Tag: Cost Control and Management Accounting Osmania University b.com Notes

Collaboration brings:

Providing Value: Working towards the same goal inspires in the team members with a strong sense of purpose. The team sees value in working together as the common goal gives them a meaningful reason to work together, along with receiving mutual benefits for the company as well as the team.

Brainstorming: Collaboration allows team members to come together on a common platform and work towards the achievement of a common goal by thinking, brainstorming, and offering various perspectives to provide solutions.

Equal Partaking: Collaboration provides every team member with equal opportunities to participate and communicate their ideas.

Horizontal Integration

The merger of two or more firms, which are engaged in the same line of business and their activity level is also same; then this is known as Horizontal Integration. The product may include complementary product, by-product or any other related product, competitive product or entering into the product’s repairs, services, and maintenance section.

Horizontal Integration reduces competition between firms in the market, as if the producers of the product get combined they can create a monopoly. However, it can also create an oligopoly if there are still some independent manufacturers in the market.

It is a tactic used by most of the companies to expand its size and achieve economies of scale due to increased production level. This will help the company to approach new customers and market. Moreover, the company can also diversify its products and services.

Vertical Integration

Vertical Integration is between two firms that are carrying on business for the same product but at different levels of the production process. The firm opts to continue the business, on the same product line as it was done before integration. It is an expansion strategy used to gain control over the entire industry.

Forward Integration:  If the company acquires control over distributors, then it is downstream or forward integration.

Backward Integration: When the company acquires control over its supplier, then it is upstream or backward integration.

Managing collaborator relations

Share the company’s mission over and over again. Everyone needs a reason to show up each day a cause to be part of, and a broader objective to work towards.

Defining your company’s mission is the first step towards bringing people together under one common goal and working together towards making it happen.

Communicate your expectation for collaboration.

Similarly, if your team doesn’t know that you want them to work together, you can’t expect them to do so. From the start, set your expectation for collaboration as a minimum standard. Even better, it should be part of your onboarding process so that potential recruits know you prioritize teamwork.

Promote a community working environment.

A sense of community is crucial for collaborative working environments. 54% of employees state that a strong sense of community led them to stay at a company longer than was in their own interests.

When people feel that their opinion matters, they are more likely to apply themselves more. Conversely, when people know their opinion doesn’t count for anything, they feel redundant and team-playing disintegrates.

Encourage Creativity.

A collaborative team is an innovative one. Likewise, creating the space for creativity will help foster collaboration. It’s a virtuous circle.

Brainstorming sessions can be a great way of opening up your team to creative thinking. An environment in which they can put forward and challenge ideas will help employees feel like they have a stake in the company’s mission.

Collaborators are any third parties that work directly with your company to support or assist in the development or execution of a strategy. Some common examples of collaborators include vendors, warehousers, and consultants.

Types:

Partners

Partners are any individuals with a formal interest in the success of a company. While all collaborators can be thought of as partners, this group specifically refers to business partners with a legal agreement in place.

Agencies

Agencies act as intermediaries and facilitators, connecting companies with other peoples and companies with skills they may need. An employment agency may provide a company with administrative staff, whereas a marketing agency could handle all of a company’s promotional needs.

Distributors

Distributors are responsible for a company’s supply chain. Not only do they maintain relationships with suppliers and vendors, they also house and facilitate the shipment of the company’s product.

Suppliers

Suppliers contribute not only the materials to make a company’s product, but as manufacturers are considered a supplier, they may create the product itself.

In defining your company’s collaborators, you also need to assess them for capability and commitment. A collaborator being unable to offer the support you need can have a serious impact on your operations, so it’s best to determine a collaborator’s capacity beforehand.

Collaboration as Business process

• An integrated business process which consists of relevant business processes across participating organisations.
• A set of mutually synchronized actions of peering and autonomous enterprises in order to conjointly provide an output for an external customer.
• An integrated business process which consists of relevant business processes across participating organizations.

Utilize the power of consumers

Collaborative marketing is more than collaborating with other organizations. Modern technology gives us better outreach to capture the voice of your target audience. This continues to develop as the use of social media and wide-reaching digital reviews expand.

Fulfill campaign goals

Use collaborations to strategically mask your weaknesses or promotional shortcomings. Broaden your outreach with collaborative marketing that syncs with your organization. Relatable organizations will have similar goals, marketing campaigns and target audiences. Create mutually beneficial marketing promotions with these companies to fulfill the needs of your team.

When you bring this idea to modern collaborative marketing, you’ll need systems in place to enable this creative collaboration. The marketing technology stack your team is using should be configured to make this process as smooth as possible.

It’s essential to have the basic collaborative tools in place. The most important solution for marketing collaboration is digital asset management (DAM). This used by modern organizations for optimal brand management and asset storage. With DAM, you can easily collaborate on projects with externals through features like collection links and portals.

Align with like-minded businesses

Increase your brand awareness with collaboration. Work with other brands to promote similar products, which increases the outreach and strength of the advertisement. The marketing powers of numerous brands come together to bolster your business and minimize budget spending.

Here’s a real life example of this in action. Two different reputable Hollywood companies produce a movie. Though they are competitors, they solidify the quality of the film by collaborating. The brands build off each other this way, masking weaknesses and developing strengths in the eyes of consumers.

Plan the entire collaboration process

A strong collaboration is preceded by a systematic planning of the entire collaboration process. Begin by researching companies that have similar goals, marketing, brand and products. Especially online, marketing collaborations are more effective with higher amounts of collaborative companies. The next step is meeting with the collaborators and setting guidelines and agreements with each of them.

After the partnerships are formed, ensure all agreements are in place before launching the marketing advertisements. Finally, re-evaluate your campaign to ensure you’re constantly getting the most value from it. Ensure the companies you partnered with don’t change their goals or branding values without your knowledge.

Adapt to evolving organizational needs

Your collaborative marketing campaigns thrive when internal audits of collaborative relationships are routine. The needs of your organization are dynamic and the digital landscape changes constantly. In order to stay relevant and keep the collaborative marketing campaigns prosperous, regularly reassess both your organization’s needs and changes to the relationships with externals. Ensuring the relationship is still viable and beneficial to your organization will garner success.

Advantages of Collaboration

Better Division of Labor

One of the advantages of collaborative efforts in the workplace is the way that the work is divided. When more than one person is involved in accomplishing a certain task, particularly when it is a large project, it helps for everyone to have a small portion of the responsibility to ensure things get done versus loading one or two people with too much work to accomplish the task.

Greater Creative Input

When you have different people collaborating on a project, then you get a greater sense of creative input. You are able to tap into the creative combination of several employees in one group. The collection of different ideas, approaches to the project and brainstorms can spur innovative results that can in turn raise the visibility and quality of the products or services offered by your company.

Increased Employee Morale

Having employees collaborate also has a positive effect on their morale. As employees work together to accomplish goals, they can celebrate their successes both individually and as a group, and this can cause them to have a more positive view of their jobs and team members. In turn, this can also build trust among co-workers as each member contributes to the team’s accomplishments.

Drawbacks of Collaboration

Lack of Trust Among Team Members

To work effectively, employees on a team need to trust each other. Forbes notes that trust can quickly erode if a single team member doesn’t pull their weight. Because the work is collaborative, an employee who misses deadlines or doesn’t complete their assigned work can negatively impact the work of the entire team. This can lead to frustration and lack of trust within the other employees, reducing the effectiveness of their work and creating tension in the workplace.

Conflicts in Working Styles

When you group different people together to collaborate on one project or set of responsibilities, there may be a conflict in the working styles of the individuals within the group. This is one of the negative aspects of collaboration because it can hold up progress on accomplishing the job at hand, while team members instead muddle through conflicts caused by the different ways team members approach the work.

Too Many Faux Leaders

When you have a collaborative group, you may sometimes end up with too many people trying to lead the group, and not enough members that are willing to take a backseat and just do what it takes to get the job done. This ill will can then bleed over into other areas of the work environment, causing more tension among the rest of the staff, including those that may not even be involved in the collaborative effort.

Profit Strategy is the strategy in which, the only target of the company is to maintain profitability by hook or a crook. It is a type of corporate-level stability strategy, where the profit generation takes place in a forced strategic way by the management of the company. And the management of the company, in order to achieve profits, tries to slash costs, cut additional investments, try to increase the efficiency or productivity level, raise the selling price or can adopt any intense steps in this direction.

Profit Strategy continues to use the old technology, at the time of technological change. And under this strategy, the management does not replace the old or obsolete technology with new technology in any case. Moreover, even if the replacement is inevitable, then the partial acquisition of technology takes place. Thus, this Strategy focuses on capitalizing as much as possible, out of the current situation.

Strategic financial management means not only managing a company’s finances but managing them with the intention to succeed that is, to attain the company’s long-term goals and objectives and maximize shareholder value over time.

Strategic financial management is about creating profit for the business and ensuring an acceptable return on investment (ROI). Financial management is accomplished through business financial plans, setting up financial controls, and financial decision-making.

Before a company can manage itself strategically, it first needs to define its objectives precisely, identify and quantify its available and potential resources, and devise a specific plan to use its finances and other capital resources toward achieving its goals.

Strategic management also involves understanding and properly controlling, allocating, and obtaining a company’s assets and liabilities, including monitoring operational financing items like expenditures, revenues, accounts receivable and payable, cash flow, and profitability.

Strategic financial management encompasses furthermore involves continuous evaluating, planning, and adjusting to keep the company focused and on track toward long-term goals. When a company is managing strategically, it deals with short-term issues on an ad hoc basis in ways that do not derail its long-term vision.

Increasing sales and revenues are related but different goals, and each needs its own strategy. Although the tactics for each may be different, they should complement each other. Understanding how sales and revenue are related and how to increase both helps you market efficiently and optimize your profits.

Sales vs. Revenues

The words “sales,” “revenue” and “income” have different meanings, and become confusing if used as synonyms. “Sales” refers to the number of units of your product you sell, “revenues” refers to the total amount money your sales generates, and “income” refers to your profit from those sales. Keep these in mind as you plan sales strategies to strike the right balance for your business’s needs. Don’t be surprised to hear “sales” and “revenues” used as synonyms, which is a common occurrence in business.

Increase Your Marketing

An obvious way to increase sales is to boost your marketing. Quantity doesn’t necessarily mean quality, so careful planning, test-marketing and monitoring your results maximizes your sales. Conduct marketplace research to learn which messages speak to your target audience.

Run ads and promotions in limited locations and check the results before spending your entire budget. Incorporate some way to monitor marketing communications, such as using coupons, electronic codes or website traffic statistics.

Review Your Pricing Strategies

If your product or service is price sensitive, pay special attention to your pricing strategies. Find out what your competition is charging and raise or lower your prices based on your goals. Lowering your prices can increase revenues to make up for lower margins.

Raising your prices can create a higher perceived value in the minds of consumers and increase your margins. Raising your prices can also increase your revenues without increasing sales.

Expand Your Distribution Channels

Changing where you sell your product can significantly boost your sales and revenues without requiring any changes to your marketing or pricing. Perform a careful study of the effects of using online selling, direct mail, wholesalers, retailers, distributors and outside sales reps to project how each method can affect your sales volumes, profit margins and total profits. In some cases, new distribution channels require marketing support.

Diversify Your Offerings

If you’re a mature company, it might be time to add new products and services to create exponential growth. If you feel you’ve saturated the marketplace, determine the products your target customers buy that you’re not selling and that you think you can make and market profitably. You might need to replace old products with new ones. This might result in a decrease in sales, but higher revenues if the replacement product has a higher price.

Develop Relationships and Cross Promotions

The more people you can get to promote your product or service, the more sales and revenues you’ll have. Look for businesses that don’t compete with you but which have the same target customer and develop cross promotions. For example, if you sell sports apparels, sponsor golf and tennis instructors and youth league coaches to wear and promote your line. Partner with charities to get them to promote you to their supporters. Use social media programs to build a following generated by satisfied customers.

Optimizing price

Price optimization is the practice of deciding upon the most effective pricing for a product or service. Reliant on crystal clear data, great pricing optimization enables companies to offer their products at the price points that are most likely to be picked up on by customers.

Optimal price points will deliver the best possible profits for the company, and may also be designed to achieve additional goals such as assisting in improving the company’s market share or enabling expansion into previously unexplored markets.

• Starting prices: The starting price of a product or service is of course fundamental to its success, so pricing optimization is key here. Pricing optimization software will analyze data to reveal the best possible starting prices, taking a wide range of internal and external factors into account.
• Discounts: Many companies opt to push their products out to larger audiences, or tempt back past customers, with the offer of discounts. Well-managed pricing optimization software can also be used in these instances, to ascertain the optimal price points.

The Benefits of Price Optimization

Pricing optimization brings a multitude of benefits, which are evident throughout the sales process. Take a look at some of the main advantages of pricing optimization strategies.

• Maximize Sales and Profits: The best possible price points allow companies to achieve their true potential, particularly when it comes to maximizing sales and profits. Customers are more likely to pick up on products and services when they’re priced optimally, and companies soon reap the benefits.
• React faster to market changes: Pricing software makes it possible for companies to react quickly to changes in the market, outsmarting their competitors by offering goods and services at the best possible prices for any given circumstances.
• See fast ROI improvements: With pricing optimization software, it’s easy to see how things are improving. ROI can be closely monitored, with all changes available to view in real-time. This data-driven approach enables teams to respond to fluctuations in demand quickly, maintaining the best possible ROI for the company.
• Gather insights into customer behavior: The more data a company has, the better it can understand its customers. And with this understanding comes immeasurable opportunities. Data allows companies to offer products they know their customers will love at prices they’re sure customers will respond favorably to.

Lowering costs

Cost cutting refers to measures implemented by a company to reduce its expenses and improve profitability. Cost cutting measures are typically implemented during times of financial distress for a company or during economic downturns. They can also be enacted if a company’s management expects profitability issues in the future, where cost cutting can then become part of the business strategy.

Cost reduction is the process used by companies to reduce their costs and increase their profits. Depending on a company’s services or products, the strategies can vary. Every decision in the product development process affects cost: design is typically considered to account for 70 – 80% of the final cost of a project such as an engineering project or the construction of a building.

Companies typically launch a new product without focusing too much on cost. Cost becomes more important when competition increases and price becomes a differentiator in the market.

The importance of cost reduction in relation to other strategic business goals is often debated.

Cost reduction strategies

• Supplier consolidation: see examples in the aerospace manufacturing industry
• Component consolidation
• Low-cost country sourcing
• Request for quotations (RFQ)
• Supplier cost breakdown analysis
• Function cost analysis / Value analysis / Value engineering
• Design for manufacture / Design for assembly
• Reverse costing
• Cost driver analysis
• Activity-based costing (ABC), which assigns a cost of each activity undertaken in the production and delivery of each product and service according to the actual consumption by each activity including a share of overheads. Peter Turney in a 1989 article examines the role of ABC in the achievement of manufacturing excellence and the product cost information needed by managers working towards this goal.
• Product benchmarking
• Competitor benchmarking
• Design to cost
• Design workshops with suppliers
• Half cost strategies: ambitious strategies which aim to reduce the costs of specific production processes or value adding stages to 1/N of the previous cost.