Beruflich Dokumente
Kultur Dokumente
Introduction
Strategic management involves the formulation and implementation of the major goals and
initiatives taken by a company's top management on behalf of owners, based on consideration
of resources and an assessment of the internal and external environments in which the
organization competes.
Strategic management provides overall direction to the enterprise and involves specifying the
organization's objectives, developing policies and plans designed to achieve these objectives, and
then allocating resources to implement the plans. Academics and practicing managers have
developed numerous models and frameworks to assist in strategic decision making in the context
of complex environments and competitive dynamics. [2] Strategic management is not static in
nature; the models often include a feedback loop to monitor execution and inform the next round
of planning.
Harvard Professor Michael Porter identifies three principles underlying strategy: creating a
"unique and valuable [market] position", making trade-offs by choosing "what not to do", and
creating "fit" by aligning company activities with one another to support the chosen
strategy Dr. Vladimir Kvint defines strategy as "a system of finding, formulating, and developing
a doctrine that will ensure long-term success if followed faithfully.
Corporate strategy involves answering a key question from a portfolio perspective: "What
business should we be in?" Business strategy involves answering the question: "How shall we
compete in this business?" In management theory and practice, a further distinction is often made
between strategic management and operational management. Operational management is
concerned primarily with improving efficiency and controlling costs within the boundaries set by
the organization's strategy.
Strategic Cost Management (SCM) is understood in different ways in literature as a matter of
fact that there is no universally agreed definition. In fact, different costs are for different
purposes. However, SCM can be defined as the use of cost information to do the following: help
formulate and communicate strategies, carry out tactics that implement those strategies
1
As a general rule, an organization should never undertake any practices that are predicted
to weaken the position of the organization.
Cost estimating can be done in a variety of ways. Accurate cost estimating is one of the main
elements involved in cost management. The following is a list of estimating techniques that may
be used for an organization:
(3) The model can be applied to both large and small scale projects.
Bottom-Up Estimating - This involves estimating the cost of work items and them
summing the estimates to get a project total. Smaller work items increase the cost and
accuracy.
Report Objectives
This report is a summary of a research done on the area of Strategic Cost Management (SCM).
This report includes a detailed discussion and application of Life Cycle Costing (LCC) which a
3
Implementation
The second major process of strategic management is implementation, which involves decisions
regarding how the organization's resources (i.e., people, process and IT systems) will be aligned
and mobilized towards the objectives. Implementation results in how the organization's resources
are structured (such as by product or service or geography), leadership arrangements,
communication, incentives, and monitoring mechanisms to track progress towards objectives,
among others.
Running the day-to-day operations of the business is often referred to as "operations
management" or specific terms for key departments or functions, such as "logistics management"
or "marketing management," which take over once strategic management decisions are
implemented.
The LCC concept was developed by United States' (US) Department of Defense in the early
1960s to increase the effectiveness of government procurement (Shields and Young 1991). After
that, the concept came into the business, and is used there in product development studies and
project evaluation. Then the concept was taken by the management accounting. However, the
application of LCC is limited until 1980s when there were criticisms of the traditional
management accounting practices, which is focused primarily on the manufacturing stage of a
Product's Life Cycle (PLC).
PLC progresses through a sequence of stages from introduction to growth, maturity, and decline.
Thus, accountants might not be able to analyze cost behavior and computation of all associate
costs would be challenging. The planning and design stage incur the most cost so cost
management has to be done in this stage.
LCC refer to the process of estimating and accumulating the total costs that the producer or
manufacturer will incur over the product's entire life; from the beginning to diminish the
particular product. In other words, "cradle-to-grave costing". The main focus of LCC is not only
to reduce the costs that the producer will incur over the PLC including design, manufacturing,
marketing, logistics, and service, but also the costs that customer will incur such as the costs of
7
10
12
Involves both strategy formulation processes and also implementation of the content of
the strategy;
Is done at several levels: overall corporate strategy, and individual business strategies;
and
Chaffee further wrote that research up to that point covered three models of strategy, which were
not mutually exclusive:
1. Linear strategy: A planned determination of goals, initiatives, and allocation of resources,
along the lines of the Chandler definition above. This is most consistent withstrategic
planning approaches and may have a long planning horizon. The strategist "deals with"
the environment but it is not the central concern.
2. Adaptive strategy: In this model, the organization's goals and activities are primarily
concerned with adaptation to the environment, analogous to a biological organism. The
need for continuous adaption reduces or eliminates the planning window. There is more
13
SWOT Analysis
By the 1960s, the capstone business policy course at the Harvard Business School included the
concept of matching the distinctive competence of a company (its strengths and weaknesses)
with its environment (opportunities and threats) in the context of its objectives. This framework
came to be known by the acronym SWOT and was "a major step forward in bringing explicitly
competitive thinking to bear on questions of strategy." Kenneth R. Andrews helped popularize
the framework via a 1963 conference and it remains commonly used in practice.
A SWOT analysis is an organized design method used to evaluate the strengths, weaknesses,
opportunities and threats complex within the person or the group or the organization where the
functional process takes place.
SWOT analysis involves both internal and external factors in an organization. such that the first
two elements indicate internal capability and limitations while the last two factors indicate
chances in business and limitations.(SW =strength and weakness are internal factors while OT=
Opportunities and threats are external issues to a business).
14
15
30%
Public
Private
70%
20%
Yes
No
80%
17%
17%
Dictatorial
Autocratic
Democratic
25%
Liaise Fare
42%
30
30
Not a priority
Low priority
Some priority
High priority
20
20
Top priority
10
5) How would you rate your Strategic Cost implementation on communication of the
objectives and rationale for the project?
a) Fair
b) Average
c) Good
d) Excellent
17
10%
20%
45%
Fair
Good
Average
Excellent
25%
18
20
21