Question Bank 2015 Questions

Question 1

Explain the concept of cost drivers and value drivers

Answer 1

An organisation’s value chain is the sequence of activities by which value is added to its service. The influences the margin a customer is prepared to pay over the costs the organisation incurs in delivering this service.

Within the value chain there can be both cost and value drivers. Whilst cost drivers influence the cost of a given activity, value drivers help an organisation to differentiate itself from competitors.

Question 2

What can be determined as a key driver?

Answer 2

• Technology as a value driver of customer service - making widespread use of existing technology to add value by making it easier for customers to use the company’s services . Payment system also may be more secure online
• Technology as a cost driver - can reduce the costs of the company - high level of customer service at a low cost to the company
• Procurement (cost driver) - Flexibility of supply or reducing the dynamic demand-based pricing model
• After sales (value driver) - asking customers to follow-up or following up with customers creates a perception that the company cares about the customer experience
• Customer service (value driver)
• Firm infrastructure (cost driver) - low-cost, flexible model, little infrastructure costs (no requirement for investment in non-current assets for example) or employment costs of drivers