Application Of Value Chain Analysis In Strategic Cost Management

In 1950s, the world entered the post industrial era. With the rapid development of science and technology, emerging industries emerge in an endless stream, customer demand is diversified, the world economy tends to be integrated, and market competition is more intense.

Many enterprises realize that internal efficiency is important, but what is more important is overall planning according to the change of external environment. The strategy is equivalent to the direction of enterprise development. Only when the strategic decision is correct, can efficiency be meaningful. In this case, the center of enterprise management activity is promoted to the strategic level, from the pursuit of short-term performance goal to the long-term sustainable development goal, from the improvement of professional function management level to the overall strategic management, forming the strategic and strategic management thought.

At the same time, the traditional cost management system based on the consumption of internal value of enterprises can not adapt to the change of management environment under the background of implementing strategic management, and can not provide useful cost information for strategic decision making of enterprises.

Therefore, management scholars organically integrate cost management accounting and enterprise strategic management ideas, thus forming the theory of strategic cost management and rapidly gaining wide recognition and application in the business world.

Strategic Cost Management (SCM) is a cost management that improves the competitive advantage of an enterprise.

It means

From the perspective of strategy, the personnel analyze the cost formation and cost structure around the "strategic triangle" composed of the enterprises, customers and competitors. They not only provide the export-oriented information with strategic relevance to the enterprises, but also strategically survey the internal information of the enterprises and provide information services for strategic management.

Cost effective thinking (Cost Benefit)

The purpose of implementing strategic cost management is not just

It is more important to establish and maintain the long-term competitive advantage of enterprises.

Cost performance appraisal should be evaluated through the relationship between input and output, not just saving expenses.

Unilaterally emphasizing cost reduction is bound to dampen the enthusiasm of enterprises for the future to increase efficiency and to pay for some short-term seemingly expensive but necessary costs, thereby affecting the long-term strategic objectives of enterprises and the cultivation of core competitiveness.

Cost extension theory (Cost Broaden)

By integrating the internal structure and external environment of enterprises, strategic cost management includes not only internal cost analysis, but also cost analysis of competitors and cost analysis of enterprises, thus breaking through the cost management of individual enterprises from all angles and angles.

Cost avoidance (Cost Avoidance) thought

Strategic cost management focuses on cost avoidance, based on prevention and control of the source of cost, thereby extending the vision of cost reduction from the manufacturing field to the whole product life cycle, including producer cost (development and design cost, manufacturing cost, logistics cost, marketing cost) and consumer cost (use cost, maintenance cost, maintenance cost, disposal cost), so that cost control can be avoided. Early avoidance can avoid the cost as much as possible.