Blue Ridge

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Views: 136

Words: 400

Pages: 2

Category: Business and Industry

Date Submitted: 03/06/2014 08:38 AM

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Blue Ridge Strategies:

Cost leadership and the focus of selling the towels to customers in the south eastern states are the initial competitive strategies of Blue Ridge. Cost leadership is apparent because of the use of the modern plant with upgraded facilities using ABC to ensure the company’s competence and high volume production. These are characteristics of cost leadership in which the company will produce the towels at a low price to attract larger amount of the market. Since the new, non-toxic ink that will not wash out has been introduced, Blue Ridge also uses the differentiation strategy where high volume production and the production levels are based on every customer’s requests on the type of product they request. Another strategy for Blue Ridge is just-in-time. Using this strategy, the firm can cut expenses such as the inventory cost and also avoid the risk of any alterations of the customers’ desires. The firm is trying to improve its ink in order to maintain the quality of the products and increase value of the goods. This way it can attract various customers and also keep its good status.

Blue Ridge used volume-based costing to allocate the manufacturing costs but the firm had no basis for identifying the profitability of customers in the 3 categories, but now by using ABC we are able to identify the customer profitability as shown in our work. According to the customer profitability analysis, it indicates that the small customer group has a negative profit of $4,828. Since this customer base takes up quite a bit of Blue Ridge’s total sales volume some action should be taken to improve the profitability by maybe selling more towels to the larger customer groups. You could even increase the large customer group size, especially since Blue Ridge is planning to go national, because right now there are only 8 large groups compared to 824 small customer groups. As you can see from the profitability computations in the table, the small sized customers...