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　　Value analysis, otherwise known as ‘cost engineering’ and ‘value engineering’, is a technique in which a firm’s products, and maybe those of its competitors, are subjected to a critical and systematic examination by a small group of specialists. They can be representing various functions such as design, production, sales and finance.

　　Value analysis asks of a product the following questions:

　　§ Does the use of the product contribute value?

　　§ Is its cost proportionate to its usefulness?

　　§ Does it need all of its features?

　　§ Is there anything better for the intended use?

　　§ Can a usable part be made better at lower cost?

　　§ Can a standard product be found which will be equally usable?

　　§ Is it made on appropriate tooling, considering the quantities used?

　　§ Do material, labour, overheads and profit constitute total cost?

　　§ Is anyone buying it for less than its stated price?

　　The strategic implications can be measured in terms of a component’s relative cost versus its relative performance. There are four different situations:

　　1 If a component is both more expensive than and inferior to that of a competitor, a strategic problem requiring change might be necessary. It could be, however, that the component is such a small item in terms of both cost and impact on the customer that it should be ignored.

　　2 If the component is competitively superior, a value analysis, where a component’s value to the customer is quantified, may suggest a price increase or promotion campaign.

　　3 If a component is less expensive than but inferior to that of a competitor, a value analysis might suggest either de-emphasising that part or upgrading the relative rating.

　　4 If a component is less expensive than and superior to that of a competitor, a value analysis might suggest that component is emphasised, perhaps playing a key role in promotion and positioning strategies.

　　A cost advantage may be obtained in many ways, e.g. economies of scale, the experience curve, product design innovations and the use of ‘no-frills’ product offering. Each provides a different way of competing on the basis of cost advantage.