Contents of strategic cost driver analysis

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Edited at 2022-09-13 09:06:17

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Contents of strategic cost driver analysis

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Contents of strategic cost driver analysis

Define strategic cost driver analysis: Strategic cost driver analysis is a method of identifying the cost drivers behind an organization's strategic decisions. It helps organizations understand and explain the cost impact of strategic decisions so they can make more informed decisions.

Definition of strategic decision-making: Strategic decision-making refers to decisions about the long-term goals and direction of an organization. It usually involves resource allocation, market positioning, product development, etc., and has a significant impact on the overall strategy of the organization.

Definition of cost: Cost refers to the price of monetary and non-monetary resources paid by an enterprise for production and operating activities.

Definition of cost drivers: Cost drivers refer to factors that have an important impact on cost changes, including internal factors and external factors.

Why conduct strategic cost driver analysis

Understand the cost consequences of strategic decisions: The impact of strategic decisions on costs may lead to cost changes. Through strategic cost driver analysis, the cost consequences of strategic decisions can be more clearly understood so that more informed decisions can be made.

Discover cost improvement opportunities: Strategic cost driver analysis can help organizations discover cost improvement opportunities, find the main factors affecting costs, and take effective measures to reduce costs and improve benefits.

Steps in strategic cost driver analysis

Determine the objectives and scope of the analysis: The first step is to clarify the objectives and scope of the strategic cost driver analysis, that is, which strategic decisions and cost drivers are to be analyzed.

Collect data and information: The second step is to collect relevant data and information, including strategic decision-making data, cost data, market conditions, etc.

Analyze data and information: The third step is to analyze the collected data and information to find out the impact of strategic decisions on costs and determine cost drivers.

Predict cost changes: The fourth step is to predict cost changes based on strategic decisions and cost drivers, and evaluate the cost consequences of strategic decisions.

Make improvement suggestions: The last step is to make improvement suggestions based on the analysis results to reduce costs, optimize resource allocation and improve efficiency.

Cost reduction suggestions: Based on the analysis results, make suggestions for cost reduction, including suggestions on changing strategies, optimizing processes, and resource allocation.

Suggestions for improving efficiency: Based on the analysis results, suggestions for improving efficiency are made, including suggestions for developing new products, expanding markets, and optimizing sales strategies.