Defines strategic cost management in the following words:
“It (SCM) is cost analysis in a broader context, where the strategic elements become more conscious, explicit and formal. Here, cost data is used to develop superior strategies enroute to gaining sustainable competitive advantage….. A sophisticated understanding of a firm’s cost structure can go a long way in the search for sustainable competitive advantage. This is strategic cost management.”
Strategic Cost Management
Traditional costing is useful but having many limitations like :
Emphasis on short term decisionsRelay on Internal InformationMethods of Apportionment and Absorption is arbitratoryReactive approach
Strategic Cost Management concern the focus of Cost Management efforts
Explicitly highlights strategic issues and concernUses both internal and external information for decision makingCost structure use for search of best strategyAim for long term sustainable competitive advantage
Strategy – Michal Porter develop two important strategy – Cost Leadership & Product differentiate strategy
Cost Leadership strategyAims to lowest costEconomics of scaleTight cost control
Product differentiate strategy
Unique dimension in product / serviceInnovativeVery high brand imageLuxury product / service
Take the example of Maruti and Mercidize car, how strategic cost management apply in these companies.
Strategic Cost Management Techniques
Some techniques of Strategic Cost Management which companies use Above and many more techniques are employed for long term sustainability competitive advantage instead of narrow cost sheet frame. In short Strategic Cost Management applying Strategic Management through Management Accounting perspectives.
Sub Fields of AccountingHow is Risk Management Policy formulated ?Meaning of Accounting, Scope of AccountingCMA Final Suggested Answers
