Strategic Cost Driver Analysis And Applied Research

Sufficient profits constitute the prerequisite for enterprises' survival and expansion and the most direct and efficient way of achieving profits is to lower costs. Therefore, it is a must for enterprises to increase their competitiveness through strengthening the cost management. In the meantime, it is compulsory for enterprises to enhance the strategic cost management in order to acquire long-term profits, which helps enterprises adapt themselves to the ever-changing internal and external environments. At the core of the strategic cost management lie analyzing strategic cost driver in the first place, regulating and controlling cost in a whole way, thus forging enterprises' long-term competitiveness. The proposed Cost Driver Theory moves that of cost management into a higher and deeper level, which contributes greatly to the innovation and development of the cost management theory. In China, studies on the theory of cost management are in a pre-mature stage and against this background the author begins a comparatively systematic pilot study in this field.This thesis, which bases itself on analyzing strategic cost driver theories and studying related theoretical frameworks, concentrates, from the perspective that goes from commonality to particularity and from theory to application, on exploring respectively the application of structural and executional strategic cost drivers in cost management and enterprises' development through comparative and normative research methods combined with related cases.The theory of cost driver came into being in the 1980s. It introduced cost theory into studies which aimed at researching cost driver factors hidden behind the cost. Strategically, the costs of enterprises were controlled by these special cost drivers, any of which would possibly constitute a source of competitive advantage for enterprises. One of the fundamental strategies enterprises use to increase competitiveness is to choose an advantageous cost driver as thecutting-edge point. Cost driver analysis, which accompanies strategic cost management all the way, is the premise of the latter.As a result, attaching importance on cost driver analysis will be more likely to provide enterprises with opportunities to change cost status de quo and sharpen competitiveness. The strategic cost driver analysis is a strategic approach to obtaining a comprehensive knowledge about enterprises' cost structure and behavior, to finding out factors resulting in cost changes and to seeking methods strengthening competitive advantages by lowering cost in the long run.The first step to make strategic cost driver analysis is to learn about and recognize the strategic cost drivers, which is helpful to control and make use of cost drivers. Strategic cost drivers are made up of structural and executional ones which are of two different levels. The former ones include economy of scale, degree of integration, training, technology and location, etc. The latter ones include use modes of productivity, external and internal connection, total quality management, selection of opportunities, and so on. Various strategic cost drivers are interdependent, which has much influence on the overall operative costs, and embodies the cost levels of enterprises. However, it is very hard to describe the relationships of the different cost drivers because of their complicatedness. Consequently, it is a wise idea to find out, on the basis of analyzing enterprises' development strategies, the leading cost driver, and evaluate and ameliorate the current operating status. By that means, the costs of enterprises will be reduced as their strategies have planned.During the very stage that focuses on application studies of strategic cost drivers, the author puts forward a framework where strategic cost drivers are applied in the cost management and illustrates the concrete application of the framework in enterprises' internal checking and calculating, in fixing internal transferred price and in supply chain. In order to be more practical to the operating reality of en...