Chapter 1- Cost management and strategic decision making Flashcards
1
Q
What is cost management?
A
- goes beyond historical measurement and reporting
- assesses the impacts of current and proposed decisions
- a philosophy, an attitude and a set of techniques to create more customer value and achieve lower costs
2
Q
Cost analysts use cost accounting and other data to:
A
- Improve products
- Support strategies
- Improve resource use
- Reduce costs
- Improve services
3
Q
The 5 stages of the decision making process:
A
- Setting goals and objectives
- Gathering information
- Evaluating alternatives
- Execution and tracking costs
- Obtaining feedback
4
Q
Key questions for strategic decision making:
A
- Where do we want to go?
- How do we want to get there?
5
Q
4 types of strategic destinations/ missions
A
- Divest
- Harvest
- Hold
- Build
6
Q
Divest stage
A
LOW rewards
LOW risks
- need to exit at lower cost
- market declining or bad fit
- need to minimize losses
- focus on finding a buyer quickly
Example: Nokia
7
Q
Harvest stage
A
MEDIUM reward
MEDIUM risk
- need to maintain cash flow
- mature market
- need to maintain volume
- focus on cutting costs
Example: BMW, Volvo- the car industry
Tesla- in between harvest and hold
8
Q
Hold stage
A
MEDIUM reward
MEDIUM risk
- need to maintain growth
- market continuing
- need to be major player
- focus on protecting market share
Example:
Tesla (between hold and harvest)
The gaming industry (in some countries)
9
Q
Build stage
A
HIGH REWARD
HIGH RISK
- need to achieve growth
- new market potentially high
- import to early entrance
- focus on capturing market share
Example: SpaceX
10
Q
Target costing
A
- calculate the target cost
- typical in Japan
- Apple, Samsung, car industry
11
Q
Threats to competitive advantage
A
- existing competitors
- new competitors
- customers
- suppliers
- substitutes
