The Research Of Inter-firm Cost Management Based On Inter-organization Theory

With the emergence of network economy in 1990s, organizational forms and value creation of enterprises have been drastically changed. Under the background, academic research based upon inter-organization theory has come to an era of unparalleled prosperity, whereas, in practice, inter-organizational formations such as production of outsourcing, supply chain coordination, strategic alliances, network organizations, value network, value constellation, virtual enterprises and so on have also been rapidly developed. The concept of inter-organization is of very broad quality, which refers to a variety of organizational forms between pure enterprises and markets, including, characteristically, strategic alliances, enterprise networks and virtual enterprises. One of the common characteristics of these organizational forms is that, with natures of both enterprise and market, relying on both pricing mechanism and bureaucratic mechanism as a means of control, inter-organization completes the activities of allocation of resources and seeks a win-win position through cooperation among the member enterprises thereof. Under an ever-changing environment, the need for a new management thinking mode is obvious. The changes of environment in which organizations operate require corresponding innovation and development in both cost management theory and practice to meet the requirements for organization management under the new organizational environment and to enhance competitive advantage. This requires us to re-examine the internal and external environmental factors faced by enterprises and to re-think strategic cost management theory- and practice-related issues. With the growing maturity of manufacturing costs management methods, the space for enhancing the competitive advantages further will be gradually reduced merely by increasing productivity and saving resources. The breakthrough of the cost of management will have to count upon changing mode of thinking, expanding horizon and seeking new opportunities for cost improvement. The emergence of organizational forms of all kinds requires a comprehensively strategic thinking by enterprise, which will be bound to bring about another revolutionary evolution in cost management. As hybrid relational forms come into existence, the introduction of new cost management techniques across organizational boundaries is required, by means of which a cooperative effort of buyers and sellers will be reached for the purpose of reducing costs. Inter-firm cost management will no doubt become the trend of cost management evolution.Based upon previous research achievements, this paper attempts to undertake a study of Inter-firm cost management on a systematic manner, aiming at constructing a framework of Inter-firm cost management theory in accordance with the requirements by inter-organization for cost management and at building a set of methodological systems and modes of implementation.This paper is divided into seven chapters, of which the chapter 3, 4, 5, 6 and 7 form its main parts. The key contents of each chapter are as follows:Introduction of the paper briefly explains the implications of the study, the structure and ideas, research methods, the contributions as well as the limitations of the paper.Chapter 1 the Evolution and Prospect of Cost Management: from the Perspective of Evolutionary EconomicsResearch on cost management cannot be divorced from the environment in which enterprise operates, nor can it be cut off from its history and even beyond the history for obtaining an overall understanding and grasp of cost management. By utilizing of the idea of evolutionary economics, the chapter builds the analytical framework for cost management from both the courses and scenarios factors of the evolution and consequently sorts out the trace of its evolution. As a result, in line with the analysis of realistic characteristics and future trends of internal and external environments, this paper presents a new mode for adapting to today's production environment– Inter-firm cost management.Chapter 2 Inter-organization Theory and Inter-firm Cost ManagementNetwork environment of inter-organization is the environment in which Inter-firm cost management is performed, whereas inter-organization theory is directly theoretical foundation of Inter-firm cost management. Through summarizing fundamental issues of Inter-firm cost management, the chapter, combining with basic features of inter-organization and their impacts on strategic cost management, explores the characteristics of Inter-firm cost management and structures a framework of elements of Inter-firm cost management.Chapter 3 the Systemic Analysis of Object of Inter-firm Cost ManagementThe changes of the environment where enterprises operate result directly in the changes in object of Inter-firm management, and in turn, the behavior of cost management undertakes trial and error adjustments. The priority of establishing an effective mode of cost management lies in conducting a systemic analysis of the current changes in the object of cost management. This chapter builds a two-dimensionally analytic mode of the object of Inter-firm cost management, systematically analyzing the object of Inter-firm cost management on a product-cost dimensional basis and on an environment-relationship dimensional basis, respectively. The former positions the target of Inter-firm cost management, whereas the latter identifies the key points of Inter-firm cost management.Chapter 4 the Methodological System of Inter-firm Cost ManagementProducts-cost dimensional view requires Inter-firm cost management to be aimed at rationalizing comprehensive costs. This chapter, in a systematic pattern, describes the connotation and workings of a variety of Inter-firm cost management approaches with an extraversion quality, including target costing, value engineering, functionality-price-quality trade-offs, concurrent engineering, inter-organizational cost investigations and Kaizen costing. The remainder of this chapter analyzes the mutual compatibility among these approaches and adaptation of Inter-firm cost management thinking modes.Chapter 5 Inter-firm Cost Management: Method Integration Model and Implementation ModelBased upon the discussion of the previous chapter, this chapter incorporates the idea of integration management into Inter-firm cost management, analyzes target costing, value engineering, functionality-price-quality trade-offs, concurrent engineering, inter-organizational cost investigations and Kaizen costing and explores in considerable detail both integration model and implementation model in process perspective as well as integrated model based on relation type of member enterprises within inter-organization.Chapter 6 the Structuring of Coordination Mechanism of Inter-firm Based On Interface Management Environment-relationship dimensional view regards both the relations among enterprises and interface as an important aspect of cost management. The chapter analyzes the potential space for improvement of cost rationalization and subsequently establishes the viewpoint that the identification of a comprehensive coordination mechanism is the path of implementing interface management. Comprehensive coordination mechanism comprises of formal covenant coordination mechanism and informal coordination mechanism. This chapter, in connection with the former, examines contractual contents arrangement, contractual design process, contractual trait and the design of self-performance mechanism of inter-organization, whereas, with regard to the latter, discusses confidence mechanism, reputation mechanism and communication mechanism.Chapter 7 the Structuring of Security System of Implementation of Inter-firm Cost ManagementThis chapter explores the structuring of security system of implementation of Inter-firm cost management from two aspects, i.e. network information sharing among inter-organization and co-operative performance evaluation of and interests distribution of Inter-firm cost management. And coordination mechanism among inter-organization is not only a tool to manage Inter-firm costs from the environment-relationship dimension, but also an integral part of the security system.The primary contributions of the paper are as follows:⑴By analyzing the development of organizational forms and the evolution of cost management, the paper argues that Inter-firm cost management is a brand new cost management thinking model for matching post-modern organizational environment and, for the first time, undertakes a systematic and experimental study about Inter-firm cost management.⑵This paper sets up a two-dimensional analytic model for the object of Inter-firm cost management, divides the object of Inter-firm cost management into the product-cost dimension and the environment-relationship dimension and subsequently points out that the product-cost dimension establishes the target of Inter-firm cost management, whereas the environment-relationship dimension identifies the focus of Inter-firm cost management.⑶Beyond the boundaries of traditional cost management thinking model, the paper emphasizes the importance of Inter-firm relations and interface management in Inter-firm cost management, following the illustration of the two-dimensional analytic model of the object of Inter-firm cost management, and addresses the optimization problem of transaction costs of inter-organization and coordination costs by virtue of the structuring and operating of coordination mechanism of inter-organization.⑷This paper, in a systematic basis, investigates a variety of Inter-firm cost management approaches with an extraversion nature in common and examines the mutual compatibility among a range of the approaches as well as the adaptation of Inter-firm cost management thinking modes. In a logic sequence, this paper holds the point of view that for seeking the most favorable implementation model of Inter-firm cost management, various methods of Inter-firm cost management should be integrated in terms of both product chain process and relations type of inter-organization.The following are two main limitations of this paper:⑴Under the circumstances in which there is seldom the literature closely related to Inter-firm cost management either at home or abroad, this paper sets up a theoretic framework of Inter-firm cost management based upon organizational theory, together with economics theories, such as evolutionary economics theory, covenant theory, game theory, and so on, reaching study conclusions of the paper basically by logical reasoning. Therefore, in the course of logical reasoning and the formation of these conclusions, there might be the oversights or omissions, making the conclusions to be questioned to a certain degree.⑵Given the pioneering nature of the paper, it is difficult for the author to validate his conclusions by finding out and investigating such an enterprise which undertakes Inter-firm cost management in its daily operations. As a consequence, the conclusions of the study may lack necessary verification.