Research On Cost Control Of K Company

K is a private enterprise producing and selling liquid crystal display(LCD) modules, mainly manufacturing 5-inch to 11.6-inch LCD modules. Since high-quality customers of the LCD industry are mainly composed of some large-scale terminal client groups(such as ECS, Amazon and Samsung Electronics), and suppliers of main materials(glass and IC) are also large-scale with certain monopolistic nature, module manufacturing enterprises between them have a lack of voice with limited bargaining power. Glass and IC need to be taken with cash and ordered in advance, and meanwhile, customers have certain payment days, which lead to a great amount of money for stock and increasing financial pressure. In recent years, the sales revenue of K has been continuously kept a growth rate of more than 50%. In July, 2015, its shipments have been ranked at the fifth of domestic shipments in the same dimension, but its profitability has declined year by year. With the expansion of the enterprise, the capital turnover gets more and more difficult on the contrary, and production and operation are faced with relatively severe problems. The main problems of continuously declining profit lie in the excessively high cost, increasing loss and difficult capital turnover of the enterprise. Thus, the cost control becomes the most significant management issue of the enterprise in the future. The operation of other enterprises in the same industry is also not optimistic. A batch of small-scale module plants has gone into liquidation, while relatively large-scale module plants have also chose reorganization, merger and acquisition to increase their risk resistance capacity. However, how to control the cost and gain a superiority of cost is still a key of whether enterprises can earn profit, obtain the maximum enterprise value and realize long-term development.Through a case study of K, this paper conducts analyses and comparisons from a perspective of industry to find out characteristics in the industry, mainly discussing how to control the cost in a strategic aspect; what are the factors causing the high cost at present; how to use the method of cost management to solve such factors; as well as possible effects and references for other enterprises. As for theories, this paper may adopt current new cost analysis methods, such as strategic cost management, operating cost method, target cost method and enterprise value chain, which apply to the management of K aiming to verify their applicability and effectiveness, so as to conclude what kind of cost control modes and measures shall be used for addressing problems of cost management in the LCD module industry, improving the ability and level of cost control, and promoting profits of enterprises.According to studies on cost of K, this paper concludes some measures and methods of cost control, which can provide references for other enterprises in the industry, promote the improvement of cost control level in the whole industry, and bring favorable economic benefits and social benefits.