Strategic Cost Management Assignment
15 Pages3068 Words630 Views
Added on 2019-09-18
Strategic Cost Management Assignment
Added on 2019-09-18
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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 the basis of their internal and external capabilities and their strategic vision for delivering the value from the investment being made. Traditionally, it was seen that the firms were under intense pressure of cutting the costs without analyzing the integration and sustainable growth of the business 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 solutions used traditionally had failed to deliver the cost reductions and did not produce effective results despite considerable consumptions of the resources. Various cases saw a substantial damage to the image, corporate structure, culture and morale of the company. Therefore, it is imperative of the organization to understand Cost as a strategic issue and should strive to optimize their spending in the context of the business model. Further, a balance must be maintained between the cost and the revenue growth of the company. There is a need to scrutinize the organizational processes 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 be applied 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 the techniques of activity-based cost allocation system and benchmark relating it to Adidas and its functioning on the organization.
DiscussionStrategic cost management is beneficial in developing a framework for the organization which will review the strategic allocation of all the resources across all the operational functions of the nosiness on the basis of their core business activities and processes. It is also beneficial in improving the business and its understanding of all the cost drivers so as to maintain an improved 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 management along 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 marketplace present 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 management follows the principles that the activities lead to costs, and in order to control the costs, all the activities must be controlled. In this technique of strategic cost management, all the activities are first identified and then expense associated with each activity is clubbed together for getting a detailed activity-based expense. Then a cost driver is selected for each activity, and product cost is 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 then monitors every activity closely by relating the activities to their costs and bringing upon the effectiveness 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 the resources (Kaplan, R.S., and Atkinson, A.A., 2015). It is recognized as one of the most importanttechniques in the recent decades due to
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