Strategic Cost Management: The New Tool for Competitive Advantage [Paperback]

Shank Govindarajan (Author)

Book Description

Publication Date: November 18, 2008

As often reported in Business Week and Fortune, most large companies today concede that their cost systems are desperately obsolete. In this eagerly awaited book, John Shank and Vijay Govindarajan, nationally known experts on the strategic use of cost information, address head-on the fundamental concepts of management accounting that are in desperate need of change. The authors demonstrate how strategic cost management, the first analytic framework to relate meaningful accounting information to a firm's business strategy, is revolutionizing accounting—and overall business practices in leading firms. With numerous extended examples including Ciba-Geigy, Ford, Texas Instruments, and many more, the authors show how the three key tools of strategic cost management—value chain analysis, strategic positioning analysis, and cost driver analysis—provide a sustainable competitive advantage over firms whose cost systems are in disarray.

With persuasive evidence, Shank and Govindarajan demonstrate the strategic power of value chain analysis, i.e., linking external value creating activities all the way from basic raw materials, to component suppliers, and through to the ultimate end-use product delivered to the consumers. Next, they examine how cost management and cost control must be differentiated depending on the strategic positioning chosen by the firm, be it cost leadership or product differentiation. Finally, the authors offer penetrating in-sights on cost driver analysis using such examples as Champion International and Motorola to describe the uses and limitations of activity-based costing, quality costing, and technology costing.

Traditional cost analysis, the authors show, is limited to assessing the financial impact of managerial decision alternatives, with no consideration for strategic business objectives. In this indispensable guide, Shank and Govindarajan show how Strategic Cost Management (SCM) relates to a broader context, where strategic elements become far more conscious, explicit, and formal, and cost data is used to develop superior strategies en route to gaining sustainable competitive advantage.

Editorial Reviews

Review

Clark H. Johnson Vice President, Finance and CFO, Johnson & Johnson It's time for management accountants to be players with the team on the line. Learn how to achieve competitive advantage using Strategic Cost Management.

Tom Walther Partner, Coopers & Lybrand Shank and Govindarajan move beyond the traditional theory of cost analysis to a new paradigm which integrates many of the strategic value models and concepts that are critical for success in today's global economy. This important book should be essential reading.

Barry J. Brinker Editor, Journal of Cost Management This book—by insisting that management accounting must consider strategic issues and showing how to do so—provides a sophisticated understanding of cost structures, which is essential to achieving a sustainable competitive advantage.

Daniel P. Keegan Partner, Price Waterhouse Executives and managers of all levels will find something in this book that will help them improve the bottom line.

H. Thomas Johnson Retzlaff Professor of Quality Management, Portland State University, author, Relevance Regained Here is a balanced and penetrating review of the information companies need to support continuous learning—perhaps the only sustainable source of competitive advantage. I recommend Strategic Cost Management to all executives, regardless of background or experience.

About the Author

John Shank is Noble Professor of Management Accounting at the Amos Tuck School of Business Administration at Dartmouth College. He has published twelve books, and is an active consultant.

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Product Details

• Paperback: 272 pages
• Publisher: Free Press (November 18, 2008)
• Language: English
• ISBN-10: 1439150362
• ISBN-13: 978-1439150368
• Product Dimensions: 9 x 6 x 0.7 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (6 customer reviews)
• Amazon Best Sellers Rank: #1,049,821 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

9 of 9 people found the following review helpful:

4.0 out of 5 stars SCM is really a New Tool, August 5, 2000

By 

T SUBBARAYUDU (GURGAON, HARYANA India) - See all my reviews

This review is from: Strategic Cost Management: The New Tool for Competitive Advantage (Hardcover)

The analysis of the Siemens Electric Motor Works case is excellent. Though the case is presented in Cooper and Kaplan's "Design of Cost Management Systems", the analysis here is outstanding. It provides an excellent platform to demonstrate how the "ABC View of Costs" - as distinct from the "Traditional View of Costs" provides useful insights into potential starting points for starting a Kaizen exercise ; and measuring progress on such an exercise once it gets started. The Baldwin Bicycle case is another excellent case where the contrast of results using conventional analytical tools like BCG matrix and NPV on the one hand, and SCM on the other lead to different results and clearly establishes the superiority of the SCM methodology.

3 of 3 people found the following review helpful:

4.0 out of 5 stars Adding the insights of Corp Strategy to Cost Accounting, January 15, 2004

By 

Craig Matteson (Saline, MI) - See all my reviews
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This review is from: Strategic Cost Management: The New Tool for Competitive Advantage (Hardcover)

If you, like me, are interested in Cost Management and think that most companies would do better if they invested more care in this topic, you might be interested in this book. The core idea of the book is to marry cost management (management accounting) with the insights that have been developed in Corporate Strategy over the past 20 years. What we get is a richer and more informative use of management accounting, but one that is more difficult to apply because it relies less on simple formulas and rules.

I like the way the book uses cases to show the additional insights you get by using their approach by comparing it to the results you would get from the case with the traditional approaches. The authors are honest about the complications and difficulties and that helps us better assess the trade-offs.

This is a book that requires some background in traditional cost accounting and then after this book you will want to do more reading study and real-world analysis. It isn't a panacea nor does it try to be. But it sure is interesting and helpful if you care about the subject.

3 of 3 people found the following review helpful:

4.0 out of 5 stars Important Work, Great Fundamentals, December 28, 2001

By 

Sandy Paige (Davis, CA) - See all my reviews

This review is from: Strategic Cost Management: The New Tool for Competitive Advantage (Hardcover)

I have taken John Shank's required first year class at Babson College (MBA program, first year) and bought this for more background since he requires no textbook for the class. It takes much of Michael Porter's work and merges it with a cost accounting angle. The book was exactly the mix of Michael Porter and John Shank that Shank preaches in the classroom and is critical to a responsible understanding of any manufacturing-based operation. From my perspective, it is probably most useful to business operators/managers -- far more so than consultants. The sample cases are a good mix in their simplicity and relevance -- I will refer to the book for years to come.

I bought it used through Amazon and paid about $10.00 -- it was promptly delivered in perfect condition.