Acknowledgements
I would like to take this chance to express my sincere gratitude to my advisor Ma Shu in the Foreign Languages Department for his/her kindly assistance and valuable suggestions during the process of my thesis writing. His/Her willingness to give his/her time so generously has been very much appreciated.
My gratitude also extends to all the teachers who taught me during my undergraduate years for their kind encouragement and patient instructions.
Abstract
In the background of economic globalization, the export enterprises in china not only influenced by the revaluation of RMB, the rising price of raw material and the raising cost of labor, but also faced a huge impact .The impact on export enterprise will cause obviously negative effect to the increase of economy in China.
Recently, some small and medium-sized enterprises have poor benefit, even bankruptcy or to lay off employees. The most prominent reasons for these are the drawbacks in cost management, the not perfect cost management system which can hardly bear the sudden harsh pressure and make the enterprises lose the capability of sustainable development.
In the future, during a long period time, how the export enterprises in our country effectively face the bidirectional extrusion of price and cost, that is how to control price in a more large pricing space and how to decrease the cost then improve benefit, has become the long-term challenge to test the export enterprise.
Under such rigorous pressure, if we just only depend on the low price way to fight in the price war obviously can’t adapt to the long-term effective way in the international market. Therefore, to strengthen the competitive power of enterprises and to enhance the competitive status of enterprises are particularly important.
And strategic cost management is a kind of power weapon in helping the enterprises to strengthen cost management and gain sustainable advantage in competition. Compared to traditional cost management, the new one has its huge advantages, and due to its unique comprehensive and prospective modernized management method, it can better cope with the sudden change in the market.
This paper profoundly studies the application of strategic cost management in export enterprises in China to preferably apply the strategic cost management in enhancing the competitive power of our country’s export enterprise and maintaining the sustainable development of them. This paper mainly uses the method of combining the theoretic discussion with the case analysis, based on the systematically arrangement of domestic and abroad strategic cost management theories, to take an export enterprise as an example to analysis its strategic cost management .And then, try to do a profound research of the current situation in the application strategic cost management in export enterprises in China.
Key words?export enterprises; cost management;competitive power
Table of Contents
Acknowledgements i
English Abstract and Keywords ii
Chinese Abstract and Keywords iii
Table of Contents iv
1. Introduction 1
2. Strategic cost management theory 2
2.1 the strategic cost management theory 2
2.2 the export enterprise of our country carries out the necessity of strategic cost management 3
3. Export enterprise cost management present situation and the application of strategic cost management 4
3.1 our country export status of enterprise cost managementt 5
3.2 the export enterprise strategic cost management application 5
3.3 the export enterprises in our country the strategic cost management 6
4. L company strategic cost management case analysis 8
4.1. case introduction 9
4.2 the L company strategic cost management analysis 9
4.3 case summary 10
5. China export enterprise application of strategic cost management countermeasure 10
5.1 the key factors to enhance the competitiveness of the cost control 10
5.2 to enable enterprises to the change idea, establish the strategic cost management 11
5.3 the enterprise should enhance core competition ability, change export structure. 11
5.4 to enhance their own R & D innovation and new technology development capability 12
6. Conclusion 13
Works Cited 17
1. Introduction
In such a severe environmental crisis, if our export enterprises can stand stably in the international market, they must improve the long-term competitive advantages. Under the circumstance of economic globalization, export enterprise should comprehensively apply the factors of cost, brand, service and quality and so on to get into an all-round competition. And the cost plays a crucial and vital role in the enterprises.
However, the traditional cost management with its great limitation and short-term cause the cost management lag behind, the management benefit is poor. It can’t adapt to the need of the developing market gradually, hinder the further development of export enterprises and make the ability to resist risk of export enterprises is low. The strategic cost management will be a new research field combining the strategic thought with cost management. It emerges with the existence of strategic management and the development of all kinds of innovation of theory and practice in accounting. It caters to the demand of cost management of export enterprises properly. How to use the strategic cost management to make the export enterprises won the long-term competitive advantages in the fight for global market under this severe pressure and maintain long-term sustainable development of them, which is also the purpose of this study.
2. Basic theory of strategic cost management
2.1 Basic theory of strategic cost management
(1) connotation of strategic cost management.
AS for what is the strategic cost management, in the academic circle, different people have different cognition. American scholar Jack•Zanker believes that ,simply, the strategic cost management is the management application in strategic management of one or more of the stage to the cost information.
The strategic cost management is the cost management under the premise of consideration of the competitive status of enterprises. Some people also put forward how the strategic cost management use cost information to make the strategic decision and how to organize the cost management with different strategic choices.
(2) three analytical tools of strategic cost management. Strategic value chain analysis that in order to build the mode of value chain in enterprises, we need to know the location of the enterprise in this industry and the situation and future of this industry. Through the analysis of upstream and downstream value chain, to search the way to lower the cost of upstream and downstream value chain, meanwhile, by the analysis of self-value chain, we should find and eliminate those works who cannot add the value themselves ,in order to reduce the cost.
Strategic positioning analyses mean that to a certain point of enterprises, the environment is static, but from the continuity point, the environment is a dynamic one. The enterprises always in a constantly change process. Therefore, Strategic positioning analysis is that the enterprises need to have a careful and elaborate investigation of its own internal and external environment and make sure the opportunities, threats and its own advantages and disadvantages owned in the competitive market and then confirm the competitive strategy to ensure to stand stably in this field, market and product. To beat the competitors and get a higher benefit than the average profit in the same industry.
In terms of the strategic cost driver analysis, based on the mode of value chain above, the strategic cost driver divided into structural cost driver, executive cost driver which analyze the condition of cost structure. All-round view to manage the cost will finally make sure the key cost factors. Enterprises only through control the key cost driver in the main value chain ,or even restructure the value chain if necessary can they really gain the cost advantages to improve the competitive status of the enterprises.
Three analysis tools of the Zanker mode have intrinsic logic and an inseparable relation with each other.
Firstly, enterprises need to analyze value chain from a strategic view , know where the cost arise from, and understand the chain of product cost, which play a crucial role in making strategy to eliminate the disadvantage of costs and create cost advantages.
Then, the positioning analysis determines the enterprises should take cost the lead or take product diversity competition strategy as leader, so as to make sure the direction of the cost management. Once the enterprise competition strategy has determined, in fact, it also have determined the enterprise resource configuration mode and the corresponding management mechanism. Then, enterprise will do the strategic cost driver analysis to find out the factors which have given rise to cost change strategically, to further define the key of cost management, and then to seek strategic way to reduce the cost. The way needs to match the enterprise competition strategy.
2.2 export enterprise in our country to carry out the strategic cost management
2.2.1 the need to adapt to the external environment change
Export enterprise is facing the business environment with complex and rapid changes. In this international market, because our country executes macro regulation, it has less instable factors than the factors in the international market. The improvement of science and technology cause the enterprise to face constantly changing in internal and external environment.So, to make the export enterprise better adapt to the complex international market environment, the traditional cost management with limitation and incomprehensive drawbacks is out of need. In order to survive and develop, enterprise must make an overall plan, analyze the internal advantage and external opportunities to help enterprises to form enterprise strategy, and create a competitive advantage, so as to reach the purpose that enterprise effectively improve internal strength, to adapt to the change of external environment. So implementing the strategic cost management has become the urgent need to export enterprise.
2.2.2 the need to compete in the market
The competition in the market gradually intensive, especially after the WTO entry, it is not easy for our country to fight with other science and technology advanced country for market .Foreign enterprise have entered in the market ,so export enterprise need to consider how to improve competition ability to stand stably in the international market Export enterprise must carefully study the environment of domestic and abroad, further strengthen internal management, and also need to learn foreign advanced experience to carry on the management innovation. In order to adapt to the market, they must make a plan to clearly determine the development strategy, to reduce strategic cost, to form the cost advantage, then they will win in the competition.
3. the current situation of cost management in export enterprise and the application of strategic cost management
The labor price is low, the resources are rich and so on, these are the advantages of the export enterprises in our country but the profits are far lagged behind other foreign enterprises in the same industry. With the gradually increasing number of foreign enterprises in our country, they have utilized these resources to the fullest extent, so this makes advantages of our export enterprise gradually weaker. The limitation of the traditional cost management and its short-term cannot meet the need of modern enterprise cost management, so how to use the strategic cost management to optimize the entire value chain, to make a clearly long-term competition strategy, and to promote enterprise competitive position, which has become the urgent problems of export enterprise in China.
3.1 the current situation of cost management in export enterprise
3.1.1 not comprehensive
Currently, some export enterprises still only pay attention to the cost management of internal production in our country and lack of the consideration of the external environment and competitors factors which also may produce cost .The external environment tangibly or intangibly hinder the view of the managers and restrain the creation and usage of various potential and the possible cost management model. The current cost management only emphasis the obvious cost factors, such as the cost of raw materials and labor, the financial expenses and management fees, but ignore the hidden cost factors, such as the cost of marketing expansion, the adjustment of internal structure ,the enterprise scale, management culture fees and so on. The current management doesn’t fully reveal real structure of enterprise cost, so the information cost not only cannot help managers to make strategic decision effectively, but also will affect the correctness of the strategic decision.
3.1.2 short-term
Enterprise cost management focus too much on short-term cost reduction and it doesn’t make a plan to obtain long-term cost advantages. This may make the enterprise lose the good strategy for developing and affect the formation of competitiveness. For example, the inputs to strengthen technical innovation can simplify the production process and reduce the relative costs. Although the current cost of the input will be higher than the cost before we adopt the technology innovation, but in the long run, they can show the long-term cost advantages. The lead advantage of an initial cost cannot simply consider in an accounting period, it need a relatively long period to study .In order to make enterprise always keep the advantage and keep lead position in cost , we need not only to analyze the current situation ,but also analyze its potential power as well as the future trends.
3.2 The application of strategic cost management in export management
3.2.1 analysis of value chain
Industrial Value Chain means the whole process from the initial raw material to final consumers. An enterprise is always in one or a few links in the industrial value chain, it hardly take up the whole value chain and in any stage of the value chain will emerge different competitors. Export enterprise use the industrial value chain analysis not also can clearly know the position of the industrial value chain, the situation of other enterprises in the same industrial value chain, but also can make the enterprise explore and use industrial value chain to reduce production cost.
The picture below is the industrial value chain of export enterprise, from the value chain picture, it is not difficult for us to find export enterprise’s valuable creation activities which have the upper and the downstream. The upper part includes suppliers of raw materials, the downstream part includes the import and export businessmen, wholesalers, retailers and consumers abroad. Now, most of the export enterprises in our country still focus on the manufacturing like the manufacturing factories: the suppliers of raw material offer the raw material to the enterprises, then the foreign vendors order their order form to produce, and after finishing the production, they entrust the logistics company to transport the goods to foreign importers who also sell the goods to consumers.
the suppliers of raw material→export enterprise→logistics company
→foreign importers→wholesalers and retailers→consumers
Export enterprise in China need to perfect the connection of industrial value chain, makes the enterprise and its upstream (vendor), downstream (customer) to reduce costs and to improve the whole advantages of these enterprises related, therefore, to look for win-win opportunities. Enterprise can establish a new “benefit- oriented partner” relations with suppliers. When the enterprise needs raw materials, the supplier should promptly offer the raw materials to the enterprise, and guarantee the quality, which reduces the enterprise inventory and cost of storage.
The value chain analysis of the rival is to make sure the cost trend of enterprise compared by the opponents by the analysis of opponents’ value chain, and then to eliminate the disadvantages to keep the advantages. At last we can make strategy to bit rivals in the competition.
3.2.2 strategic positioning analysis
To a certain point of enterprises, the environment is static, but from the continuity point, the environment is a dynamic one. The enterprises always in a constantly change process, especially for the export enterprise. Therefore, Strategic positioning analysis is to through a careful and elaborate investigation of its own strategic environment of enterprise and make sure the opportunities, threats and its own advantages and disadvantages owned in the competitive market and then confirm the competitive strategy.
(1) analysis of SWOT in export enterprise. The SWOT analysis is a kind of quickly master, easily use tool to systematically analyze the competitive advantages, it provides four kinds of strategies for enterprise to select: SO strategy, WO strategy, ST strategy, WT strategy. Enterprise can analyze its own actual situation to formulate the competitive strategy.
The four kinds of combination in the form is an integration to influence the internal and external factors. It is also the key point for us to make choice and strategic decision, for example
When product costs of foreign competitors dropped substantially or the shortage of raw material supply to enterprise which leads to the enterprises no longer have cost advantages, while the development of new technology has the restriction of money and staff to form WT combination, export enterprise should take the new subdivision of the target market or adopt the product disparity competition strategy to deal with the low cost advantage of their rivals.
?2?competitive strategy. According to Michael Potter’s competitive strategy theory, we can put the competitive strategy into three models: Overall cost leadership, product differentiation strategy and target gathered strategy.
3.2.3 cost driver analysis
Based on the value chain analysis and strategic positioning analysis, the enterprise can determine its cost management strategy, but in order to further define the key point of management cost, we still need to find out factors of the driver cost, to restructure and optimize the value chain, and to guarantee the effectiveness of strategic cost management.
Cost driver can be divided into three levels: Structural cost driver, execution cost driver, operation cost driver. This paper exactly emphasizes the first two levels above.
The size of the enterprise, the standard, experience, technology and diversity and so on, all these are the objects of structural cost driver analysis. The features of structural cost driver are below:
The influence to cost is lasting and profound.
This cost has formed restrained and fixed cost before the start of production.
These factors not only affect the product cost, but also permeate into the quality of product, human resources management and so on, which to a great extent determine the formation of competitive advantages in enterprise.
3.3 the management problems of strategic cost of export enterprise in China
1. the relationship of industrial value chain is not close to upstream and downstream value chain in export enterprises in China. The relation between export enterprise of our country and upstream and downstream value chain is not close enough, especially to the downstream customers. Because the export enterprise is facing the foreign market, born with some geographical environment disadvantages, and compared with foreign enterprise ,our country’s export enterprise don’t have an intimate relations with market. All these cause enterprise in our country on one hand lack of sensibility to consumer needs and lose the perfect chance to be the first to occupy the market.
On the other hand, the foreign enterprises have the flexible application ability to face the domestic and international market and resources. When facing changes in the international and domestic economic environment, foreign enterprises show strong power of adjustment and adaptability. Due to the raw material purchased in a large number and amass they can often get raw materials at lower prices. While, export enterprise in our country rarely reach strategic partner relationship with suppliers, which leads to the high cost of raw material, the poor quality of them ,the unreliability of the supplier ,and the supply is not in time. All these will make the production and business operation activities hardly go forward.
2. lacking analysis to the rivals. There is an ancient saying in China, “Know the enemy and know yourself, and you can fight a hundred battles with no danger of defeat.” But it is not easy to identify the value chain and the value activities of the competitors to make sure the cost of them. Because different combination of value chain can produce different cost results, and even the same value chain, if there exists disparity in inner efficiency also can affect the relative position of cost.
3. low cost profit in export enterprise in China. Foreign enterprises have the advanced technology and scientific management system and those countries who are the leaders in industry with advanced technology innovation , invest companies in our country and combine advanced technology and scientific management experience with China's cheap labor and other resources. Therefore, in this way, it strengthens the comparative advantages among this kind of advanced products. The scientific management system makes it work more efficient than the efficiency in China which reflects the high efficiency in value chain. But our country’s export enterprises are labor-intensive enterprises, having low value-added products and profit margins in the enterprises are low.
4. the countermeasures of application strategy cost management in export enterprise in China
4.1 control the key factors in cost to enhance competitiveness
To successfully apply the method of strategic cost management, export enterprises in our country should effectively make use of the value chain analysis tools to enhance competitiveness. In the optimization of the value chain, to adapt to the increasingly fierce competition environment and to enhance competitiveness, enterprises must pay attention to the extension of the value chain to participate in upstream suppliers and customers in the downstream of the value chain. On the one hand, enterprises need to establish strategic partner relationship with suppliers, on the other hand, they should build connection with the customers in downstream. Moreover, enterprise can also by the reconstruction of the value chain, to reduce the cost and to achieve the purpose of strengthening the competitive position of enterprise.
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Works Cited
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