Drantex is focusing on the low-cost strategy to attract the customers whereas Confiar is focusing on differentiation strategy by providing faster delivery and high-quality services.

3. Confiar’s high-quality services and faster delivery than Drantex are the possible sources of greater value to Adriana. The value of these features offered by Confiar exceeds the additional operating and maintenance cost required by Confiar’s PC. The managerial accounting system should collect the information what is more valuable to a customer and how much sacrifice they can make for this. Like in this example quality services and faster delivery is more appealing to the customer than maintenance cost.

4. The decrease in delivery time and improvement in the quality of product increase the value that customer receives from the product whereas the decrease in the price reduces the amount paid by the customer to acquire the product. Thus these actions have double impact, on one side better quality and reduced delivery time increases customer value and on the other side decrease in price reduce the cost for the customer. The managerial accounting system should collect data regarding the cost, quality and delivery time of the product as these elements are vital for competitiveness.