Strategic Cost Management - by Shank Govindarajan (Paperback)

Book Synopsis

As often reported in Business Week and Fortune, most large companies today concede that their cost systems are desperately obsolete. In this eagerly awaited book, John Shank and Vijay Govindarajan, nationally known experts on the strategic use of cost information, address head-on the fundamental concepts of management accounting that are in desperate need of change. The authors demonstrate how strategic cost management, the first analytic framework to relate meaningful accounting information to a firm's business strategy, is revolutionizing accounting--and overall business practices in leading firms. With numerous extended examples including Ciba-Geigy, Ford, Texas Instruments, and many more, the authors show how the three key tools of strategic cost management--value chain analysis, strategic positioning analysis, and cost driver analysis--provide a sustainable competitive advantage over firms whose cost systems are in disarray.

With persuasive evidence, Shank and Govindarajan demonstrate the strategic power of value chain analysis, i.e., linking external value creating activities all the way from basic raw materials, to component suppliers, and through to the ultimate end-use product delivered to the consumers. Next, they examine how cost management and cost control must be differentiated depending on the strategic positioning chosen by the firm, be it cost leadership or product differentiation. Finally, the authors offer penetrating in-sights on cost driver analysis using such examples as Champion International and Motorola to describe the uses and limitations of activity-based costing, quality costing, and technology costing.

Traditional cost analysis, the authors show, is limited to assessing the financial impact of managerial decision alternatives, with no consideration for strategic business objectives. In this indispensable guide, Shank and Govindarajan show how Strategic Cost Management (SCM) relates to a broader context, where strategic elements become far more conscious, explicit, and formal, and cost data is used to develop superior strategies en route to gaining sustainable competitive advantage.

Review Quotes

Barry J. Brinker Editor, "Journal of Cost Management" This book--by insisting that management accounting must consider strategic issues and showing how to do so--provides a sophisticated understanding of cost structures, which is essential to achieving a sustainable competitive advantage.

Clark H. Johnson Vice President, Finance and CFO, Johnson & Johnson It's time for management accountants to be players with the team on the line. Learn how to achieve competitive advantage using "Strategic Cost Management."

Daniel P. Keegan Partner, Price Waterhouse Executives and managers of all levels will find something in this book that will help them improve the bottom line.

H. Thomas Johnson Retzlaff Professor of Quality Management, Portland State University, author, "Relevance Regained" Here is a balanced and penetrating review of the information companies need to support continuous learning--perhaps the only sustainable source of competitive advantage. I recommend "Strategic Cost Management" to all executives, regardless of background or experience.

Tom Walther Partner, Coopers & Lybrand Shank and Govindarajan move beyond the traditional theory of cost analysis to a new paradigm which integrates many of the strategic value models and concepts that are critical for success in today's global economy. This important book should be essential reading.

Barry J. Brinker

Editor, "Journal of Cost Management"

This book--by insisting that management accounting must consider strategic issues and showing how to do so--provides a sophisticated understanding of cost structures, which is essential to achieving a sustainable competitive advantage.

Clark H. Johnson

Vice President, Finance and CFO, Johnson & Johnson

It's time for management accountants to be players with the team on the line. Learn how to achieve competitive advantage using "Strategic Cost Management."

Daniel P. Keegan

Partner, Price Waterhouse

Executives and managers of all levels will find something in this book that will help them improve the bottom line.

H. Thomas Johnson

Retzlaff Professor of Quality Management, Portland State University, author, "Relevance Regained"

Here is a balanced and penetrating review of the information companies need to support continuous learning--perhaps the only sustainable source of competitive advantage. I recommend "Strategic Cost Management" to all executives, regardless of background or experience.

Tom Walther

Partner, Coopers & Lybrand

Shank and Govindarajan move beyond the traditional theory of cost analysis to a new paradigm which integrates many of the strategic value models and concepts that are critical for success in today's global economy. This important book should be essential reading.

About the Author

John Shank is Noble Professor of Management Accounting at the Amos Tuck School of Business Administration at Dartmouth College. He has published twelve books, and is an active consultant.