MINIMIZE FIXED COST OF BUSINESS

Minimize Fixed Cost of Business to Optimize Profits



Table of Content

CHAPTER 1: INTRODUCTION3

Problem3

The Objectives7

Research question7

Purpose8

Structure of the Thesis9

CHAPTER 2: TRENDS AND CHANGES IN THE BUSINESS ENVIRONMENT12

2.1: Change of the Markets and a Greater Focus on the Customer12

2.2. Shifts in the Basis of Competition17

2.3. Advances in the Manufacturing and Information Technologies20

2.4. New Forms of Management Organization22

CHAPTER 3: TRADITIONAL COST MANAGEMENT LONG-TERM FIRM'S SUCCESS26

Overview26

3.2. Evaluation of Traditional Cost Management27

3.2.1. Non-Financial Controlling-Information27

3.2.2. Standard Cost Perspective and Cost Management31

3.2.3. Diversity and Complexity in the Manufacturing33

3.2.4Strategic Influence on the Costs35

3.2.5. Adequate Support for Introducing of New Technologies36

3.2.6. Market Orientation38

CHAPTER 4: STRATEGIC COST MANAGEMENT40

4.1The Issue of Terminology40

4.2. The Strategic Importance of Cost Management41

4.3. The Concept of Strategic Cost Management43

4.4. Concerns and Objectives of Strategic Cost Management46

4.5. The Suggested Framework for Strategic49

CHAPTER 5: ANALYSIS FIELDS & ACTIVITIES51

5.1 Overview51

5.2. Cost Behavior Management52

5.2.1. The Concept of Cost Behavior52

5.2.2. Cost Behavior Management58

5.2.3. The Effective Utilization of Capacity and Cost Behavior59

Maximizing throughout65

Maximizing profitability66

Minimizing Total Cost of Operation67

Minimizing Wasted Resources (Idleness)69

Maximizing Flexibility and Responsiveness70

Minimizing Investment71

Maximizing Economies of Scale (Technology)73

CHAPTER 6: SUMMARY AND CONCLUSIONS75

SUMMARY75

REFERENCES81

BIBLIOGRAPHY93

CHAPTER 1: INTRODUCTION

Problem

During the last years, we have seen a significant shift in the cost accounting and management (Maher and Deakin 1994:10, Günther 1997:97 and Götze 2004:261). This shift is the result of an increasing competitive environment due to the introduction of new manufacturing and information technologies, the focus on the customer, the growth of worldwide markets, and the introduction of new forms of management organization (Blocher et al. 1999:8).

Accounting information plays a vital role in determining the most appropriate strategic direction for the organization. It guides managerial actions, motivates behaviors, and supports and creates the cultural values necessary to achieve an organization's strategic objectives (Ansari et al. 1997a:2). In particular, cost management information (both financial and non- financial information) is a critical type of information to the success of the company. For this reason the role of cost accounting and management has expanded. Accountants are now participants on multifunctional management teams.

Cost management systems are important, but equally important is knowing how and when to apply them to achieve long-term success. Cost management systems help managers understand cost structure and behavior. Therefore, they can make decisions that will enable the organization to achieve or exploit a strategic competitive advantage (Buckingham and Loomba 2001:12). In taking a strategic emphasis, cost management looks to the long-term competitive success of the firm. Strategic cost management plays an important role in management functions especially strategic management; it can facilitate the developing and implementing of business strategy where the accountant is viewed as a business partner rather than a mere bookkeeper (Shank 1989:50).

Strategic management seeks to develop the competitive position in which the firm's competitive advantage provides continued success. A strategy is a set of goals and specific action plans, which, if achieved, will provide the desired competitive advantage (Thompson 1995:7). Strategic management involves the identification and implementation of these goals and action plans. Effective strategic management is critical to the success of the ...