In an attempt to minimize the damages caused by financial crises and the use of company resources, managers apply strategies that only work momentarily, but that in the medium and long term can pose serious risks to the survival of the business.

Given this, it is necessary to view the strategic cost management as a competitive advantage in companies.

This is a matter of survival in the market, since processes that are poorly thought out and not prepared by analyzing the data and the entire value chain end up becoming villains rather than tools that ensure the operation and health of corporations.

With this context in mind, this article will explain what, in fact, cost management is and the step-by-step for you to implement it in your organization. Keep reading and learn about it.

What is strategic cost management?

Strategic cost management has emerged with the technological innovation of companies. Before using software that automate and manage a good part of the financial processes, the management was directed only at the reduction of expenses, in a way that it was possible to decrease the prices of products or services and, thus, allowing the company to continue to stand out.

However, business models have changed, and strategic cost management is seen as a competitive advantage for companies. This is because, currently, this control takes into account the relationship between the expenses of a product or service and the financial management of the business.

In other words, the strategic cost management starts to study the entire consumption process, from internal to external factors, such as customer satisfaction.

Therefore, this concept has more importance than many companies believe, as it is responsible for placing the organization in a strategically competitive position without regarding the costs only as numbers, but as a chain of financial resources.

After all, with the changes in the market and the consumption habits of the population, price is no longer the only relevant factor for companies that want to have brand authority and competitiveness.

In moments of crisis, for example, a company that has a good strategic cost management end up having enough resources to overcome the situation and do not come out of it very fragile, mainly due to the control of wastes and failures.

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How to implement it in a company?

In order to work with strategic cost management as a competitive advantage, it is necessary to have a well planned and structured implementation process, since several factors must be considered.

First and foremost, it will be necessary to bring together all the business owners and board members to present the concept of strategic cost management and involve them in this deployment project. This should be the first step, as managers will be responsible for the deployment and supervision.

To do so, present the term, explain what the benefits to the business are in the medium and long term, and be open to listening to opinions, as action plans may emerge from them.

Cost management should be preceded by a process mapping in order to develop a project and a plan, always specifying the order of each step and the periods in which they will be reviewed and measured.

The next step is to put all the information that has been collected in a software, including values, data and costs that have been identified, without disregarding any, minor or insignificant as they may seem, as they should be part of a precise calculation that should be as real as possible.

Next, a data analysis should be done in order to understand the costs of each step of sales and all departments and units of the company.  Finally, before deployment, it is necessary to present this entire project to the rest of the company, that is, to the whole work team, because without engagement no strategy survives.

In addition, it is of utmost importance to continually review and evaluate the results of your cost management, since it is common for things to be planned one way, but work in another. Therefore, it is necessary to monitor the progress of the strategy and, where possible, improve it.

For which sectors is it essential?

Clearly, strategic cost management as a competitive advantage is a reality for sectors that have high and expressive competition, because any productive bottleneck, failure or waste, however small, can be disastrous and make the survival of an organization unfeasible.

In this scenario, we highlight the commodities segment – the one that takes care of all the raw material that originates in the primary sector. Because they are traded on the stock exchange and are of great importance to the economy and the financial sector, the prices practiced by companies in this area are determined by the market. This is because they need to aim for increased profitability.

It is exactly the opposite for businesses that are not part of this sector, which set prices by their own criteria and, mainly, due to marketing strategies, have influence on consumption. Good examples are cell phone brands and clothing.

Therefore, the main difference for the success and competitiveness of the commodities segment is exactly a strategic cost management that is well structured and has the engagement of teams and managers, since no company grows alone and without an excellent administration.

In addition, large investors and corporations study a company’s management strategies before investing in it because they know that cost management says a lot about the health of the business, and that even if the organization goes through troubled times, this measure is able to eliminate bottlenecks and waste in a timely manner.

As a manager, you should view the strategic cost management as a competitive advantage in companies and as a tool that guarantees not only the control of your value chain, but also waste and failures, as these are aspects that influence the health and image of your business.

It is impossible to have cost management without efficient software in your company. So contact us and learn about our technological solutions to control this strategy.