ABSTRACT
This chapter examines how companies use cost management methods and practices to help them reach their strategic goals and objectives. The chapter begins with a discussion of how companies create a competitive advantage using cost leadership, differentiation and focusing strategies. After discussing the unique sources of competitive advantage available to international/global companies, the chapter explains how companies can use value chain analysis and exploit internal and external linkages in order to reduce costs and strengthen a firm’s competitive position. An in-depth review is made of how companies take advantage of external linkages using supply chain management and customer relationship management. The chapter discusses the concept of activity-based management (ABM) and how ABM is used by companies to help identify and eliminate non-value-added costs. The balanced scorecard is set in context to help focus management’s attention on the company’s long-term strategy. The chapter discusses managing and controlling quality costs and concludes with a discussion of target costing.
