RESEARCH PRACTICES

Research Practices

CHAPTER 1: INTRODUCTION

Problem

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

The Objectives

“Cost management is like wringing out a wet towel. The biggest reaction is obtained first, but we must keep wringing. The biggest reaction is obtained first, but we must keep wringing.

Research question

In view of this, the main objective of this study is to suggest a comprehensive conceptual framework for strategic cost management. The suggested framework attempts to answer the key questions:

What is strategic cost management?

What are the concerns and objectives of strategic cost management?

What are the pillars of the strategic cost management-framework? To what degree do these pillars contribute to strategic cost management?

What are the relationships between these pillars?

Purpose

Besides this main objective of the study, there are some sub-objectives. They are:

Discuss the primary trends and changes in the business environment and show how cost management systems can be adapted to meet the needs of the business environment.

Discuss strategic management and competitive strategies as an answer to trends and changes in the business environment.

Show that traditional cost management might not be relevant according to requirements of the business environment changes and supporting long-term firm's success.

Explain that there is a need for new accounting concepts and methods - strategic cost management and its instruments - that contribute to the overall success of the company.

CHAPTER 2: TRENDS AND CHANGES IN THE BUSINESS ENVIRONMENT

"In today's environment, nothing is constant or predictable - not market growth, customer demand, product life cycles, the rate of technological change, or the nature of competition" (Hammer and Champy 1993:17). Many trends and changes in the business environment in recent years have caused significant modification in accounting and management concepts and methods. We briefly discuss the primary trends and changes of the business environment and their effects on accounting and management methods and concepts, particularly cost accounting and management. We analyze change of the markets and a greater focus on the customer, shifts in the basis of competition, advances in the manufacturing and information technologies and finally new forms of management organization.

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

Traditional cost management originates from a time when the focus of attention was not the whole value chain, production was relatively aimed at one product or a homogeneous range of products but was not flexibly automated, and when the indirect functions played a subordinate role unlike today (Horvath 1991:72). Traditional cost management was developed in a moderate business environment, in which production was the crucial competition factor and cost structures were unequally more flexible and thus easy to influence (Fröhling and Weis 1992:135). The main task of cost systems was recording and reporting the past events regarding costs and profits (in the form of periodical reports); cost systems focused on determining the cost of goods produced and the cost ...