Managing Costs and Cost Structure Throughout the Value Chain: Research on Strategic Cost Management

51 Pages Posted: 12 Dec 2005

See all articles by Shannon W. Anderson

Shannon W. Anderson

University of California, Davis - Graduate School of Management

Date Written: October 2005

Abstract

Strategic cost management is deliberate decision-making aimed at aligning the firm's cost structure with its strategy and optimizing the enactment of the strategy. Alignment and optimization must comprehend the full value chain and all stakeholders to ensure long run sustainable profits for the firm. Strategic cost management takes two forms: structural cost management, which employs tools of organizational design, product design and process design to build a cost structure that is coherent with strategy; and executional cost management, which employs various measurement and analysis tools (e.g., variance analysis, analysis of cost drivers) to evaluate cost performance. In this chapter I develop a model that relates strategic cost management to strategy development and performance evaluation. I argue that although management accounting research has advanced our understanding of executional cost management, other management fields have done more to advance our understanding of structural cost management. I review research in a variety of management fields to illustrate this point. I conclude by proposing that management accounting researchers are uniquely qualified to create a body of strategic cost management knowledge that unifies structural and executional cost management.

Keywords: cost management, strategy, costing

JEL Classification: M40, M46, M19

Suggested Citation

Anderson, Shannon W., Managing Costs and Cost Structure Throughout the Value Chain: Research on Strategic Cost Management (October 2005). Available at SSRN: https://ssrn.com/abstract=869070 or http://dx.doi.org/10.2139/ssrn.869070

Shannon W. Anderson (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

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