Strategic Cost Management Assignment

Added on - 18 Sep 2019

  • 15

    pages

  • 3068

    words

  • 65

    views

  • 0

    downloads

Showing pages 1 to 4 of 15 pages
Strategic Cost ManagementNameSubjectSubmitted toDate
Table of ContentsIntroduction......................................................................................................................................3Discussion........................................................................................................................................4Activity based cost allocation system..........................................................................................4Advantage of ABC..................................................................................................................5Disadvantages of Activity Based Costing...............................................................................6Adidas and Activity based cost allocation system...................................................................6Benchmarking..............................................................................................................................8Pros of Benchmarking.............................................................................................................9Cons of Benchmarking..........................................................................................................10Adidas and Benchmarking.....................................................................................................10Conclusion and Recommendations................................................................................................12References......................................................................................................................................14
IntroductionIn the competitive marketplace, all of the spending being done by the firms and organizations areseen as investments. The organizations are making efficient decisions on their spending on thebasis of their internal and external capabilities and their strategic vision for delivering the valuefrom the investment being made. Traditionally, it was seen that the firms were under intensepressure of cutting the costs without analyzing the integration and sustainable growth of thebusiness strategy.There is a need for the development of multifaceted cost competence due to increased regulation,increased global competition, changing demographics, etc. It was seen that the tactical solutionsused traditionally had failed to deliver the cost reductions and did not produce effective resultsdespite considerable consumptions of the resources. Various cases saw a substantial damage tothe image, corporate structure, culture and morale of the company. Therefore, it is imperative ofthe organization to understand Cost as a strategic issue and should strive to optimize theirspending in the context of the business model. Further, a balance must be maintained betweenthe cost and the revenue growth of the company. There is a need to scrutinize the organizationalprocesses so as to knock down all the departmental barriers and to understand the business of thesuppliers in order to improve the process. Further, the cost management techniques have to beapplied for improving the strategic position of the firm and further to reduce the cost. (Cooper,R., and Slagmulder, R., 1998).This paper will discuss the various characteristics of the strategic cost management and thetechniques ofactivity-based cost allocation system and benchmarkrelating it to Adidas and itsfunctioning on the organization.
DiscussionStrategic cost management is beneficial in developing a framework for the organization whichwill review the strategic allocation of all the resources across all the operational functions of thenosiness on the basis of their core business activities and processes. It is also beneficial inimproving the business and its understanding of all the cost drivers so as to maintain animproved articulation of the strategic plans regarding the cost (Shank, J., and Govindarajan, V.,2004).The following section discusses the two primary techniques of strategic cost managementalong with discussing the usage of these techniques in Adidas.Activity based cost allocation systemABC can be considered as a natural outgrowth of the competitive and complex marketplacepresent today. It helps in providing an approximation of the product cost rather than providing bythe traditional volume based costing method. This technique of strategic cost managementfollows the principles that the activities lead to costs, and in order to control the costs, all theactivities must be controlled. In this technique of strategic cost management, all the activities arefirst identified and then expense associated with each activity is clubbed together for getting adetailed activity-based expense. Then a cost driver is selected for each activity, and product costis worked out in the end. Whereas the traditional cost accounting used to measure the cost relatedto the task but ABC also was taken into account the cost of not doing the task. The system thenmonitors every activity closely by relating the activities to their costs and bringing upon theeffectiveness of the cost. ABC helps in recognizing the activities relating to special engineering,machine setups, special testing and others which cause costs to the company by consuming theresources (Kaplan, R.S., and Atkinson, A.A., 2015).It is recognizedas one of the most importanttechniques in the recent decades due to