Strategy
...strategic planning. In his book, “A concept of corporate planning,” Ackoff mentions that there are some aspects of the future about which we can be virtually certain. Here, companies can pursue commitment planning. There are some aspects of the future about which we cannot be certain, but we can be reasonably sure of what the possibilities are. Here, contingency planning is useful. A good example is planning for a military invasion. Every possibility is identified and analyzed and a suitable action plan prepared, because time is of the essence, once a possibility has become a reality. Finally, there are some aspects of the future, which cannot be anticipated. Here, responsiveness planning can be used, i.e. building flexibility into the organization.
(See Adaptive Planning)
Activity-Based Costing: Activity Based Costing (ABC) increases the accuracy of cost information by linking overhead and other indirect costs to product or customer segments more precisely. Traditional accounting systems distribute indirect costs on the basis of direct labor hours, machine hours, or material costs. This leads to a distorted picture. Decisions about which product line to invest in and which not to invest in, become difficult. ABC undertakes detailed economic analyses of important business activities to improve strategic and operational decisions.
To build a system that will support ABC, companies should:
• Determine the key activities performed;
• Determine the cost drivers by activity;
• Determine overhead and other indirect costs by activity, using clearly identified cost drivers.
ABC can be used to:
Re-price products - Managers can analyze product profitability more accurately by combining activity-based cost data with pricing information. This can result in the re-pricing or elimination of unprofitable products. Managers can also estimate new product...
View Full Essay
