Achieving Cost Competitiveness Through the Cost Transformation Model

          As more companies struggle with global competition and a faltering economy, they can now benefit from a cost transformation model that is designed to help them to achieve and maintain cost competitiveness.

          The model serves as a practical and logical planning and control framework for transforming and managing a business' cost-competitiveness. It consists of a set of six co-dependent areas that, once viewed together as a set, will help organisations achieve and maintain long term cost-competitiveness.

          The six areas are:

          - Engendering a cost-conscious culture
          For the effective execution of a cost-transformation and management strategy, people need both to be aligned to the organisation's purpose and to respond in ways that keep the organisation agile in the face of destabilising influences.

          - Managing the risks inherent in driving cost competitiveness
          While businesses will invariably face risks that are unique to their market or organisation, certain risks to cost competitiveness may be more prevalent.

          - Connecting products with profitability
          Whatever the type of business, the value its products generate for its customers must be analysed and understood. If the targeted customers of a commercial business do not value its products, they will either pay a lower price or transfer their custom elsewhere.

          - Generating maximum value through new products
          New products should be designed to be flexible enough to allow the addition or elimination of features to suit as many markets as possible without sacrificing margin.

          - Incorporating sustainability to optimise profits
          Adopting sustainable approaches throughout the business model (in research and development, manufacturing, packaging, logistics and marketing for example) helps to optimise the use of resources across the value chain.

          - Understanding cost drivers: Cost accounting systems and processes
          The right information is vital to driving and holding costs down while preserving or enhancing customer value on an ongoing basis.

          The cost transformation model also includes three case studies that covers the electronics, property development and steel packaging industries. The model was developed by the Chartered Institute of Management (CIMA) and the American Institute of CPAs (AICPA) and it is available at www.cgma.org