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Lec 3: STRATEGIC COST MANAGEMENT ( SCM )

Lec 3: STRATEGIC COST MANAGEMENT ( SCM ). Akuntansi – FE UAJY. Definition Strategic Cost Management. Strategic Cost Management is a way to address cost concern while preserving the key parts of the business

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Lec 3: STRATEGIC COST MANAGEMENT ( SCM )

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  1. Lec 3:STRATEGIC COST MANAGEMENT (SCM) Akuntansi – FE UAJY

  2. Definition Strategic Cost Management • Strategic Cost Management is a way to address cost concern while preserving the key parts of the business • Strategic cost management is the use of cost data to develop and identify superior strategies that will produce a sustainablecompetitive advantage. Akuntansi - FE UAJY

  3. Strategic Cost Management:Basic Concepts • Strategic decision makingis choosing among alternative strategies with the goal of selecting a strategy, or strategies, that provides a company with reasonable assurance of long-term growth and survival • The key to achieving this goal is to gain a competitive advantage. Akuntansi - FE UAJY

  4. Competitive Advantage Competitive advantage is the process of creating better customer value for the same or lower cost than that of competitors or creating equivalent value for lower cost than that of competitors. Customer value is the difference between what a customer receives (customer realization) and what the customer gives up (customer sacrifice). customer satisfaction The total product is the complete range of tangible and intangible benefits that a customer receives from a purchasedproduct. Akuntansi - FE UAJY

  5. The background of SCM • Sfifting customer priorities • Customer awareness • Lower transaction costs • Increased access to information • The emergence of competitors • Channels Proliferation • Pressure from Financial market Akuntansi - FE UAJY

  6. The Steps of SCM • Strategy Formulation  identification, evaluation and selection • Strategies Communication formally • Implementing strategies programming • Monitoring the strategies in achieving the goals performance evaluation Akuntansi - FE UAJY

  7. SCMTechniques • Value-chain Analysis • Strategic Positioning Analysis • Cost Driver Analysis Akuntansi - FE UAJY

  8. Positioning Strategic There are three general strategies that have been identified: • cost leadership • product differentiation • focusing Akuntansi - FE UAJY

  9. Positioning Strategic: cost leadership It happens when the same or better value is provided to customers at a lower cost than a company’s competitors. Example:A company might redesign a product so that fewer parts are needed, lowering production costs and the costs of maintaining the product after purchase. Akuntansi - FE UAJY

  10. Positioning Strategic: Cost Leadership • Economies of scale • Learning Curve benefits • Cost control • Process innovation • Reduce manufacturing time and costs • Reengineering activities Akuntansi - FE UAJY

  11. Positioning Strategic: Productdifferentiation • strives to increase customer value by increasing what the customer receives (customer realization). • Implemented effectively when the business provide unique or superior value to customer  Higher price • Uniqueness: product quality, features, after sales support Akuntansi - FE UAJY

  12. Positioning Strategic: focusing strategy • It happens when a firm selects or emphasizes a market or customer segment in which to compete. • By operating in a niche markets not attractive to larger competitors Example: Paging Network, Inc., a paging services provider, has targeted particular kinds of customers and is in the process of weeding out the nontargeted customers. Akuntansi - FE UAJY

  13. Organizational Activities and Cost Drivers Organizational activities are of two types: structuralandexecutional. Structural activities are activities that determine the underlying economic structure of the organization. Executional activities are activities that define the processes and capabilities of an organization and thus are directly related to the ability of an organization to execute successfully. Akuntansi - FE UAJY

  14. Organizational Activities and Drivers Structural ActivitiesStructural Cost Drivers Building plants Number of plants, scale, degree of centralization Management structuring Management style and philosophy Grouping employees Number and type of work units Complexity Number of product lines, number of unique processes, number of unique parts Vertically integrating Scope, buying power, selling power Selecting and using process Types of process technologies, technologies experience Akuntansi - FE UAJY

  15. Organizational Activities and Drivers Executional ActivitiesExecutional Cost Drivers Using employees Degree of involvement Providing quality Quality management approach Providing plant layout Plant layout efficiency Designing and producing products Product configuration Providing capacity Capacity utilization Akuntansi - FE UAJY

  16. Operational Activities and Drivers Akuntansi - FE UAJY

  17. The End Akuntansi - FE UAJY

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