ACC4028W - B.Com (Honours) In Strategic Cost Management

Introduction

The developments within the global environment have ushered in a turbulent business environment that presents many challenges to the entire business landscape. From the private sector perspective, the fast-paced global market has seen many players coming in due to (i) the opening up of hitherto closed economies, (ii) the development and introduction of new & revolutionary technologies and (iii) information exchange capabilities coupled with the advent of E-commerce beyond national and regional boundaries. Invariably consumers have a wide range of reasonably priced goods and services from which to choose; hence they are not confined to a few suppliers. Consequently, the customer-is-king market paradigm has ushered in an era that is characterised by decreased customer loyalty, ever-changing quality and customer service requirements, shorter product life cycles, mass product customisation, and fast-paced technological innovations.

The survival of companies hinges on creating value for the end-use customer in this consumer-centred market where flexibility, speed and productivity are the battle commands. Creating sustainable competitive advantage in this global village requires, among other things, a lower cost structure compared to competitors. Achieving sustained profitability in this cut-throat environment through improved top-line growth is becoming increasingly difficult due to global competition. The proactive management of costs is now regarded as conferring sustained competitive advantage due to the ability of a company to weather the pressures arising from dwindling margins. The trend towards greater product variety means that companies have to be able to create new designs quickly at lower cost, shifting production from one product to another without wasting time and/or resources. Managers require cost management knowledge that helps them to understand why, when and how cost information is used in developing strategies that set their companies apart from competitors. Thus cost management has never been more important for the survival of companies.

In addition to the above, there has also been a shift to value based management and maximising shareholder wealth. This means that companies are driven to increase margins by reducing costs. Although there is market dominance by a few companies in certain sectors, like the banking sector, there are significant pressures to increase returns on assets, margins and thereby increase shareholder value. This means that shareholder activism and remuneration structures linked to share price performance is having a significant effect on management’s focus on the reduction of cost structures and achievement of best practice. Managerial accounting, via cost management techniques and practices, has become a critical tool that supports the achievement of value-based management and the maximisation of shareholder value.

The challenges presented by the global environment are not only confined to the private sector; they have permeated every structure of the public sector as well. Governments all over the world have been faced with the dual problem of providing a myriad of services which are seen as public goods at the lowest cost possible. The challenge here is balancing the constitutional rights of citizens to access goods and services such as justice, shelter and water, while at the same time minimising cost. The dichotomy involved in this challenge has led to numerous public sector reforms in various parts of the world, including South Africa. These reforms, which have resulted in the restructuring of government ministries as well as public utilities such as parastatals, entail among other things, the following:

• New forms of institutions (such as commercialised parastatals)
• New frameworks of accountability (performance management systems that support a commercial view of operations)
• New management systems and processes, i.e. a shift from emphasis on administration of services to the management of services
• New accounting practices and procedures, i.e. a shift from the traditional stewardship role to cost management

The shift in management systems and accounting practices and procedures within the public sector highlights the notion of “value-for-money”, which is supported by techniques of performance measurement, budgeting and cost management. Thus managers/executives in the public sector also require cost management knowledge that assists in streamlining their operations to provide services to the public in a cost effective way.

From the background given above, it is clear that the role of cost management (and cost management specialist) has never been more important to both the private and public sectors. The current global competitive environment requires a cost information system that assists with the management of the future; a requirement that has led to the development of cost management. In this context, cost management involves the proactive management of costs by influencing cost structures and cost behaviour. This process entails the assessment, planning, controlling and evaluation of intra-company and inter-company costs along a product/service value chain. Cost management specialists are now seen as members of the executive team charged with charting the course of an organisation, and supporting its survival in the long run in this customer-centred global environment. The programme, as detailed below, is aimed at equipping managers with specific skills that will enable them to (i) generate relevant information that encapsulates the scope and nature of cost management, and (ii) deploy cost management strategies that confer sustainable corporate competitive advantage in a customer-centric organisation.

Programme Scope

The programme will offer students the opportunity to graduate with an Honours degree, while at the same time enabling them to upgrade it to a Masters degree. For the purposes of graduating with an Honours degree, a student should pass the course work (ACC4028W - assignment, tests and exam) and then write and pass a Technical Report (ACC4027F). Only students with an average of 65% in their overall course marks (ACC4028W) are invited to upgrade to a Masters degree. The Masters degree will involve writing a thesis that is based on empirical study. The codes for the Masters degree are ACC5026W for the course work and ACC5027W for the thesis component. The Masters degree will involve further research methodology lectures and workshops. Students who pass the Honours with at least 65% are exempted from ACC5026W.