Strategic Cost Management in Aviation
Added on 2020-03-23
15 Pages3792 Words68 Views
|
|
|
Strategic Cost Management 1STRATEGIC COST MANAGEMENTBy (Student’s Name)Professor’s NameCollegeCourseDate
Strategic Cost Management 2STRATEGIC COST MANAGEMENTGlobalisation of industries and financial capital has forever changed the competitivelandscape. Disruptive technologies and changing market demographics and preferences provideboth opportunities and significant challenges to companies. Strategic management is designed toidentify these opportunities and challenges and provide a basis for competitive strategies tosuccessfully compete in global markets. A sub-set of this is Strategic Cost Management (SCM)and is an increasingly popular area of research. This paper provides a brief summary of theprevailing literature on Strategic Cost Management and offer insights to how, where as well aswhy the techniques underpinning SCM have been employed. Literature Review: Research into SCMSCM as Strategy SCM is used as a strategy in the present extremely competitive environment where themanagement of cost has turned into a critical survival skills for many organizations. It is neverefficient to merely reduce the costs; rather, cost management must be done strategically.Strategic cost management (SCM) describes the application of cost management techniques toconcurrently enhance strategic position of the firm as well as decrease the costs. The SCM isapplicable in service as well as manufacturing contexts and in no-for-profit surroundings. TheSCM concept is demonstrated best by instance (Anderson and Dekker 2009). The focus on SCM accounting system have been expanded to allow managers to betterserve the customers’ needs as well as manage the business processes of the firm that are utilizedin the creation of value to customers (Janjić, Karapavlović and Damjanović 2017). The SCMallows the firm to create a competitive edge via the provision of increasing customer value for
Strategic Cost Management 3reduced cost compared to its rivals. Managers seek to enhance time-oriented performance,efficiency and quality through SCM using accounting information. As a strategy, SCM work in three-fold based on cost management initiatives: the onesstrengthening the competitive position of the firm, the ones that have no effect on the position ofthe firm and the ones that weaken the firm. The 1st class of initiative can be demonstrated via ahospital that undertakes to redesign its admission process for the clients to become simpler,faster as well as less stressful on client to be admitted. Where the client has the latitude ofchoosing the hospital they shall enter, the novel process shall make hospital increasinglyattractive to them. Therefore, strategic position of the organization has been in this sensestrengthened. The organizations do benefit by undertaking a swift audit of each cost managementinitiative they have already planned or are presently undertaking and observe how many reallystrengthen their strategic position. In case of a few answer, the organization needs to refocus onits cost management program. For instance, cost reduction programs that decrease cost tenpercent across the board remain at the best strategically neutral as well as typically weaken thestrategic position of the firm. For this same reason, among other considerations, the cost“savings” often disappear once the crisis ceases. SCM as a Technique Strategic Cost Management can be used through various SCM techniques. These techniquesinclude: Activity Based Costing (ABC)Target Costing (TC)Total Quality Management (TQM)
Strategic Cost Management 4BenchmarkingBusiness Process Reengineering (BPR)JIT Inventory Control System Balanced Score Card Kaizan costing Six Sigma Life Cycle costing (LCC)Theory of constraints (TOC)Activity Based Costing (ABC) The technique remains a natural outgrowth of the present day competitive and complexsurrounding. ABC give firms a closer approximation of cost of the product compared to thatprovided by traditional volume based costing method. The major principle of ABC posit thatactivities trigger costs as well as control cost, and hence activities have to be controlled. Underthe ABC system, the identification of activities is done, the associated expenses to every activitybecome clubbed together to acquire activity-wise expense and the selection of a cost driver forevery activity is done and eventually the product cost is worked out. The traditional cost accounting undertakes to measure what it costs to undertake a taskwhilst ABC documents the cost of not doing as well. The ABC system monitors activitiesincreasingly closely, relates costs to the activities as well as bring in effectiveness of cost. Such asystem of costing makes substantial influence in service sector as well. ABC remains the primarysource of info for the Activity Based Management (ABM). The ABM is primarily a top downstrategy wherein top management exploits the info drawn from ABC and passes decisions tooperational level towards enduring enhancement as well as excellence.
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents