Strategic cost driver analysis

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Edited at 2021-07-31 17:07:00

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Strategic cost driver analysis
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Strategic cost driver analysis

What is strategic cost driver analysis?

Strategic cost driver analysis is a method used to determine the factors that contribute to strategic costs.

Why conduct strategic cost driver analysis?

Because strategic costs are the various costs that organizations need to bear when implementing strategies, understanding their drivers can better optimize resource allocation and decision-making.

What is the process of strategic cost driver analysis?

Step One: Identify Strategic Cost Categories

Strategic costs include direct costs, indirect costs, fixed costs and variable costs.

Step Two: Identify Cost Factors

For each strategic cost category, all relevant cost factors need to be identified, such as human resources, material procurement, marketing, etc.

Step 3: Analyze the relationship between cost factors

Analyze the interdependence and influence between cost factors and find out the main factors that lead to cost increase or decrease.

Step Four: Assess the Importance of Cost Factors

Determine the importance of each cost factor to strategic costs and rank them in order of impact.

Step 5: Develop an improvement strategy

Based on the evaluation results, corresponding improvement strategies are proposed to reduce strategic costs.

Example of strategic cost driver analysis

Short Topic: Human Resource Costs

Examples: employee salary, employee training, benefits, etc.

Example: employee salary levels

Example: Market competition causes salary increases

Example: Employee Performance Level

Example: Employee training costs

Example: Benefits

Short Topic: Material Procurement Costs

Examples: raw material procurement, equipment procurement, packaging material procurement, etc.

Example: Raw material purchasing costs

Example: Raw material price fluctuations

Example: Supplier Cooperation Strategy

Example: Equipment Purchase Cost

Example: Packaging material procurement costs

Short Topic: Marketing Costs

Examples: advertising expenses, market research expenses, promotion expenses, etc.

Example: advertising costs

Example: Advertising channel selection

Example: Advertising content design

Example: Market research expenses

Example: Promotional Fees

The significance of strategic cost driver analysis

Through strategic cost driver analysis, it can help organizations comprehensively understand the sources and influencing factors of strategic costs, and provide a basis for formulating reasonable strategies and resource planning.