What Is Strategic Cost Management?

Strategic Cost Management (SCM) ideas that study cost formation and control from a strategic perspective were gradually formed in the 1980s under the initiative of management accounting scholars in Britain and the United States. Since the 1990s, the discussion of this idea and related methods has been deepening, and Japanese and European and American business management practices have proved that this is an effective way to obtain long-term competitive advantages. Enterprise strategic management is the use of strategy to manage the entire enterprise. It is a series of management operations formed by combining daily business decisions with long-term planning decisions. Enterprises must strengthen strategic awareness and carry out strategic thinking and strategic management.

Strategic cost management

To adapt to the rapidly changing external market environment and obtain sustainable competitive advantages, companies must focus on formulating competitive strategies, while traditional cost management often restricts their vision to simply reducing costs. It is undeniable that in cost management, saving as a means is unquestionable, but in fact, when enterprises adopt different competitive strategies, when focusing on ensuring the differentiation of enterprise products (such as after-sales service), it can be Properly increasing costs can also achieve the goal of obtaining a competitive advantage.

For example, when a telecommunications operator provides circuit rental to a large customer, in order to ensure circuit security, the operator often has to provide it with a backup circuit of the same bandwidth (sometimes the customer does not pay), and the enterprise may pay for it accordingly.

As can be seen from the above examples, strategic cost management is the product of the organic combination of cost management and strategic management, and it is a countermeasure of traditional cost management.

In cost management, have you encountered the following situations:

The boss's business idea keeps pace with the times and puts forward higher requirements on our cost control. I feel pressured, but I don't know where to start.

A monthly cost analysis report is made after working overtime each month, but it seems that other departments do not take it seriously. What is the value of cost analysis?

When it comes to reducing costs, other departments feel that it is a financial matter. How can they be taken seriously?

The business department did not consider the impact on costs when doing things, and the cost was overrun before consulting financial advice. Can you put this control work ahead and reduce the losses?

Indirect costs are getting more and more, how does it seem inappropriate to apportion them? ^[1]

Enterprise cost model and competitive advantage Understand the composition of costs and the relationship with their own work. Choose a cost calculation method that is conducive to cost control. Effectively control costs through cost analysis. Combine with the company's own situation to find key points in cost control

Strategic Environmental Analysis

origin

Strategic cost management was first proposed by the British scholar Kenneth Simmonds in the 1980s. From the perspective of the competitive position of enterprises in the market, he

China Civil Aviation Status and Problems

Civil aviation cost components are mainly (1) the cost of aviation fuel (2) aircraft ownership and

I. Value chain analysis

Every final product from its initial input of raw materials to the final consumer has to go through numerous interconnected operations, which is the operation chain. The value chain analysis method was first proposed by Porter. It decomposes the value chain from basic raw materials to end users into strategy-related activities in order to understand the nature of costs and the causes of differences. It is a tool to determine the cost of competitors. It is also the basis for SCM to formulate its competitive strategy. We can analyze from three angles: internal, vertical and horizontal.

Second, SWOT analysis: strong-weak-opportunity-threat

From the perspective of competition, the analysis of the choice of cost measures comes not only from the analysis and judgment of internal factors of the enterprise, but also from the analysis and judgment of the competition situation. The core idea of the cost-strong-weak-opportunity-threat (SWOT) analysis is to analyze the external environment and internal conditions of the company, to identify the opportunities available to the company and the risks it may face, The advantages and disadvantages of enterprises are combined to form different strategic measures for enterprise cost control.

The basic steps of SWOT analysis are as follows: (1) Analyze the internal strengths and weaknesses of the enterprise both in terms of corporate goals and competitors. (2) Analysis of external opportunities and threats facing the enterprise may come from changes in external environmental factors that are not related to competition, or changes in the strength and factors of competitors, or both, but the key external opportunities and threats Should be confirmed. (3) Match external opportunities and threats with internal strengths and weaknesses of the enterprise to form feasible alternative strategies.

There are four different types of SWOT analysis: strength-opportunity (SO) combination, weakness-opportunity (WO) combination, strength-threat (ST) combination, and weakness-threat (WT) combination.

Benchmarking

Benchmarking is the process of comparing the performance of an enterprise with the best existing performance in order to find effective ways and methods to continuously improve business operations and performance. Its main purpose is to identify gaps and find ways to continuously improve. The method is to research the organizations or institutions with the most significant performance in similar activities or production of similar products to find the best business practices and apply them to their own companies. There are usually three types of best performance: internal benchmarks, competitor benchmarks, and general benchmarks. It is ideal to compare with competitors, that is, to use competition benchmarks to identify the best practitioners among competitors, and to judge the factors that have obtained the best practices for reference. This is essentially a competitor analysis.

To use benchmarking to analyze competitors, we must first identify who is the real competitor of the company. Secondly, the basic competition strategy adopted by competitors must be clarified, because it determines the enterprise's measures on costs. Enterprises adopting cost-leading strategies take low cost as the first goal and use various methods and means to reduce costs; while companies using differentiation strategies take differentiation as the first goal and reduce costs in ways and means so as not to affect the enterprise Differentiation is the limit; companies implementing target aggregation strategies aim to occupy specific market segments. In specific market segments, they will still adopt cost aggregation or differentiation strategies. Cost benchmarking is most valuable when it comes to competitor analysis that uses the same basic competitive strategy. The third is to analyze competitors' value chain and cost drivers and compare them with the company's own value chain and cost drivers. If competitors provide similar products or services to the target market and adopt the same basic competitive strategy, they will be in the same market environment. The analysis should focus on the internal factors of the enterprise.

The use of benchmarking in cost control is multiple. First of all, it is an effective method for companies to analyze strengths and weaknesses. It can determine the best practices of competitors and their success factors. After analyzing the value chain and cost drivers, it can understand the strengths and threats of the company itself. It is a SWOT analysis method. The basics. Secondly, benchmarking analysis can improve corporate practices, by comparing with best practices, identifying areas for improvement and providing methods and means. Third, benchmarking analysis provides a new basis for performance measurement. It measures performance based on best practices and enables each department's goals to be determined on an advanced level, making performance measurement scientific and guiding.