The Cost Management Model Design Based On Value Chain

One of the most remarkable characteristics of market economy is to encourage every enterprise to become an independent economic entity and to participate in market competition by its own economic strength. The success or failure mostly depends on the enterprise's inside economic management efficiency. Undoubtedly, as one of the administrative important links, cost management ought to be well worked. The enterprise competitive advantage originates from the value which is created for the customer by enterprise and lowers than its cost. Guided by the strategy of cost in the lead, the enterprise's target is to become a low cost firm in its profession. If enterprise is able to create and maintain low cost position in the lead and control its cost under or approaching an average level, it can make a better achievement that is prior to the average. In order to fierce market competition, everyone enterprise dreams of gaining cost advantage. However, the traditional cost management already can not adapt to what enterprise need in the new economy environment. Neither can it provide accurate cost information, nor provide correlativity support to decision-making.With the development of network economy, knowledge-based economy and economic globalization, the management environment and pattern have changed up and down. Value competition has been the main competing content and value management has become the core problem which modern enterprise pays more attention to. It is considered that the enterprise's mission is to create and transfer value. The producer is connected with supplier, serving business and the final customer on value creation and realization. Under this background, it becomes an alternative direction to restructure new cost management pattern based on the view of value.This article used both the standard and real diagnosis research on studying the method of value chain with demonstration in cost management. First, it made a statement of this article's theory base, summarized the value chain and cost management theory's current situation on research and analyzed its merit and deficiency in application.Second, based on the relevant theory, it gave a boundary to value chain cost management, made a statement of the content, step and method of cost analysis and designed the cost management model based on value chain theory. Finally, combining with the practice of enterprise, it took one company as an example to discuss the application of cost management based on value chain to reality in enterprise.