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Introduction To Strategic Cost Management

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Strategic cost management focuses on using cost information to improve a firm's competitive position while reducing costs, unlike traditional cost management which only focuses on cost reduction; it involves formulating, communicating, implementing, and monitoring strategies at all stages to achieve long-term cost levels, structures, and patterns that provide a competitive advantage; examples are provided of initiatives that can have a positive, negative, or neutral impact on a firm's strategic position.

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Introduction To Strategic Cost Management

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Shiwanithakur
62 views11 pages
Strategic cost management focuses on using cost information to improve a firm's competitive position while reducing costs, unlike traditional cost management which only focuses on cost reduction; it involves formulating, communicating, implementing, and monitoring strategies at all stages to achieve long-term cost levels, structures, and patterns that provide a competitive advantage; examples are provided of initiatives that can have a positive, negative, or neutral impact on a firm's strategic position.

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Introduction to SCM

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Strategic cost management focuses on using cost information to improve a firm's competitive position while reducing costs, unlike traditional cost management which only focuses on cost reduction; it involves formulating, communicating, implementing, and monitoring strategies at all stages to achieve long-term cost levels, structures, and patterns that provide a competitive advantage; examples are provided of initiatives that can have a positive, negative, or neutral impact on a firm's strategic position.

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Attribution Non-Commercial (BY-NC)
Download as PPTX, PDF, TXT or read online from Scribd
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62 views11 pages

Introduction To Strategic Cost Management

Uploaded by

Shiwanithakur
Strategic cost management focuses on using cost information to improve a firm's competitive position while reducing costs, unlike traditional cost management which only focuses on cost reduction; it involves formulating, communicating, implementing, and monitoring strategies at all stages to achieve long-term cost levels, structures, and patterns that provide a competitive advantage; examples are provided of initiatives that can have a positive, negative, or neutral impact on a firm's strategic position.

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Introduction to Strategic Cost Management

INTRODUCTION Traditionally, cost management systems have tended to focus on costs. Consequently, there is a danger that if the non-financial measures that are necessary to compete successfully in today's worldwide competitive environment are not emphasized, managers and employees will be motivated to focus exclusively on cost and ignore other important marketing, managerial and strategic considerations.

According to Cooper and Slagmulder :

Strategic cost management is the application of cost management techniques so that they simultaneously improve the strategic position of a firm and reduce costs".

According to Shank and Govindarajan : Strategic cost management is defined as: "the managerial use of cost information explicitly directed at one or more of the four stages of strategic management: (1) formulating strategies, (2) communicating those strategies throughout the organization, (3) developing and carrying out tactics to implement the strategies, and (4) developing and implementing controls to monitor the success of objectives".

According to Horvath and Brokemper

Strategic cost management has emerged as a key element to attain and sustain a strategic competitive advantage through long-term anticipation and formation of costs level, costs structure, and costs behavior pattern for products, processes, and recourses.

Hence, the term strategic cost management has a broad focus, it is not confined to the continuous reduction of costs and controlling of costs and it is far more concerned with management's use of cost information for decisionmaking.

THREE SORTS OF IMPACT OF COSTMANAGEMENT INITIATIVE

Positive

Negative

Neutral

Example of positive Impact:A hospital redesigns its patient admission procedure so it becomes more efficient and easier for patients. The hospital will become known for its easy admission procedure so more people will come to that hospital if the patient has a choice. The strategic position of the hospital has just been increased over its competitors.

Example of Neutral Impact:An insurance company decides to reevaluate its accounts payable system to make it more efficient. The evaluation has no positive benefits to the insurance company in the external market. The objective of the change is to make the organization more profitable.

Example of Negative Impact:A large airline company only has two desks for administering and selling tickets. This set-up induces long lines for the airline customer which can ultimately result in high dissatisfaction and a bad reputation for the airline. This may reduce the amount of ticket sales when compared with the airline's competitors. Even though having only two desks available for customers may initially be cost effective, in the long run, it harms the company.

Query:
Online Counseling will have which kind of impact?

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