STRATEGIC COST MANAGEMENT

Strategic cost management - to win the competitive advantage of new tools At the same time in terms of cost control, cost analysis have done some useful work. After the transition to a market economy, Chinas cost management of a breakthrough in theoretical research, corporate cost management are on a standardized track, the implementation of the standard cost system, the responsibility system costs, changes in cost, cost management businesses into a new Historical stage of development. And strategic cost management, compared to the limitations of traditional cost management mainly in the following aspects: 1. Maximizing profits is the pursuit of corporate financial management objectives. Cost management services for financial management, cost management, as the traditional pursuit of maximizing profits as their duty to maximize profit as the goal, to promote enterprise emphasizes accounting, management, but not only to maximize profits at the end of enterprises to consider the long-term planning and neglect of the market Economic conditions one of the most important concern - the risk. The result is increased corporate financial risk, undermine their long-term development. Today, the maximization of shareholder wealth has become the pursuit of corporate financial management objectives, traditional cost-effective management of short-term exposure of the doubt. 2. Traditional cost management has failed to rival the cost of the necessary conditions analysis and research, and the fierce competition in the enterprise environment, to maintain the competitive edge and continue to compete in an advantageous position to pass their own analysis And the competitive dynamics of the competition to determine the competitiveness strategy. This requires enterprises to understand the cost of competitors, and therefore must calculate the cost of competitors. 3. And fail to link the strategic enterprises. How to adapt to the changing external market environment, to achieve sustained and competitive edge, is the modern enterprise must consider the most important issue. Therefore, enterprises must focus on the development of competitive strategy. And the cost of traditional management to look confined to the purely on cost reduction. Despite the lower costs for business, any time is important, but the fact of different enterprises in the competitive strategy circumstances, to ensure that when the differences of their products (such as competitors can not match the characteristics of products and after-sales service, etc.) Focus, may be appropriately increased costs, the same can achieve a competitive advantage purposes. 4. Traditional cost management within enterprises are the main targets of the production process, and the enterprise supply and marketing chain is considered small for enterprises outside the value chain is relatively neglected. In the open, competitive market environment in enterprises, through the understanding of the whole industry value chain to carry out cost management, but also help achieve the goal of corporate strategy. Therefore, the strategy is the subject of cost management throughout the product life-cycle costs. Including both the production process also includes research and development and design must also consider the after-sales service sectors, both upstream suppliers and attention to the links, should also attach importance to and downstream customers and dealers of cooperation. 5. Traditional cost management attention to the only tangible cost driver, to the neglect of the intangible cost driver. In traditional cost management concepts, such as raw materials, labour, manufacturing costs and other costs of the project is a major factor, and the product of research and development, market development, internal restructuring and cost management and so the number of no relevance. But in fact, some of the costs of projects are often visible is not the main factor affecting the cost, while some traditional cost management failed to consider factors such as the size of the business, location, products such as the complexity of factors will have on the cost of the product Greatly affected. These cause the accumulation of long-term need to be formed, and a form it will be difficult to change, it must be stressed that comprehensive strategic considerations. 6. Traditional cost management because of the cost of excessive reliance on the existing management system, and the failure to adopt flexible and diverse cost management accounting method, cost management has also made limited to a simple order to lower costs and reduce the cost of the narrow scope, can not provide the ultimate decision-making Need the correct information. In addition, since the traditional focus on cost management stressed that financial aspects of the information, to the neglect of non-financial aspects of the information, such as timely delivery of goods number, the number of customer complaints and other data so that enterprises can not be fully competitive strategy for the development of the information. The basic strategy of cost management framework, including the following aspects. (A) value chain analysis Is a series of the value chain link by link all the interdependence of the collection of value-creating activities. In other words, the value chain is not independent activities of the pool, but interdependent activities constitute a system. Value chain analysis is the main supplier of raw materials from up to the final consumer products related to the integration of activities, from a strategic point of view of how to control costs. According to their analysis and perspective into industry value chain analysis, enterprise value chain analysis, value chain analysis of competitors. (B) strategic positioning Strategic positioning is for the survival of enterprises in market competition on how to choose weapons to fight competitors. In strategic management, business analysis should be the first in which the product life cycle and market share, etc., and then determine its strategy to be taken. Boston has a well-known development matrix that BCG matrix, by the Boston consulting firm design inventions. In a different quadrant of the products to different market strategy. If a company issues a product of products that have high market growth rates and low market share, then the product has great market potential, and the establishment of strategic enterprises should take. Specific to the financial resources to increase investment, pricing to the short-term cash flow at the expense of market share in exchange for the expansion of slaughter, the cost of management would strive to establish a clear strategy, product differentiation strategy is to win (the cost gap could not Widening the circumstances, the production better than rival products to show differences to attract customers), or the cost of leading strategic victory (in product quality and performance will be little difference between the circumstances, efforts to reduce costs and lower prices to Gain competitive advantage). (C) cost driver analysis Cost driver is the cost of the product that caused the causes. From the perspective of the value chain, a value-creating activities have a unique set of cost driver, it used to explain the value-creating activities of the cost. Therefore, each of the value creation activities have a unique source of competitive advantage. Stressed the strategic cost management cost driver can be divided into structural cost driver and implementation of cost driver two categories. Structural cost driver is decided to organize the economic structure based on the cost of driving factors, including: Chinas enterprises should establish the concept of strategic cost management, the establishment of the new cost management. Cost management strategy is to find the real cost advantage, research and implementation of cost management strategies are highly realistic significance. 1.s Cost management strategy formation and development of a modern market economy and the inevitable result of competition. Cost is to decide their products or services made in the competition can share and the number of share of possession the key factors which influence the cost of the core business strategy is cost, rather than the traditional operating costs. 2.s Cost management strategy formation and development of the cost of establishing and perfecting a modern management system, strengthen enterprise management costs of the inevitable requirement. In the modern cost management, cost management a very important strategic position, it broke through the traditional limitations of cost management to keep costs at the micro level field of study, the overall corporate strategy to focus more of this vast field of study, a business-friendly The right to conduct a cost projections, decision-making, thus the right to choose their business strategy, correctly handle enterprise development to strengthen the relationship between management costs and improve their overall economic efficiency. 3.s Cost management strategy formation and development is conducive to update the concept of cost management. In traditional cost management, cost management objective was reduced to lower costs, savings have become the basic means to reduce costs. It is undeniable that the cost of management, conservation as a means is beyo