Strategic Cost Management Report: AI, Uber, MOIA, and McKinsey 7-S

This report delves into strategic cost management, emphasizing the role of Artificial Intelligence (AI) in cost reduction and enhancing business strategies. It explores how AI influences business operations, particularly in achieving competitive advantages and increasing production efficiency. The report examines the impact of AI on various aspects, including product, process, and insight applications. Furthermore, it analyzes the competitive landscape, focusing on how companies like Uber are affected by innovations, such as MOIA. The report also applies the McKinsey 7-S Framework to evaluate Uber's strategies, structure, and systems, highlighting the importance of elements like strategy, structure, systems, shared values, style, staff, and skills. It provides a comprehensive analysis of the challenges and opportunities related to AI adoption and strategic planning in a dynamic business environment.

Strategic cost
Management
SRN : 17060531

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
(A) Artificial Intelligence Goes Mainstream.............................................................................1
TASK 2............................................................................................................................................3
(B) FT Article on launch of MOIA in Hamburg, Germany........................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Strategic cost management help the organisation to reduce it's cost which improve
business position through various strategies. It involves the process of decision making with the
help of relevant cost information. This report is about how Artificial intelligence (AI) help the
company to reduce their cost and provide higher profit in comparison to those organisation who
not used AI.
TASK 1
(A) Artificial Intelligence Goes Mainstream
Artificial intelligence (AI) is the part of computer science that create a intelligent
machine. This machine includes the various activities which helps the human in their workplace
on regular basis, even nowadays AI is the part of work culture. Without Artificial intelligence
company not able to achieve their targets and it also create the huge mess in the process. In the
organisation number of forces affect the Artificial intelligence along with various technology. It
have huge processing power which can complete the task very quickly and it is also helpful for
reducing cost rapidly. It provide facilities such as outsourcing of data storage and cloud
computing. These functions help to reducing price and that allowed company to invest in AI and
develop their process regularly(Guenther and Gaebler, 2014). This technology provide the
mobility and bandwidth facilities for the worker or users so they can access the applications from
any location. Developer understand that how human brain works and how they have to alter
these things in the computer system. Which increase it's capacity to recognise a person through
different patter, voice, natural language and machine learning.
Artificial intelligence help the organisation to build strategies which provide proper
competitive advantage. This intelligence technique help to increase production at low cost which
directly increase the profit of organisation. According to Deloitte studies, AI have three major
categories such as product, process and insight applications.
Product application of Artificial intelligence plant in the product level which enhance the
quality of production that directly provide benefit to the customers. It use the functional analysis
for the competitive advantage. So manager of the company build strategic plan for executing AI
in the production level for reducing cost of product and services. Functional analysis show the
relation between product function, it provide end benefit for the consumers. For example: -
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mobile phone provide various applications such as net surfing, texting, call facilities, MSGs and
music.
Process application adopt the AI process in the organisation for improving their
efficiency and effectiveness of the worker. Organisation use the different technology which
reduce the burden of human forces as well as reduce the cost of product or service. Such as
automatic voice system who response on behalf of any person for example call centre. Most of
the company use this process to save time & money and it is very effective. It also follow the
continuous improvement strategy for the competitive advantage. Which provide organisation to
reduce response time, improve quality or performance of the activity that is directly satisfy the
customers.
Insight application support the analytical capability like they pass the information
through machine learning to reveal insight. That convey the operational and strategical decision
in the organisation. For example: - employees of Inter company use predictive analysis for high
level data. It involves various techniques like data mining, statistical and machine learning which
is helpful in forecasting of future event. Intel company classify the customers according to their
needs and buying pattern. They use information for the further promotion and sales efforts.
Organisation need to understand that what is the market requirement in context of
technology. Also identify that how AI enhance the quality, functions, revenue growth and speed
of work. After applying these technology company not only find the opportunity they also face
some problems. Because excessive use of technology can ruin the business as well. That is
happen, when whole process of production depend upon the machinery. If it is not working than
it heavily influence the business as well as the whole industry(Hinton, 2012).
Artificial intelligence affect the business strategies as well as development of the
organisation which provide competitive advantage. Company follow the continuous
improvement strategy which reduce the waste elements from the production. It also reduce the
time, simplify it's design of process and products, which improve the performance or quality of
product. Company also follow the value and functional analysis that provide direct benefit to the
consumers with the help of AI. Organisation adopt these strategies with the help of AI
technology which further reduce the cost, time and increase profit of the business. Use of
Artificial intelligence in the company make it competitive in the market(Raford, 2015).
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Artificial intelligence is beneficial as well threat for the organisation as well because it
has power to destroy the whole business because the excessive use of technology is harmful for
the organisation.
For example Hanson Robotics develop humanoid Robots with the use of Artificial
Intelligence for the purpose of commercial and consumer market. It is the advance learning
social robot who can change their facial expression at the time of conversation with humans just
to show their emotions. It's robot name is Sophie who become media celebrity right in the past
few months. Sophie have memorable appearance and this robot also get the citizenship of Saudi
Arabia.
CONCLUSION
From the above discussion it has been concluded that Artificial intelligence play very
important role in the business. It help to increase productivity also cut the cost of each unit which
directly increase the profit. Cost planning provide the proper competitiveness in the organisation
by using different AI technology and strategies.
TASK 2
Introduction
Strategic cost management contains cost managing and cost controlling system. In this
report some points are covered that relates to McKinsey 7-S Framework. Further report is about
how Uber company build their strategies to compete MOIA and also discussed that the impact
of innovation on Uber(French, 2013).
(B) FT Article on launch of MOIA in Hamburg, Germany
MOIA Volkswagen wanted to provide pooling services in 50 cities, and its goals to bring
out their business at global level. Company launched 100 vehicles across Hamburg, and wants to
increase it up to 500 within 12 month. It can be effect Uber business by launching and producing
new vehicles which is discussed as below:
Market growth and differentiation: This means new market competitor entering in to a
new business model or same, at lower price. MOIA affect the Uber business by providing
pooling services at low price than Uber. There is need to increase in production and brings new
creativity(Lee and et.al., 2013). Fast reaction to changing conditions of Uber, it can face great
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challenges because of fast change. Volks brings new technology, which is more demanding by
customers, for this innovation is must.
Highly competitive: To secure a sustainable market, Uber must be creative and should be
develop new ideas. Uber can face many problems such as perfect competition, decrease in
number of sale,production, etc. Change in customer demand is the main impact of new
innovation that people will change their demand from existing to new product. MOIA accept
new technology and manufacture new vehicle and provides polling services at low cost than
Uber. Efficiency and cost helps to new creativity that can lead to a reduction in production cost
and help to increase productivity. It impacts on Uber business because of low efficiency and
higher cost(Luo, Chang and Su, 2012).
McKinsey 7-S Framework
Uber McKinsey's model states the ways in which business can increase productivity and
effectiveness. These are useful for reviewing market capabilities of any organisations. Uber
contains a strong links between all elements of this structure that includes strategy, structure and
systems are hard elements whereas skills, shared values, style and staff are soft elements which
is given as below-
Strategy of Uber follows cost leadership business strategy that help to achieve its goals.
Its purpose to make solid plans and strategies that enhance competitive advantages. This also
contains ideas and experience which help to increase in number of consumer(Naumann and Suhl,
2013). Structure includes structure of any organisation and who reports to whom. This also
contains coordination mechanism, integration and division of activities. Uber organisation
structure described as hierarchical and proper communication around the whole department.
They use cross functional teams and steering groups for making better structure.
Systems is a formal procedure for resources allocation, rewarding to employees, and
measurement of their performance. Uber includes various systems such as employee
recruitment, selection,orientation and team development system. It mainly focus on business
intelligence system, customer relationship system and knowledge management system, which
helps to provide faster services. Shared values means overall culture of the organisation which
helps to meet company's objectives, and its purpose that everything should be done. Uber stretch
to all staff for creating a feeling of connectivity and sociability(Nixon and Burns, 2012). It also
involves moral and social behaviour of this organisation for their employees.
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Style of any enterprises contains both need of organisation team and culture of the
company. It shows that, In which style an organisation going to lead to their team. In Uber , there
are many different styles engaged by manager according to situation, so there is need to craft
own formulation and policies to the business which helps to interactions between stakeholders
and employees. Staff means hiring, selecting and maintaining a qualified and competent staff. It
is a management tool also which includes recruiting, choosing, training, appraising, and
compensating employees. Uber observed and evaluate the strength and weakness of their team
and make them responsible for their good performance. This also includes rewards, appraisals
and motivation for best performance of their staff. This process helps to increase in number of
sale as well as in production(Schiffer and Walther, 2018).
Skills element is also connected with staff and other elements. It helps to get good
communication skills in team members and staff. In Uber managers maintains a relationship with
its staff which helps to communicate intelligently, accept responsibility and praising
them(Phillips and Moutinho, 2014).
Following key strategic challenges are faced by Uber that is given below-
Right talent and skills: Manager of Uber company facing right and talented person who
can adopt new technology in order to provide better services to customer. For solving this issue
manager need to make solid plan that will helps to hire experienced and talented person.
Sustain growth and innovation: Uber's manager facing problems that relates to growth
and innovation. For solving this problem manager need to make strategic plan and should
introduce new innovation such as pick up at the time of booking, sharing, getting location easily
etc. that will helps to attract passenger and increase number of customer.
CONCLUSION
From above report it has been considered that McKinsey 7-S Framework helps to
increase productivity and performance evaluation of employees. In addition,MOIA company
affect the business of Uber so it follow the 7–S framework which provide proper vision of the
company. They also follow different kind of strategies provide them to sustain or grow in the
market.
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REFERENCES
Books and Journal
French, D., 2013. British Economic and Strategic Planning: 1905-1915. Routledge.
Guenther, T. W. and Gaebler, S., 2014. Antecedents of the adoption and success of strategic cost
management methods: a meta-analytic investigation. Journal of Business Economics.
84(2). pp.145-190.
Hinton, K. E., 2012. A practical guide to strategic planning in higher education. Ann Arbor, MI:
Society for College and University Planning.
Lee, K. C., and et.al., 2013. An agent-based fuzzy cognitive map approach to the strategic
marketing planning for industrial firms. Industrial Marketing Management. 42(4).
pp.552-563.
Luo, C. M. A., Chang, H. F. and Su, C. H., 2012. ‘Balanced Scorecard’as an operation-level
strategic planning tool for service innovation. The Service Industries Journal. 32(12).
pp.1937-1956.
Naumann, M. and Suhl, L., 2013. How does fuel price uncertainty affect strategic airline
planning?. Operational Research. 13(3). pp.343-362.
Nixon, B. and Burns, J., 2012. The paradox of strategic management accounting. Management
Accounting Research. 23(4). pp.229-244.
Phillips, P. and Moutinho, L., 2014. Critical review of strategic planning research in hospitality
and tourism. Annals of Tourism Research. 48. pp.96-120.
Raford, N., 2015. Online foresight platforms: evidence for their impact on scenario planning &
strategic foresight. Technological Forecasting and Social Change. 97. pp.65-76.
Schiffer, M. and Walther, G., 2018. Strategic planning of electric logistics fleet networks: A
robust location-routing approach. Omega. 80. pp.31-42.
Online
Artificial intelligence. 2019. [Online]. Available through:
<https://www.techwalla.com/articles/negative-effects-of-artificial-intelligence>
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