Strategic

Cost
Management
Chapter 3:
Contemporary Business Environment and
Strategic Focus of Cost Management
Factors that change the Business Environment
1. Global Business Environment
2. Advances in Manufacturing Technologies
3. Advances in Information Technologies
4. A Greater Focus on Customers
a. Cost Leadership
b. Product Differentiation
5. New Forms of Management Organization
6. Changes in the Social, Political, and Cultural
Environment of Business
1. Global Business Environment

The growth of international markets and trade are the

key development that drive the extensive changes in
the contemporary business environment

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Advances in Manufacturing Technologies

Firms around the world adopt new manufacturing

technologies to remain competitive in the face of the
increased global competition. Many firms adopt methods
applied in some Japanese manufacturing firms that
produced significant cost and quality improvements using
quality teams, and statistical quality control.

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Advances in Information Technologies

The increasing use of information technology, the internet and

e-commerce is perhaps the most fundamental of all business
changes in recent years. This new economy is manifested in the
rapid growth of Internet-based firms (the dot-com's such as
Amazon, eBay, and E-trade) and the increased use of the Internet
for business data processing, communication, and sales.

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A Greater Focus on Customers

To succeed in this era, customer value is the key focus that

businesses of all types must be concerned with. A key change in
increased customer demand for product functionality and
quality. As business firms seek to add new features and new
products as quickly as possible, shorter product life cycle thereby
increasing the overall intensity of competition. The new business
process focuses on customer satisfaction.

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New Forms of Management Organization

Management organization has changed in response to the

changes in marketing and manufacturing. Because of the focus
on customer satisfaction and value, the emphasis has shifted
from financial and profit-based measures of performance to
customer-related, nonfinancial performance measures such as
quality, time to delivery and service.

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Changes in the Social, Political, and Cultural
Environment of Business
The new business environment requires firms to be flexible and
adaptable and to place greater responsibility in the hands of a
more highly skilled workforce. Additionally, the changes tend to
focus the firm factors outside the production of its product or
provision of its service to the ultimate consumer and the global
society in which the costumer lives.

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How to stay competitive on
this Contemporary Business
Environment?
Strategic Management
is the Key!!
Thank you!!