Strategic Cost Management: Definition, Techniques, Strategy

Strategic Cost Management, presents an extensive protection of modern-day expense management methods to satisfy the needs of enterprise in the brand-new competitive environment. This book provides a new structure to the vital concern of cost management, usage of cost info to create a company’s competitive method and provide enhanced value to clients, shareholders and other stakeholders. The book develops a logical linkage between the concepts and treatments and how these can be utilized in practice by business organizations. It goes over expense management methods in detail and their function in strategic decision-making of a firm and building and sustaining competitiveness.

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Defines tactical cost management in the following words:

” It (SCM) is expense analysis in a wider context, where the strategic aspects end up being more conscious, specific and formal. Here, expense information is utilized to establish superior techniques enroute to getting sustainable competitive benefit … An advanced understanding of a company’s expense structure can go a long method in the search for sustainable competitive benefit.

Strategic Expense Management

Standard costing is useful however having many limitations like:

  • Emphasis on short term choices
  • Relay on Internal Information
  • Techniques of Apportionment and Absorption is arbitratory
  • Reactive technique

Strategic Expense Management issue the focus of Cost Management efforts

  • Clearly highlights strategic concerns and issue
  • Uses both internal and external information for decision making
  • Cost structure use for search of best strategy
  • Go for long term sustainable competitive advantage

Technique– Michal Porter develop two essential method– Cost Management & Product distinguish method

  • Expense Management method
  • Goals to lowest cost
  • Economics of scale
  • Tight expense control

Product separate method

  • Special measurement in item/ service
  • Ingenious
  • Extremely high brand name image
  • Luxury product/ service

Take the example of Maruti and Mercidize vehicle, how tactical expense management use in these business.

Area Cost Leadership (Maruti) Product Differentiate (Mercidize)
Standard Costing System Very high important Not much important
Expense Control method Very high important Moderate essential
Development & Research Not much important Very important
Strong market abilities Very little important Really high essential
Business credibility Moderate Extremely high essential
Product engineering Moderate Really high crucial

Strategic Expense Management Methods

Some strategies of Strategic Expense Management which business use

  • ( 3) Location advantage— Buying existing plant where worker cost is extremely low, Aman-MNC straight-out purchased existing plant in Gujarat of the comparable items.
  • ( 8) Life Cycle costing– Thinking about cost of whole life cycle of product, instead of one or 2 years and accordingly establish and accept the technology and research study work for a long term successful survival.
  • (9) e. company— e company recently developed however its scope is really big and extremely cost efficiency and unlimited border for organization.

    Above and much more strategies are used for long term sustainability competitive advantage instead of narrow cost sheet frame. In short Strategic Expense Management using Strategic Management through Management Accounting perspectives.

    • Sub Fields of Accounting
    • How is Risk Management Policy developed?
    • Significance of Accounting, Scope of Accounting
    • CMA Final Suggested Answers
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