Question

define strategic cost management and discuss how the various strategic cost management tools and techniques outlined below could help organization manage their cost tactically.
1 shareholder analysis
2 cost concepts
3 cost management systems

Answer 1

	Strategic cost management: It is the process of establishing the relations between costs and decisions. It is the process of making decisions in the organization, based on cost impacts and with the aim of cost reduction. It includes identiying and classifying costs to be used in the process of business decision-making.
1	Shareholder analysis: There are different types of shareholders. Cumulative preferred shareholders need to be paid dividends regularly (according to the terms) while the common shareholders need not be paid. Shareholder analysis involves understanding the existing capital structure, identifying opportunities to reduce cost by making changes to capital structure. It helps in strategic cost management by helping in setting the target capital structure which reduces the costs, and making economic decisions based on the cost impacts.
2	Cost concepts: Cost analysis is the system of identifying and classifying various costs incurred by the organization, and understanding their behavior in relation to operating activities of the organization. Understanding varous types of costs will help in making decisions which reduce the cost.
3	Cost management systems: This includes systems which are used to track all the costs incurred, and prepare reports to use in decision making. There are various cost management systems like traditional costing system, absorption costing, target costing, etc. Using these systems will help in understanding the nature of costs being incurred, identifying areas where costs can be reduced, and in making respective decisions. It helps in formulating the strategic business plan designe to reduce costs.