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Chapter 3: Contemporary Business Environment and Strategic Focus of Cost Management

The document discusses factors affecting contemporary business environment and strategic cost management. It provides examples of how companies determine their mission and respond to business changes. It contrasts strategic financial and non-financial measures, and lists factors like increased competition, new technologies, customer focus, and management changes that are causing businesses to alter their cost management approaches.

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Jeannelle Angeles
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445 views

Chapter 3: Contemporary Business Environment and Strategic Focus of Cost Management

The document discusses factors affecting contemporary business environment and strategic cost management. It provides examples of how companies determine their mission and respond to business changes. It contrasts strategic financial and non-financial measures, and lists factors like increased competition, new technologies, customer focus, and management changes that are causing businesses to alter their cost management approaches.

Uploaded by

Jeannelle Angeles
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 3: Contemporary Business Environment and Strategic Focus of Cost

Management

Recitation Equivalent Activity


1. How does a company determine and implement its mission?
A company determine its mission by identifying what is the sole purpose of the business
or organization and also by knowing the goals specified by the company to strive in the
competitive global market. It is then implemented by providing specific objectives that will create
specific plan to be decided by the management and lastly, creating strategies for the company’s
operating activities that will be evaluated for feedback and motivation.

2. How have firms responded to changes in business?


Nowadays, business environment changes drastically and rapidly, therefore the
management should be able to quickly adapt and respond effectively to all changes. In order to
maintain the position of your business in the global market, reprocessing or restructuring is
needed for the operating activities and forms of management organization, having flexible
adaptable social workplace, providing low-cost but high quality goods, changing the workforce
to more advanced technology and network, etc.

3. Contrast the use of strategic financial measures with the use of strategic nonfinancial
measures.
The use of strategic financial measures and nonfinancial measures both lead to Critical
Success Factors that is essential to sustain the business’ status. Financial performance
including growth in sales, cash flows, and stock price shows the impact of the firm’s policies and
procedures in the firm’s current financial position and return to the shareholders. While
Nonfinancial measures including market share, product quality, customer satisfaction, and
growth opportunities show the firm’s current and competitive position from customers, internal
business process and innovation.

4. What are some of the factors in the contemporary business environment that are causing
changes in business firms and other organization, and how are the changes affecting the way
those firms and organizations use cost management information?
These are the following factors that are causing changes in business firms in the
contemporary business environment:
a) Increase in Global Competition – the rapid growth of economic independence results to
this factor for every individual has his/her freedom enter the market globally. Because of
this, it create more competition inside and outside the country that makes it hard to
survive in the market. As a result, cost management information needs financial and
nonfinancial information about doing business and competing effectively.
b) Advances in Manufacturing Technologies – We are in a generation of fast development
of technologies and businesses should make it their strength therefore many adopt
these methods to their business for quality improvements and quality control. Now, many
firms use Just-In-Time Inventory method to reduce the cost but maintaining the quality
and quantity of the products. Also, speed-to-market became a key that deliver the
product or service faster than the competition.

c) Advances in Information Technologies, the Internet, and E-Commerce – This is the most
fundamental business change that most of the successful firms nowadays applied in this
factor. This change the cost management information in a way that most firms reduce
the time required to processing transactions and expand the individual’s access to
information within the firm, the industry and the business environment.

d) Greater Focus on the Customer – This focus on the customer value that is derive from
greater customer realization than customer sacrifice. It increase the demand of a product
that has a high functionality and quality. So, cost management information changes and
focus more on reports and measures that include customer satisfaction and preferences.

e) New Forms of Management Organization – In response to the contemporary business


environment, the old exclusively financial data became a financial and nonfinancial
information, the old hierarchical command became network-based or cross-functional,
the old importance of quantity produced products became quality produced products,
etc.

f) Changes in the Social, Political, and Cultural Environment of Business – Being globally
open means having more socially and racially diverse workforce, therefore firms must
have flexible and adaptable environment for their high skilled employees. It renewed the
sense of ethical responsibility of the management that should be free of bias.

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