Question

the use of cost information in short- a term long- term, and strategic decisions making, planning and control in contemporary organizations

Answer 1

Every organization starts it's operations with a vision to grow & nurture it's business and defines it's long-term strategy to achieve the same. The approach followed here is from a macro to micro view.

Long-term strategy decides the long term goals of the organization, products & services to be launched, geographical presence, growth targets etc.

To achieve long term strategy, details of revenue budgets and cost required to be invested and incurred becomes a vital parameter. Higher the cost, lower the profitability. However, an organization with reasonably new operations/products doesn't mind spending more to establish it's brand presence in the market. Cost inputs can be seen as an important part of information in designing long to short term strategic decisions. Here's a short summary of the different examples where cost information might be important.

• Short-Term Cost Information - This information focuses on immediate to short-period expenses to be incurred like raw material, labour cost, transportation, freight, packaging & distribution, contract manpower, inventory management, marketing campaigns, advertising etc. This is more relevant for baseline managers and small enterpreneurs who're focused on today's survival rather than tomorrow.
• Long-Term Cost Information - This information focuses on long-term impact which is usually spread over multi-year period like lease rental cost, subscription costs, insurance, hiring executive personnel, geo-expansion with set-up of new offices, plants & outlets, volume discounts to retain clients, long-term borrowings, credits & overdraft facility with banks, deferred tax assets/liabilities for tax benefits, subsidiies, exemption benefits from Government etc. These are more relevant for established organizations to grow their roots deeper and expand into new markets.
• Strategic Decision Making - In terms of Strategic Decision Making, costs incurred on setting-up new foreign entities, merger & acquisition, IPO and share buyback, royalty agreements, joint ventures, research & development etc. are key in driving an organization's vision.