Integrated Total Cost of Ownership and Activity-Based Management Process Model

In highly competitive worldwide industries, companies need a strategic edge to gain and maintain market share. Traditionally, companies choose to compete using one of five factors: price, dependability, innovation, quality, or flexibility (Hayes and Wheelwright, 1984). Effective control of bottom-line cost can provide opportunities to exploit a number of these factors. Obviously, lower costs can allow a company to offer lower prices without sacrificing profit margins. Also, lower costs mean that more profits can be invested on developing new products or on improving product quality and dependability. To gain improved understanding, we begin with reviewing the professional literature on total cost of ownership (TCO) and activity-based management, and the interconnections suggested between them.