Matviienko Roman, PhD (Economics), Associate Professor, Department of Economics and Business Technologies, National Aviation University, Kyiv, Ukraine

ORCID ID: 0000-0003-0477-4022
e-mail: fpkipa@gmail.com

Cost Management in the Contemporary Business Environment

Introduction. Understanding of cost behaviour is of great significance not only for cost management but also for managers to make strategic and tactical decisions across the entire spectrum of business operations, which would at last lead to overall business performance improvement. The increasingly competitive business environment has imposed the need that costs should be managed in a more sophisticated way than they were earlier. Throughout its history, cost management went through numerous models, tools, and techniques. The contemporary business environment imposes the need for strategic cost management, which is the application of cost management techniques so that they simultaneously improve the strategic position of a company and reduce costs. The increasing pressure of global competition, technological innovation, and changes in business processes have made cost management much more critical and more dynamic than ever before. The paper is going to stress the necessity of cost management and especially strategic cost management in contemporary business environment.

The purpose of the paper is to stress the necessity of strategic cost management in the contemporary business environment. The main research objectives are:
− to accentuate the need for cost management in order to improve efficiency;
− to accentuate the need for strategic cost management as a response to the contemporary business environment.

Results. In order to record and compare its cost efficiency with competitors, the companies make its production-cost chain. This chain identifies all activities starting from supply through production and into distribution and sales. Also, this chain identifies the costs of all these activities. The purpose is to identify costs, to compare the realized costs with the planned ones, and then to implement the corrective measures to remove deviations. This chain enables a company to get insight into the cost structure and to conclude what costs are more above the competitors and what are below, then to find out the causes of such situation and to identify the corrective measures in order to improve cost efficiency. In this case, it is possible to identify two techniques of cost management: target costing and kaizen costing. Target costing is applied in order to reduce costs in the design phase of a product, while kaizen costing is used at the production phase. When either of these techniques identifies the problem of costs, then individuals from companies in the production-cost chain can work together to resolve the problem.

Conclusions. The modem business environment imposes the need for finding and defining new concepts and tools to support strategic enterprise management. The aim of introducing new concepts is certainly raising the overall efficiency of a company. Current economic circumstances exert a significant pressure on corporations to, in order to improve efficiency, better manage costs. The success of a company is the result if developing and implementing effective strategies supported by methods and tools of management accounting. Cost management is a broad concept and focuses on reducing costs and continually improvement and change rather than on the cost content itself. Unlike the traditional systems of costs control that are routinely applied on continuous basis, cost management is applied on an ad hoc basis and when it is necessary to identify the opportunities to reduce costs.

Keywords: cost management, strategic cost management, contemporary business environment.

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