Strategic Cost Management Examples
Thus, strategic budget management remains focused on cost optimization – rather than mere cost savings – and improving long-term competitive advantage without merely improving the baseline of a single fiscal year. Rather than implementing arbitrary cost cutting to save money now, finance departments should implement strategic budget management – or the use of methods that improve the company’s competitiveness while reducing spending. The survey participants included professionally qualified accountants and managers.
Several years ago we conducted a sample study on strategic budget management within the South African automotive sector. Our research shows that to be effective, budget management must be strategic and aligned with business objectives. While our research was industry-specific and site-specific, it offers lessons that can help other management accountants as they try to navigate the financial constraints caused by the pandemic.
Motor vehicle manufacturers focus on relentless cost reductions to drive down prices through efficiencies, improved productivity and relocation for production closer to markets with higher demand to avoid logistics costs, trade barriers and currency risks. In addition, it demonstrated the need for the company to expand the capacity of its financial divisions to operate cross-functionally and also to perform beyond the bounds of accounting standards. If instead it is managed with a strategic solution, it can result in significant value within the organization through reduced costs and competitive advantage.
Our research found that many automakers have failed to learn about the mistakes of others in the market by simply making cost savings their primary goal. This included proactively supporting and receiving cost increases, low cost of delivering engineering, design and quality improvements. The company also chose not to scale back on r