Expectations..

Assumptions

The student should be well versed in

management principles and perspectives.
Must go through management journals and
articles to broaden their horizons
 Our Strategy…to follow
Interactive
Participative
Self Learning
Connect with Experience
Industry parallels
Facilitation…. (no teaching !!!!!)
Triggered learning's
Presentations
Projects
Scope…
Finance
 Financial accounting
 Financial Management
 Taxation
 Treasury
Costing
 Cost accounting
 Cost & Management Accounting
 MIS
 Strategic Decision Making
Decision making that affects the long–term competitive
position of a firm must explicitly consider the strategic
elements. The important strategic elements for a firm are
its long term growth and survival. Thus, strategic
decision making is choosing among alternative
strategies with the objective of selecting a strategy, that
provides a company with reasonable assurance of long
term survival and growth .The key to achieving this goal
is to gain a competitive advantage
Strategic Decision Making
Long–term competitive position
Long term growth and survival
choosing among alternative strategies with the
objective of selecting a strategy
Assurance of long term survival and growth
To gain a competitive advantage
 What is cost
management?
Cost management may be defined as a proactive process of identifying causes of
costs, with the objectives of managing and minimising the total costs associated
with the provision of products and services to customers
Cost management starts with the identification of what is causing costs within the
company's value chain, with the objective of taking a proactive stance in
managing such costs
Identification of the root causes of costs and the management of such costs
require the use of several cost management techniques such as activity-based
costing, activity-based management, target costing and value chain analysis
Identifying root causes of costs and taking a proactive stance may be contrasted
with a reactive, across-the-board cost cutting approach, which is the domain of the
traditional cost cutting approach
However, being proactive and using cost management techniques such as activity-
based costing, activity-based management, target costing and value chain
analysis, does not translate into a strategic cost approach.
What then makes a costing management approach assume a strategic dimension?
 What is Strategic cost
management?

Strategic cost management may be defined as the process of integrating

cost management within the company's strategic plan in order to ensure that
cost management is part of a company's operating procedures aimed at the
provision of the best possible products/ services with the amount of financial
resources available
Thus strategic cost management requires that a cost management system
should be designed and developed in such as way that its structure and life-
cycle evolve to support a company's changing competitive strategy with
respect to products/services, markets, human resources and technologies
Cost management system should mirror company's life-cycle as defined by
the company's products/services, markets, human resources and
technologies
Strategic Cost
Management….
Strategic use of cost information
Use cost analysis to develop & identify
superior strategies that will produce a
sustainable competitive advantage
Brings performance improvement as well as
transformational change across the value
chain
Strategic Cost
Management
Strategic cost management is the managerial use of
cost information explicitly directed at strategic
management
Three key elements to be studied are
 value chain analysis which recognizes the linked set of value-
creating activities all the way from acquisition of basic raw
material through end-use product delivery
 cost driver analysis which recognizes that cost is caused, or
driven, by many interrelated factors
 strategic positioning analysis which focuses on cost as it
relates to how a firm chooses to compete
Strategic Cost
Management…
Viewed as part of a larger business process to
influence decisions on pricing and profitability
across several dimensions such as -
 Business Processes

 Products

 Customers

 Regions

 Distribution channels
Objectives
To identify cost drivers in an organization and
set targets for cost management initiatives
To appreciate the need and benefits of
becoming a Total Cost Management Company
To understand the tools and techniques of cost
reduction throughout the value chain (external
& internal)
To develop total cost strategies
Subject - Objectives &
Prerequisites
Objectives –
 To provide inputs for a strategic overview,
since costs are a key differentiator in
international world
Prerequisites –
 Good knowledge of Cost & management
accounting
Subject - Scope
Cost Benefit analysis with reference to strategic
Business Decision Making
Value analysis & Value engineering
Business Process re-engineering
Total quality management Product life cycle costing
Activity based costing
Target Costing
Value chain analysis & long term cost management
Balanced score card
Cost Audit and Management Audit
Wastage control - Total productive maintenance, Cost
reduction and control
Strategic Cost Benefit analysis, restructuring
propositions
SCM - Terms
Overview / Refresh
 Costing
 Marginal costing
 Breakeven Point
Fixed - Variable
Period Cost – Fixed Cost
Activity Related Cost – Variable cost
Cost – Price - Value
Cost Center – Expense Center – Revenue
Center – Profit Center – Investment Center
Cost Unit
Normal Loss - Wastage - Yield
SCM - applications
Pricing - Export Angle/perspective
Pricing – Falling Prices/Recession –
Competition – Price realisation
=Variable/Marginal Cost
Shift working OR Outsourcing
Discontinue / Divest
Special orders
In-house - External processing