Expectations..assumptions

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 activitybased 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 lifecycle 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 

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value chain analysis which recognizes the linked set of valuecreating 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