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Cost Management Research

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Rajiv D. Banker , Dmitri Byzalov , Shunlan Fang , Yi Liang; Cost Management Research. Journal of Management Accounting Research 1 December 2018; 30 (3): 187–209. https://doi.org/10.2308/jmar-51965

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The traditional view of cost behavior assumes a simple mechanistic relation between cost drivers and costs. In contrast, contemporary cost management research recognizes that costs are caused by managers' operating decisions subject to various constraints, incentives, and psychological biases. This conceptual innovation opens up the “black box” of cost behavior and gives researchers a powerful new way to use observed cost behavior as a lens to study the determinants and the consequences of managers' operating decisions. Banker and Byzalov (2014) presented an overview of the economic theory of cost behavior and major estimation issues. The research literature on cost management has grown rapidly in the past few years and has enhanced the understanding of how managerial decisions influence observed costs. In this study, we provide a comprehensive review of recent findings and insights, with a particular emphasis on the implications of cost management for understanding issues in cost, managerial, and financial accounting, and challenges and opportunities for future research.

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Term Paper on Cost Accounting | Branches | Accounting

Here is a compilation of term papers on ‘Cost Accounting’ for class 11 and 12. Find paragraphs, long and short term papers on ‘Cost Accounting’ especially written for school and college students.

Term Paper on Cost Accounting

Term Paper Contents:

• Term Paper on the Disadvantages of Cost Accounting

Term Paper # 1. Introduction to Cost Accounting :

Industrialization and advent of factory system during the second half of 19th Century necessitating accurate cost information have led to the development of cost accounting. The growth of cost accounting was slow. To quote Eldons Handristen “Not until the last 20 years of the 19th Century was there much literature on the subject of cost accounting in England and even very little was found in the United States. Most of the literature until this time emphasized the procedure for the calculation of prime costs only” .

ADVERTISEMENTS:

Rapid development in cost accounting has taken place after 1914 with the growth of heavy industry and large scale production as a consequence of First World War when cost other than material and labour (overhead) constituted a significant portion of total cost.

The development of cost accounting in India is of recent origin and it is given importance after independence, when provision for Cost Audit under Sec.233 B of Companies Act was made. Vivian Bose Enquiry Committee revealed the malpractices of manufacturing companies.

It was felt that the financial audit falls short of expectations to reveal the malpractices. Therefore, under the Companies Act, the government was given the power to order for cost audit. This has given impetus to the development of cost accounting in India.

Term Paper # 2. Meaning of Cost Accounting :

It is the method of accounting for cost. The process of recording and accounting for all the elements of cost is called cost accounting. I.C.M.A. has defined cost accounting as follows: “The process of accounting for cost from the point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centers and cost units. In its widest usage it embraces the preparation of statistical data, the application of cost control methods and the ascertainment of the profitability of activities carried out or planned”.

Cost accountancy is an aid to management for decision making. I.C.M.A., has defined cost accountancy as follows: “The application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability. It includes the presentation of information derived there from for the purpose of managerial decision making” .

Term Paper # 3. Cost and Costing:

The term ‘cost’ has to be studied in relation to its purpose and conditions. As per the definition by Institute of Cost and Management Accountants (I.C.M.A.), now known as Chartered Institute of Management Accountants (C.I.M.A.), London ‘cost’ is the amount of: actual expenditure incurred on a given thing.

The I.C.M.A., London has defined costing as the ascertainment of costs. “It refers to the techniques and processes of ascertaining costs and studies the principles and rules concerning the determination of cost of products and services”.

Concept of Cost:

A cost accountant is mainly concerned with the following cost concepts, concept of objectivity, concept of materiality, concept of time span, concept of relevant range of activity, concept of relevant cost and benefit.

Cost Unit :

A cost unit refers to a unit of product, service or time in relation to which costs may be ascertained or expressed. In other words, cost unit is the unit of output for which cost is ascertained. For examples, the cost of air-conditioner is ascertained per unit.

The selection of cost unit is important in cost accounting. It should be carefully selected to suit the nature of business operation. The selected unit should be neither too small nor too big, but ideal for cost ascertainment. Cost unit may be expressed in terms of number (units), weight, area, length etc.

The following are the cost units in various industries:

Thus, cost units may vary from industry to industry. An enterprise which produces more than one type of product may have more than one cost unit.

Cost Centre:

A large business is divided into a number of functional departments (such as production, marketing and finance) for administrative convenience. These departments are further divided into smaller divisions for cost ascertainment and control. These smaller divisions are called cost centers.

A cost centre is a location, person or item of equipment (or group of these) in relation to which cost can be ascertained and controlled. In simple words, it is a sub-division of the organization to which cost can be charged.

A cost centre can be:

(a) A location i.e. an area such as works department, store yard

(b) A person such as supervisor, sales man

(c) An item of equipment e.g. delivery van, or a particular machine.

The determination of suitable cost centre is very important for the purpose of cost ascertainment and control. The manager of a cost centre is held responsible for control of cost of his cost centre. The number and size of cost centers vary from organization to organization.

The selection of a suitable cost centre depends on the following factors:

(a) Nature and size of the business.

(b) Layout and organization of the factory.

(c) Availability of various cost data and information.

(d) Management policy regarding cost ascertainment and control.

Types of Cost Centres:

Cost centres may be of the following types:

(a) Production Cost Centre:

A cost centre is which production is carried on is known as production cost centre, e.g., machine shop, welding shop, assembly shop, etc.

(b) Service Cost Centre:

A cost centre which renders service to production cost centre is known as service centre e.g. power house, stores department, maintenance department etc.

(c) Personal Cost Centre:

It consists of a person or a group of persons e.g. Sales manager, Works manager etc.

(d) Impersonal Cost Centre:

It consists of a location or a machine or a group of machines, e.g. canteen.

(e) Operation Cost Centre:

It consists of machines and/or persons carrying out similar operations, e.g. machines and operators engaged in welding or turning.

Profit Centre:

A profit centre is a responsibility centre which accumulates revenues as well as costs. In other words, it is a department or segment of the organization which has been assigned control over both revenues and cost. For instance, if there are two divisions in a textile company, say readymade and clothing, each one may be regarded as a profit centre.

Distinguish between Cost Centre and Profit Centre:

Important differences between cost centre and profit centre are:

(i) Cost centre is created by the cost accountant. On the other hand, a profit centre is created by the top management.

(ii) Cost centre is created for the purpose of cot ascertainment and control. But the profit centre is created for the purpose of evaluation of performance.

(iii) Cost centre is a small segment, whereas profit centre is a large segment.

(iv) Cost centres do not enjoy autonomy. But, profit centres enjoy autonomy.

(v) Cost centre does not have a target of costs. But a profit centre has a target of profit for performance evaluation.

Cost Control :

Cost control can be defined as the comparative analysis of actual costs with appropriate standards of budgets to facilitate performance evaluation and formulation of corrective measures. It aims at accomplishing conformity between actual result and standards or budgets. Cost control is keeping expenditures within prescribed limits.

Cost control has the following features:

(i) Creation of responsibility centres with defined authority and responsibility for cost incurrence.

(ii) Formulation of standards and budgets that incorporate objectives and goals to be achieved.

(iii) Timely cost control reports (responsibility reporting) describing the variances between budgets and standards and actual performance.

(iv) Formulation of corrective measures to eliminate and reduce unfavourable variances.

(v) A systematic and fair plan or motivation to encourage workers to accomplish budgetary goals.

(vi) Follow-up to ensure that corrective measures are being effectively applied.

Cost control does not necessarily mean reducing the cost but its aim is to have the maximum utility of the cost incurred. In other words, the objective of cost control is the performance of the same job at a lower cost or a better performance for the same cost.

Cost Reduction :

Cost reduction may be defined as an attempt to bring costs down. Cost reduction implies real and permanent reduction in the unit cost of goods manufactured or services rendered without impairing their (product or goods) suitability for the use intended.

The goal of cost reduction is achieved in two ways:

(i) By reducing the cost per unit and

(ii) By increasing productivity.

The steps for cost reduction include elimination of waste, improving operations, increasing productivity, search for cheaper materials, improved standards of quality, finding other means to reduce unit costs.

Cost reduction has to be achieved using internal factors within the organisation. Reduction of costs due to external factors such as reduction in taxes, government subsidies, grants etc. do not come under the concept of cost reduction.

Term Paper # 4. Scope of Cost Accounting :

The term scope here refers to field of activity. Cost accounting is concerned with ascertainment and control of costs. The information provided to the management is helpful for cost control and cost reduction through functions of planning, decision making and control.

In the initial stages of evolution, cost accounting confined itself to cost ascertainment and presentation of the same with the main objective of finding the product cost. With the development of business activity and introduction of large scale production, the scope of cost accounting was broadened and providing information for cost control and cost reduction has assumed equal significance along with finding out cost of production.

In addition to enlargement of scope, the area of application of cost accounting has also widened. Initially cost accounting was applied in manufacturing activities only. Now, it is applied in service organizations, government organizations, local authorities, farms, extractive industries, etc.

Term Paper # 5. Objectives of Cost Accounting :

The following are the main objectives of cost accounting:

(i) Ascertainment of Cost:

It enables the management to ascertain the cost of product, job, contract, service or unit of production so as to develop cost standard. Costs may be ascertained, under different circumstances, using one or more types of costing principles-standard costing, marginal costing, uniform costing etc.

(ii) Fixation of Selling Price:

Cost data are useful in the determination of selling price or quotations. Apart from cost ascertainment, the cost accountant analyses the total cost into fixed and variable costs. This will help the management to fix the selling price; sometimes, below the total cost but above the variable cost. This will increase the volume of sales-more sales than previously, thus leading to maximum profit.

(iii) Cost Control:

The object is to minimize the cost of manufacturing. Comparison of actual cost with standards reveals the discrepancies- variances. It the variances are adverse, the management enters into investigation so as to adopt corrective action immediately.

(iv) Matching Cost with Revenue:

The determination of profitability of each product, process, department etc. is the important object of costing.

(v) Special Cost Studies and Investigations:

It undertakes special cost studies and investigations and these are the basis for the management in decision-making or policies. This will also include pricing of new products, contraction or expansion programmes, closing down or continuing a department, product mix, price reduction in depression etc.

(vi) Preparation of Financial Statements, Profit and Loss Ac­count, Balance Sheet:

To prepare these statements, the value of stock, work-in-progress, finished goods etc., are essential; in the absence of the costing department, when we have to close the accounts it rather takes too much time. But a good system of costing facilitates the preparation of the statements, as the figures are easily available; they can be prepared monthly or even weekly.

Term Paper # 6. Functions of Cost Accounting:

According to Blocker and Weltemer, “Cost Accounting is to serve management in the execution of polices and in comparison of actual and estimated results in order that the value of each policy may be appraised and changed to meet the future conditions” .

The main functions of cost accounting are:

(i) To serve as a guide to price fixing of products.

(ii) To disclose sources of wastage in process of production.

(iii) To reveal sources of economy in production process.

(iv) To provide for an effective system of stores, materials etc.

(v) To exercise effective control on factors of production.

(vi) To ascertain the profitability of each product.

(vii) To suggest management of future expansion policies.

(viii) To present and interpret data for management decisions.

(ix) To organize cost reduction programmes.

(x) To facilitate planning and control of business activity.

(xi) To supply timely information for various decisions.

(xii) To organize the internal audit systems etc.

Term Paper # 7. Advantages of Cost Accounting:

The following are the advantages of cost accounting – Cost accounting as an aid to management, advantage to employee, advantage to creditors, investors and bankers, advantages to the Government and the society. The importance of costing to management is as follows, Profitable and unprofitable activities are disclosed, enables a concern to measure the efficiency, provides information upon estimates and tenders, guides future policies, helps in increasing profits, periodical determination of profits or losses, furnishes reliable data, detect exact cause or decrease or Increase.

(i) Helps in Decision Making:

Cost accounting helps in decision making. It provides vital information necessary for decision making.

For instance, cost accounting helps in deciding:

(a) Whether to make a product buy a product?

(b) Whether to accept or reject an export order?

(c) How to utilize the scarce materials profitably?

(ii) Helps in Fixing Prices:

Cost accounting helps in fixing prices. It provides detailed cost data of each product (both on the aggregate and unit basis) which enables fixation of selling price. Cost accounting provides basis information for the preparation of tenders, estimates and quotations.

(iii) Formulation of Future Plans:

Cost accounting is not a post-mortem examination. It is a system of foresight. On the basis of past experience, it helps in the formulation of definite future plans in quantitive terms. Budgets are prepared and they give direction to the enterprise.

(iv) Avoidance of Wastage:

Cost accounting reveals the sources of losses or inefficiencies such as spoilage, leakage, pilferage, inadequate utilization of plant etc. By appropriate control measures, these wastages can be avoided or minimized.

(v) Highlights Causes:

The exact cause of an increase or decrease in profit or loss can be found with the aid of cost accounting. For instance, it is possible for the management to know whether the profits have decreased due to an increase in labour cost or material cost or both.

(vi) Reward to Efficiency:

Cost accounting introduces bonus plans and incentive wage systems to suit the needs of the organization. These plans and systems reward efficient workers and improve productivity as well improve the morale of the work-force.

(vii) Prevention of Frauds:

Cost accounting envisages sound systems of inventory control, budgetary control and standard costing. Scope for manipulation and fraud is minimized.

(viii) Improvement in Profitability:

Cost accounting reveals unprofitable products and activities. Management can drop those products and eliminate unprofitable activities. The resources released from unprofitable products can be used to improve the profitability of the business.

(ix) Preparation of Final Accounts:

Cost accounting provides for perpetual inventory system. It helps in the preparation of interim profit and loss account and balance sheet without physical stock verification.

(x) Facilitates Control:

Cost accounting includes effective tools such as inventory control, budgetary control and variance analysis. By adopting them, the management can notice the deviation from the plans. Remedial action can be taken quickly.

Term Paper # 8. Disadvantages of Cost Accounting:

Cost accounting has become indispensable tool to management for exercising effective decisions.

However, the following are the usual disadvantages raised against cost accounting:

(i) Cost Accounting is Costly to Operate:

One of the objections against cost accounting is that it involves heavy expenditure to operate. No doubt, expenses are involved in introduction and operation of cost accounting system. This is the case with any accounting system; the benefits derived by operating the system are more than the cost. Therefore an organization need not hesitate to install and operate the system.

(ii) Cost Accounting is Unnecessary:

It is felt by a few that cost accounting is of recent origin and an enterprise can survive without cost accounting. No doubt financial accounting may be helpful to draw P & L Account and Balance Sheet but an enterprise can work efficiently with the help of cost accounting and it is necessary to increase efficiency and profitability in the long run.

(iii) Cost Accounting Involves many Forms and Statements:

It is pointed against cost accounting that it involves usage of many forms and statements which leads to monotony in filling up of forms and increase of paper work. It is true that cost accounting is operated by introducing many forms and preparation of statements. This will become routine and as time passes the utility of forms is realized and the forms can be reviewed, revised, simplified and minimized.

(iv) Costing may not be Applicable in all Types of Industries:

Existing methods of cost accounting may not be applicable in all types of industries. Cost accounting methods can be devised for all types of industries, and services.

It is based on estimations:

Some people claim that costing system relies on predetermined data and therefore it is not reliable. Costing system estimates costs scientifically based on past and present situations and with suitable modifications for the future. This leads to accurate cost figures based on which management can initiate decisions. But for the predetermined costs, cost accounting also becomes another ‘Historical Accounting’.

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Industrial Project Management pp 153–170 Cite as

Project Cost Management and Finance

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Part of the book series: Management for Professionals ((MANAGPROF))

This chapter is dedicated to project Cost/Finance management. It includes cost estimating and project budget calculation and optimization. Baseline and Cost Accounts are central. Earned Value is treated as the main method for cost control, together with variance analysis. Cash flow, actualization, capital budgeting methods and KPIs (such as NPV, payback and IRR) are considered as part of the project plan. The chapter ends with Project Financing.

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Cooper, R., & Kaplan, R. S. (1991). The design of cost management systems: Text, cases and readings . Englewood Cliffs, NJ: Prentice-Hall.

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Cost And Management Accounting COST LEADERSHIP

Economic recessions usually spark a renewed interest in rigorous, detailed and effective cost management practices. Given the lack of orientation, preparation or temperament for a recessionary period, the first response and reaction of most managers typically involves a "siege mentality" that includes: protecting one's turf; battening down the hatches; slashing all general ledger expense categories; and viewing the finance's department's role as a head-count "executioner."

In past recessions, companies such as Chrysler Corp., Johnson& Johnson and several units of General Electric Co. have improved their profitability, productivity and performance with the rigorous, systematic and effcient use of business process analysis, activity based costing and cycle time compression metrics, among other things. Accounting and finance executives in winning companies have built career lasting reputations for excellence by leading cost leadership initiatives with the cooperation and support of their business partners. Successful cost-leadership initiatives often involve more than a singular tool. Imagine trying to complete a major home repair project with a limit of just one tool; it would be virtually impossible to do. The same is true for cost-leadership initiatives. Surveys at a variety of companies in various industries have found that the overall reputation of the finance and accounting function and leadership has improved materially in the last two decades. Managers and leaders in product development, marketing, manufacturing, logistics, distribution and other functions may be more open to what an accounting or finance professionals can offer with a view toward supporting profitable business growth.

The time may be ripe to pursue aggressive, well-planned and sophisticated cost-leadership initiatives. It is of paramount importance to lay a strong foundation for success by considering many of the behavioral, measurement, cultural and communication issues in the planning phase. In his 1980 classic Competitive Strategy: Techniques for Analyzing Industries and Competitors, Porter simplifies the scheme by reducing it down to the three best strategies. They are cost leadership, differentiation, and market segmentation(or focus). Market segmentation is narrow in scope while both cost leadership relatively broad in market scope.

Cost Leadership Strategy

This strategy emphasizes effciency. By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects. The product is often a basic no frills product that is produced at a relatively low cost and made available to a very large customer base. Maintaining this strategy requires a continuous search for cost reductions in all aspects of the business. The associated distribution strategy is to obtain the most extensive distribution possible. Promotional strategy often involves trying to make a virtue out of low cost product features.

To be successful, this strategy usually requires a considerable market share advantage or preferential access to raw materials, components, labour, or some other important input. Without one or more of these advantages, the strategy can easily be mimicked by competitors. Successful implementation also benefits from:

1. process engineering skills 2. products designed for ease of manufacture 3. sustained access to inexpensive capital 4. close supervision of labour 5. tight cost control 6. incentives based on quantitative targets.

A firm attempts to maintain a low cost base by controlling production costs, increasing their capacity utilization, controlling material supply or product distribution and minimizing other costs including R&D and advertising. Mass production, mass distribution, economies of scale, technology, product design, learning curve benefit, work force dedicated for low cost production, reduced sales force, less spending on marketing will further help a firm to maintain low cost base. Decision makers in a cost leadership firm will be compelled to closely scrutinize the cost effciency of the processes of thefirm. Maintaining the low cost base will become the primary determinant of the cost leadership strategy. For low cost leadership to be effective a firm should have a large market share. New entrants or firms with a smaller market share may not benefit from such strategy since mass production, mass distribution and economies of scale will not make an impact on such firms. Low cost leadership becomes a viable strategy only for larger firms. Market leaders may strengthen their positioning by advantages attained through scale and experience in a low cost leadership strategy. To illustrate this we are looking at the steel sector and specifically at TATA Steel as the cost leader.

Tata Steel, India’s largest steel company and the world’s sixth-largest by capacity is the cost leader in the steel manufacturing sector. Tata Steel owns raw material assets such as coal and limestone mines through joint ventures or completely, with the assets spread across countries such as Australia, Oman and Mozambique. Tata Steel and stateowned SAIL have largely been able to withstand raw material price fluctuations due to captive iron ore mines. Tata Steel is also one of the least cost markers of steel in the world. Other private steel companies, hit by steep iron ore and coal prices, have passed on the hikes to the customers, prompting the government to clamp down on price increases to control inflation.

Tata Steel, which bought out global major Corus last year doubled its profits based on the acquisition. TATA Steel and Corus together sell more than two-thirds of their production in Europe. The consolidated full year net profit for Tata Steel stood at Rs 12,321.76 crore, com-pared to Rs 4,165.61 crore, due to contribution from Corus businesses. The consolidated reve-nue for the full year totaled Rs 1,32,110.09 crore, compared to Rs 25,650.45 crore last year. Anglo-Dutch steel maker Corus was acquired in January last year for $13 billion.

In 2006 TATA Steel used to produce 6.4 million metric tonnes of steel and was ranked 45th in the world by capacity. In 2007 post acquisition of Corus its capacity became 26.5 mil-lion metric tonnes and was ranked 6th in the world. Sail is ranked 19th in the list. The other companies preceding TATA Steel are Arcelor Mittal, Nippon Steel, JFE, POSCO and Bao Steel. However, while most other companied are facing the challenge of low margins, TATA Steel has remained positive because of the cost leadership it maintains. In the iron and steel industry, the prices are determined by the market and hence all that a producer can do is cut down on its costs ti sustain its margins.

Surprisingly, China happens to be the highest producer and consumer of Iron and steel in Asia. It has been illustrated in the pie chart below. This presents TATA Steel with a sea of opportunities as the highest consumer of Steel in the world is its neighbor.

The key factors that work for TATA Steel are as follows

1. Management is confident of passing on to customers the impending raw material cost in-creases. 2. Continuous improvement programs at Corus to result in savings/benefits of GBP 300 mn in FY08. In comparison the FY09 savings/benefits is USD 350 mn. 3. Regards the total acquisition synergy benefits of USD 450 mn, a run rate of 30% (USD 135 mn) has already been achieved.

Key Data on the Steel industry

India is among the least cost producers of Steel and it is reflected in the graph below:

Cost of raw material in India is much cheaper when compared to other countries; specially China. As we can see in the figure below, India is among the cheapest countries to source steel.

India also has the cheapest labour costs for a company. Although,Brazil and South Africa have cheaper raw material cost, they have a higher labour cost to compensate. TATA Steel has access to one of the cheapest labour markets and hence is in a very strong position in minimizing its cost of production. However, it must be noted that Indian labourers are not the most efficient of labourers. They are much below the world average when it comes to effciency. As the Industry data suggests, Indian workers are not the most effcient among workers. TATA Steel in comparison pays a heavy sum when compared to its competitors. However, with the acquisition of Corus, it is bound to improve as corus has one of the most effcient workforces. Japanese Nippon Steel and Korean POSCO rule the roost when it comes to productivity.

If only TATA Steel can improve upon employee productivity, it can further cut its costs to a certain extent. It must however be noted that labour cost accounts to only to 7-8 % of TATA Steel’s revenues and hence may not hold too much of relevance as yet. But as the times goes, it is bound to be an issue and must be checked immediately. The data on cost as a percentage of revenues is given below.

Furthermore, TATA Steel also has a high return on investment and capital employed which is furnished below:

Although it has been declining, it is expected since the world steel prices have taken a beating since the economic crisis came into the picture. As we can see in the graph below, India has the competitive advantage in labour beating all countries including China.

According to TATA Steel estimates, it’s operating margins will still remain close to 20% despite the global slowdown. The EBITDA of 17% for both 2009-10 indicates why it pays to be the cost leader. The balance sheets of both Nippon Steel and POSCO would indicate that they have cut production to brace for the coming recession. However, the standalone data of TATA Steel during the period has shown an increase of 20%. (source: TATA, Nippon, POSCO annual reports) Another important factor adding to the operating expenses of the company includes transportation and freight charges. Since TATA Steel has to source its raw materials from many points such as Australia and Africa, freight becomes a major component of of its cost. Also, It has production facilities in multiple locations and sourcing becomes a important concern. It has been observed that these have been on the rise yet have been volatile. To neutralize this effect superior cost control in the areas where it possible is highly important. While on one hand, there are uncontrollable costs, it is the controllable costs that the company must aim to cut back on. In this area, TATA Steel has been highly successful.

Organizing to implement a cost leadership strategy requires particular consideration to the organizational structure, management controls, compensation policies, and implementing cost leadership strategies. The organizational arrangements and implementation tools should not only fit but reinforce the strategy. Porter (1980) has divided requirements of overall cost leadership strategy into “commonly required skills and resources” and “Common organizational requirements”. Commonly required skills and resources when implementing overall cost leadership are sustained capital investment and access to capital, process engineering skills, intense supervision of labor, products designed for ease in manufacture, and low-cost distribution systems. Common organizational requirements constitute of tight cost control, frequent, detailed control reports, structured organization and responsibilities, and incentives based on meeting strict quantitative targets. According to Barney & Hesterley (2006), few layers in the reporting structure, simple reporting relationships, small corporate staff, and focus on narrow range of business functions are elements of organizational structure that allow firms to “realize the full potential of cost leadership strategies”. Management control systems that support the implementation of cost leadership include tight cost control systems, quantitative cost goals, close supervision of labor, raw materials, inventory, and other costs, and a cost leadership philosophy. Examples of good compensation policies are rewards for cost reduction and incentives for all employees to be involved in cost reductions.

With the example of TATA Steel, we can see how a cost leadership strategy can serve a company in good stead. As we see companies like Nippon steel are crumbling under the weight of their size and are taking cover trying to improve their margins by cutting down staff and so on. On the other hand a strict cost control program has resulted in good returns to TATA even in recessionary periods.

Cost Leadership At Reliance Industries

In the 2005 Annual General Meeting it has been stated that Reliance has become a global leader in various business activities based on innovation and cost leadership (Reliance Industries Limited, 2007). Reliance today enjoys a 7 % global market share in the textile polyester business. India, China and South East Asia have nearly 80% of global textile polyester capacity, along with presence in downstream textiles. Reliance commissioned a 730,000 tonnes per year PTA plant at Hazira. This makes Reliance the fourth largest producer of PTA in the world.

Low costs are achieved in two ways:

1. More effcient production arising from experience: Reliance has been in this industry since 1977 and thus the experience lead them to find more ecient methods of production. The Polyester manufacturing is a complicated/technical process thus Reliance have a competitive advantage as the experience advantage will be greater and diffcult to capture in short term.

2. Economies of scale: Reliance is the Global leader and thus due to high demand and produc-tion lead the company to have effcient size of plant, management structure and so forth. Reliance being a Global player have enough sales to justify investing in additional capacity to capture economies of scale.Reliance will also have a cost advantage because competitors may not be able to match the scale because of capital requirements (barrier to entry) as the firm works in many countries and across the international borders.

3. Through innovation in production methods, leading to new techniques of production or better organization of production: Reliance always believed in innovation and introduced many new methods into the Indian Industry of Polyester.

4. Plentiful source of low cost labor: Reliance has its manufacturing units and head Offce in India which helped the company to have a plenty of raw material and skilled labour at low-est cost.

5. Differential Low-Cost Access to Productive Inputs: Reliance has been founded by Dhiru Bhai Ambani which gave the firm cost advantage over the others because he introduced/ pioneered the new Polyester manufacturing in India

The benefits of low cost strategy are:

1. The Cost leadership helps the Reliance to survive in the price war against its competitors.

2. Supernormal profits generated from increase in market share and demand helps Reliance Group to reinvest some funds into their internal business activities to improve quality and continue cutting costs.

Risks associated with low cost strategy are:

1. Over-emphasis on costs makes Reliance Group inward looking, production orientated and poorly focused on customer needs.

2. There can only be one lowest cost producer in the industry.

3. Gains to be made through learning- i.e. through more effcient production are usually minimal and the most effcient scale of the plant can be copied. That is "many routes to a low cost position can be easily copied."

4. If Reliance’s competitors have other profitable products, then being a lowest cost producer is not enough to survive the price war: competitors can cover their fixed cost with profit from the other lines and price close to what the variable cots are.

Due to above risks as mentioned we would recommend the company to not fully de - pend on cost leadership. Reliance should invest ion R&D to keep innovating its product and offer variety to customers.

Polyester Margin environment

Cotton, the second largest fibre in demand, is witnessing a firm trend in prices. Falling stocks accompanied by declining acreage has increased prices of cotton by more than 26% in the previous year. Global quest for biofuels is impacting the agriculture economies world wide. In February 2008, cotton futures for May 2009 went up to as high as 97 cents per pound ($ 2,138/ tonne) showing signs of firm undertone. This is one of the highest levels in the last decade.

The United States, the world’s third largest cotton producer, has seen a 28% fall in acre - age under cotton production for current season (2007-08) and is likely to see a further drop in the years to come. Most of the farmers have shifted to planting of corn and soybean, due to robust demand from the bio-fuel industry. Due to rapid additions in polyester capacity in China, there has been oversupply since 2000. Low margins in the last few years have reduced incremental growth in polyester capacities in countries like China. From an incremental capacity of 2 million tonnes over incremental demand in 2004, currently incremental demand is more than the annual new capacity creation. Polyester consumption is growing faster than that of any other fibre. There are large pockets of population that have low consumption like the Indian subcontinent and Africa. While the global per capita demand for all fibre stands at 11 Kgs, with China at 16 Kgs and the US at 38 Kgs, India is still at less than 5 Kgs and Africa is at less than 4 Kgs. These regions contribute to nearly half of the world’s population and are witnessing increase in disposable income with overall economic prosperity. Historically it is seen that rising per capita income and industrialization increase textile consumption for both apparel and nonapparel applications. Due to inherent constraints in growth of cotton, polyester is likely to capture the maximum share of future growth.

The Domestic Scenario

Currency appreciation has been of major concern for textile exporters in India. Last year, the Indian Rupee has appreciated against US dollar by 7.7%. Textile exports being a highly competitive business, is adversely affected by an appreciating rupee. The Indian Government reduced the import duty on polyester from 10% to 7.5% and again to 5% mid year in Novem-ber 2007. The Government, in an effort to give a fillip to investments in downstream textile industry has extended Textile Upgradation Fund in the 11th Five Year Plan. Benefits of this fund have been extended to technical textiles, which is an underpenetrated segment for industrial and household polyester applications. With a growing presence in domestic textile growth segments like nonwoven, industrial and automotive yarns, Reliance is well positioned to increase its polyester market share over other Indian manufacturers.

Domestic Demand

Polyester witnessed exciting demand growth in the domestic market at 17% over the previous year. POY demand grew by 18% whereas PSF demand grew by 12%. The increased demand for polyester was driven by robust investments in textile sector and PET consuming industries during the previous year.

Touching 28 touching lives. Transforming India. Indian PET bottle resin market grew by 26% and is expected to sustain the growth rate due to a wider scope of increased penetration in carbonated soft drink, mineral water, fruit juice, and healthcare and agro-chemicals segments. Reliance, with a share of 55% in PET market, is the largest player in the country. Production volumes of the Polyester (PFY, PSF and PET) including Trevira and Recron Malaysia, increased by 16.6% to 1,910 KT. Production from the new domestic polyester facility has been placed successfully in the market. The Company has maintained its focus on specialty products which account for 54% and 38% of PSF and PFY production respectively. Reliance’s domestic market share is now in excess of 49%.

New Product Initiatives

1. Copol & Copol blended fabrics. 2. Polyester / Wool / Bamboo blended fabrics with inherent antimicrobial, anti-odor and UV protection properties. 3. Wool / Soya blended fabrics with having similar moisture absorption capabilities as cotton. 4. Durable moisture management in 100% polyester sports wear fabrics. 5. Fire-retardant and water proof tent fabric, providing additional safety from fire hazards. 6. Water and oil repellant fabrics made from eco-friendly recycled polyester.

With continuous improvements and extensive backward integration, Reliance stands out as the cost leader in its industry. However, it is important for both TATA Steel and Reliance Industries LTD. to look at sustaining its cost leadership over the years to come. With effective involvement of cost control, there is further scope for cutting down on costs and remaining the undisputed cost leader in its segment. Considering the present recessionary phase all over the world, Cost leadership will stand out as the single biggest recipe for success.

BIBLIOGRAPHY

Author Last Name, First Name. “Book Title or Ref-erence Title.” City: Publisher, Date. Webster, Williams. CPA. Accounting for Managers, Mc Graw Hill, 2005 Porter,. E. Michael. Competitive Strategy, Free Press, 1980 Grant,.M. Robert. Contemporary Strategy Analysis, Black-well publishing, (wiley), Fifth Edition, 2007 Homgren, Charles. Datar, Srikanth. Foster, George. Cost Accounting. Pearson Prentice Hall, 2005 Website URLs: www.allbusiness.com www.tatasteel.com www.posco.com www.nsc.co.jp www.worldsteel.org www.ril.com www.sriconsulting.com Annual reports: Annual Reports- TATA Corus Annual report- Nippon Steel Annual report- Arcelor Mittal Annual report- POSCO Annual report- Reliance Industries Reports: India Equity research, Metals and Mining, By Edelweiss November 2008 Cost Leaders in the New World, Steel Consult International Report on the Polyester Industry: Blacks Academy  

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Cost Management Solution For Local Businesses To Increase Profitability, Update

Recession Resister, a trusted cost optimization partner of people across the US, is pleased to now be partnering with local businesses and offering them a comprehensive expense management solution.

Portland, United States - March 22, 2024 —

Recession Resister has long delivered individuals and families significant reductions on their core utilities and bills with their smart Bill Saver technology. Now they are extending their cost optimization service to small and local businesses as well.

More information is available at https://recessionresister.com/

Having begun as a small local business itself, Recession Resister knows that there are many rewards but also many financial challenges inherent in running a smaller operation. Without the benefit of economies of scale or vast negotiating power, their team has seen that small and local businesses across all industries often end up paying more than they should on basic expenses and overheads.

As a recent investigation by LinkedIn also showcased, 50% of small businesses fail by their 5th year of operation, rising to 70% by the 10th year, suggesting that many local businesses can benefit from smarter expense management.

As such, Recession Resister is pleased to be lending partnering local businesses their bill savings and negotiation expertise with their Bill Saver solution. As they specialize in bill negotiation and other cost-cutting services, they know exactly what the most reasonable rates available are and how to get them. They can also save a small business significant man-hours by taking the hassle out of market research and price negotiations.

As a spokesperson for the cost-saving tool developer said, “Technically, you could do this kind of negotiating yourself, but is it worth all the time and hassle? Let our team of experts do it for you. They have saving down to a science. Besides, your time is better spent running your business. We call your providers and negotiate for you, then show you how much you will save each month.”

If a better rate can’t be secured with a local business' current providers, they can also offer their auto-switching service, which will ensure that a business is always paying the lowest possible charges.

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By looking at core costs like energy, water, phones and internet, security, waste management, pest control, payroll, and more, Recession Resister is confident they can give local businesses the bargaining power and cost savings of a big enterprise. And, if they don’t save money for a business, they won’t charge for their services.

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Contact Info: Name: Brian Richards Email: Send Email Organization: Recession Resister Address: 11923 NE Sumner St STE 687470, Portland, Oregon 97220, United States Website: https://recessionresister.com

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EU firms in China skewed 'disproportionately' towards risk management - business group

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Laurie Chen is a China Correspondent at Reuters' Beijing bureau, covering politics and general news. Before joining Reuters, she reported on China for six years at Agence France-Presse and the South China Morning Post in Hong Kong. She speaks fluent Mandarin.

Sarah Wu is a Reuters correspondent based in Beijing, covering the rise of China's EV industry - from trade tensions to autonomous driving. Previously, she reported on politics and general news in Hong Kong and technology and politics in Taiwan. Born in Fujian, she grew up in Ontario and graduated from Harvard.

S&P 500 ends near flat but index posts biggest weekly gain of year

The S&P 500 ended little changed on Friday, but the index registered its biggest weekly percentage gain of 2024 after the Federal Reserve this week stuck with projections for three interest rate cuts by year's end.

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Oprah Takes on Weight Stigma in the Ozempic Era

In a new special, Ms. Winfrey highlighted how new drugs have changed the way we talk about weight and willpower.

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By Dani Blum

Oprah Winfrey, a longtime figure in the national conversation about dieting and weight bias, devoted an hourlong prime-time special on Monday to the rise of weight loss drugs. Her goal, she said, was to “start releasing the stigma and the shame and the judgment” around weight and weight loss — starting with her own, she said.

“For 25 years, making fun of my weight was national sport,” Ms. Winfrey said in the show, titled “An Oprah Special: Shame, Blame and the Weight Loss Revolution.”

Shame has become a focal point in that conversation as new drugs like Ozempic and Mounjaro, which are widely used for weight loss, shift how people think about treating obesity. When Ms. Winfrey disclosed in December that she was taking a medication to manage her weight, she said she was “done with the shaming” that had followed her through decades of dieting.

Many patients who start taking these medications say they have felt shamed for struggling with their weight, and then shamed for taking weight loss drugs, said Dr. Michelle Hauser, the obesity medicine director of the Stanford Lifestyle and Weight Management Center, who was not involved with the special.

“People just are constantly getting this message, both internal bias and then external bias from other people,” she said. Some might think, “‘I shouldn’t have to rely on medication, I shouldn’t be dependent on them,’” she added.

Dr. Hauser tells patients to instead ask themselves: “Would you tell someone that about their blood pressure medication?”

Ms. Winfrey did not name the medication she took, but said that after she started the drug, she understood for the first time that “all these years, I thought all of the people who never had to diet were just using their willpower, and they were for some reason stronger than me.”

Ms. Winfrey and others interviewed on the program — which included doctors who have consulted for the makers of these drugs — referred throughout the hour to the incessant internal chatter that some people experience around eating, also called “ food noise .” Many patients who have taken drugs like Ozempic have said that noise fades away on medication.

“I felt like I was freed,” said Amy Kane, who joined Ms. Winfrey onstage to discuss losing 160 pounds on Mounjaro.

The drugs, however, have notable side effects: One of the patients Ms. Winfrey spoke with said that she stopped taking a weight loss medication after she vomited blood and landed in the emergency room.

Dr. Amanda Velazquez, an obesity expert at Cedars-Sinai and one of the doctors who has consulted for a weight loss drugmaker, said in the special that she considered the side effects “overhyped.” Outside experts have said that the drugs can lead to nausea, dizziness, constipation, diarrhea, acid reflux and in severe cases, malnutrition if a person consumes too few nutrients.

Many patients have also struggled to access the medications, some of which are used to treat diabetes in addition to obesity. Some insurers do not cover the drugs for weight loss, and drugmakers have also faced difficulties keeping up with demand. Nearly all doses of Wegovy are currently in short supply, according to a Food and Drug Administration database .

Ms. Winfrey, who said shortly before announcing her special that she would not seek re-election for her position on the board of Weight Watchers, has long been public about her efforts to lose weight. In 1988, she tugged a red wagon filled with fat across the stage of her television show, a symbol for the 67 pounds she had lost while on a liquid diet. The day after that episode, she started gaining weight back, Ms. Winfrey said in the new special. At one point during the program, she pointed to an image of the cover of TV Guide from 1990 that labeled her as “bumpy, lumpy and downright dumpy.”

“She’s been subject to so much policing, so much surveillance, so much scrutiny about her body,” said Kate Manne, an associate professor of philosophy at Cornell University and author of the book “Unshrinking: How to Face Fatphobia.”

“After a lifetime of people speculating about her weight and often jeering at her weight when she gained it, and applauding her for losing weight, I can really sympathize with her sense that her body is a problem that needs to be solved,” Dr. Manne said. But she said she was concerned about the potential harms of conversations focused so squarely on weight loss.

“I feel worried that she will be again perpetuating a social sense that people’s variations in size and shape really need to be addressed as a medical problem,” Dr. Manne said.

Dani Blum is a health reporter for The Times. More about Dani Blum

A Close Look at Weight Loss Drugs

Taking on Weight Stigma: Oprah Winfrey, a prominent figure in the conversation about dieting and weight bias, tackled the rise of weight loss drugs in a new prime-time special . In December, she shared that she was taking a medication to manage her weight.

Beyond Weight Loss: Wegovy is now approved for a new use: reducing the risk of heart attacks , strokes and cardiovascular-related death in adults who have heart disease and are overweight.

Pregnancy: Doctors say they are seeing more women try weight-loss medications in the hopes of having a healthy pregnancy. But little is known about the impact of those drugs  on a fetus.

Muscle Loss: As drugs like Ozempic become increasingly popular for weight loss, more doctors and patients are looking for ways to counteract the muscle loss that can happen on these medications. Companies are racing to meet that demand .

March Madness can have compelling advantages, daunting costs for businesses, SIU prof says

Southern Illinois University | Friday, March 22, 2024

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March 20, 2024

by Christi Mathis

“March Madness can add enjoyment and bonding potential to the workplace but also has the potential for distraction, reduced productivity and even safety concerns if it gets out of control or isn’t handled appropriately” said Karau.

Media availability

SIU Carbondale Professor of Management Steve Karau is available for interviews. He can be reached at  [email protected] .

Weighing it out

Karau says the positives include:

• The potential to produce bonding and cohesion in the workplace, increasing employee satisfaction. Because the tournament is rather short-lived, many businesses may tolerate a short-term loss of productivity because of the benefits.
• Finding a way. Some surveys indicate that most employees say they still get their work done, even if they get distracted for a bit by the tournament.
• The chance for employees to refresh mentally, becoming more productive. Karau said numerous studies show that happy, satisfied employees are more committed and more likely to remain on the job. And things like fun sports conversations with colleagues can improve workplace engagement.

The potentially costly downsides include:

• March Madness activities can be a significant workplace distraction contributing to cyberloafing, said Karau, who has researched the problem extensively . Studies have found the average American reports wasting more than two work hours daily, mostly on personal internet use, including an estimated 90% of employees surfing non-work websites and 84% sending personal emails during work time. Karau notes that one study put the annual estimated price tag for this productivity loss at between $54 billion and $85 billion. Economic analyses have estimated losses associated with March Madness may total some $134 million or more in wages and $1.9 billion to $13.3 billion in productivity. Karau and his students are involved in ongoing research regarding various aspects of cyberloafing and workplace behavior.
• Workplace exclusion or ostracism of some employees who may feel left out or clueless if they don’t jump on board the March Madness bandwagon.
• Employees failing to get required work done, which could cause harm to the business or result in actual danger to themselves or other employees.
• Diminished attention to customers and clients. In the service industry, customers may take their business elsewhere. In some workplaces, such as factory line work, security positions, and health and safety careers, the distractions could actually result in injury or death to the worker or others.

The addiction is real

But why does March Madness so easily draw people in, even becoming addictive in some cases? Numerous elements and psychological phenomena are at work, Karau said, including:

• The tournament structure, including the prestige, visibility, knockout format and potential for upset victories.
• Social identification. Rooting for a team (“us”) against a competitor (“them”) increases one’s personal identification with the team.
• Fear of missing out (FOMO) on life or social events others are interested in.
• Basking in reflected glory (BIRGing) or enjoying one’s affiliation with a successful team.
• Escalation of commitment. Spending time, effort and money following a team increases one’s commitment over time.

“March Madness has fascinating implications both for human behavior and workplace productivity, with a host of possible positive and negative consequences,” Karau said.

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Oracle Delivers Foundation for More Intelligent Healthcare

Enhancements to Oracle Health Data Intelligence include new generative AI service that helps simplify care management

Suite empowers healthcare organizations to address regulatory requirements and improve quality of care while reducing costs

EHR-agnostic platform helps reduce data integration challenges, increase data security, and embed intelligence in clinical and operational applications

Oracle today announced significant enhancements to Oracle Health Data Intelligence , including a new generative AI service to help increase care management efficiency. Oracle Health Data Intelligence, formerly HealtheIntent, is a modular suite of cloud applications, services, and analytics. The suite enables a broad range of healthcare and government stakeholders to use data from across the healthcare ecosystem to help advance patient health, improve care delivery, and drive operational efficiency. Additional new capabilities include system performance improvements, pre-built clinical quality analytics, and automated alerts that can help increase reimbursements and enhance care.

Powered by Oracle Cloud Infrastructure (OCI), Oracle Health Data Intelligence gives customers access to the same mission-critical security, performance, reliability, and other cloud capabilities that Fortune 100 customers in highly regulated industries rely on today. The platform integrates, secures, and analyzes data from a broad range of sources including electronic health records (EHR), enterprise applications, insurance claims, and demographic records, to provide a more comprehensive view of individual patients and overall population health. This proven, EHR-agnostic solution enables customers to eliminate the cost and complexity of trying to integrate disparate data and systems on their own, which risks an uncertain ROI and can take years, or even decades, to accomplish.

Already, customers using Oracle Health Data Intelligence have recognized extraordinary results, including an average of 9-12 percent in cost reductions per member, per month (for commercial customers); a 5X increase in care gaps closed over 3 years through increased breast cancer screenings; and an average of 40-60 percent increase in annual wellness visits per provider, per year.

“Turning data into insights is critical to solving the problems facing modern healthcare,” said Seema Verma, executive vice president and general manager, Oracle Health and Life Sciences. “The new capabilities embedded within Oracle Health Data Intelligence can dramatically simplify customer efforts to address their regulatory goals, engage more patients, close care gaps, and lower cost of care delivery. With thousands of engineers and data scientists focused on platform enhancements, Oracle Health Data Intelligence is rapidly becoming an engine of innovation to control costs, enable breakthroughs, and drive industry transformation.”

Updates to Oracle Health Data Intelligence include:

• A new generative AI service for care management that summarizes patient history for care managers to dramatically reduce their manual chart review time and help enable them to reach more patients every day. This service is now offered in limited availability;
• Expanded clinical quality content that enables providers to more easily identify and act on care gaps with the goal of improving patient outcomes;
• Expanded network and quality analytics with more pre-built analytics for common requirements including determinants of health, childhood wellness, immunization, and chronic conditions, such as diabetes and chronic obstruction pulmonary disease;
• Additional hierarchical condition categories from multiple Centers for Medicare & Medicaid Services models to help maximize reimbursements and optimize care. The new capabilities include automated alerts within the Oracle Health EHR that help encourage providers to focus on care gaps and take action with individual patients;
• Support for performance year 2024 Accountable Care Organization benchmarks to help monitor, manage, and increase gross savings;
• Performance improvements that accelerate insights with faster page load times.

“Oracle Health Data Intelligence platform has been a critical strategic asset throughout our organization, delivering actionable insights across multiple lines of business and empowering our providers to make more informed, precise decisions at the point of care,” said April Feld, DNP, RN, NEA-BC, CCM, CPHQ, director of care management, Stony Brook Medicine. “Moving forward, we view Oracle Health Data Intelligence not just as a tool but as a catalyst for transformation. Leveraging recent updates, including the power of Oracle Cloud Infrastructure and generative AI, we believe Oracle Health Data Intelligence will shape the future of data-driven healthcare—helping us to better understand and manage complex patient information to more effectively and efficiently deliver care at an individual and population level.”

Patient, population, and health system management at hyperscale

Taking advantage of OCI’s significant price and performance advantages, as well as powerful data and AI platform capabilities, Oracle Health Data Intelligence helps healthcare providers, payers, public health organizations, government agencies, and research organizations to:

• Build custom analytics and AI capabilities with pre-built, open, and extensible tools that can help power innovation;
• Improve care by quickly identifying at-risk patients and suggesting a treatment path, and helping to enhance patient engagement, increase patient screenings, and close care gaps that can lead to long-term health challenges;
• Maximize resources by gaining a better understanding of and more control over network capacity, workforce utilization, revenue, and clinical program performance;
• Address regulatory and financial goals with pre-built regulatory and risk management services, unified population patient data, and embedded clinical applications that enable point-of-care hierarchical condition category coding.

“Oracle Health has demonstrated its ability to aggregate data from multiple sources, including non-Oracle Health EHRs, health information exchanges, and payers,” said Jennifer Eaton, research director, Value-Based Healthcare Digital Strategies, IDC. “With its continued enhancements to Oracle Health Data Intelligence, Oracle is well positioned to help customers get the full value out of their data to drive meaningful change that can positively impact their organization and patients.”

To see Oracle Health in action, please visit us at HIMSS in Orlando March 11 - 15 at booth #2761. Learn how Oracle Health is building an open healthcare platform with intelligent tools for data-driven, human-centric health experiences to connect consumers, providers, payers, public health, and life sciences.

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