Strategic Cost Management

In times of uncertainty, organizations are examining ways to enhance cost efficiencies, by focusing on cost analysis and profitability analysis. The Key is.... The key is to identify a handful of activities of sufficient size and significance to justify separate treatment and for which a single cost driver can be identified. Identifying costs that can be influenced is key to cost streamlining. Refocus resources on really profitable products, customers and channels. NOTE : When using an integrated approach, such as Activity Based Costing  that works on causal relations to allocate costs, changes in the level of activity will not lead to a proportionate change in total costs.This in turn calls for the need to analyze costs according to a cost hierarchy, focusing at four levels: unit, batch, product, company:     * Unit: Unit level costs increase in proportion to the number of units produced (e.g. labour hours)     * Batch: Costs increase in relation to the batch of units being produced (e.g. set-up or purchasing costs)     * Product: Costs at this level are incurred irrespective of the volume of products or batches produced and might include costs like technical support, etc.     * Company: Costs at the company level are incurred and cannot be assigned to products directly (admin and management) Finally, is worth noting that Kaplan differentiates between the cost of resources supplied and the cost of resources used >> (the cost of resources supplied = the cost of resources used + the cost of unused capacity.)   And unused capacity is not entertained in a  Strategic Cost Management framework. O2ibm

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Strategic Innovation - The AVAC framework (Activities, Value, Appropriability, and Change)

In his book Strategic Innovation (Routledge, 2009), professor Allan Afuah provides us with a comprehensive strategic framework for assessing the profitability potential of a strategy or product.- the value of "new game" strategies -  in the face of rapid technological change and increasing globalization. It's not enough to create value in new and different ways, he says. Nor is it sufficient to merely capture value today. To compete and win, firms may need to rewrite the rules of the game altogether, overturning existing ways of both creating and appropriating value.  The most important thing, he stresses, is that a firm pursue the right new game strategy... A brief Interview of Professor Allan Afuah by Deborah Holdship follows....Let's start by talking about strategic innovation in the most general sense.