SVKMs (NMIMS) School of Business Management Strategic Cost Management MBA (Trim IV) Faculty: Dr. S.

Maheshwari & Dr. Debashish Sanyal (email for Dr. Maheshwari:drmnmims@hotmail.com)

Performance Credit: 1.0 Course Overview : Strategic Cost Management is concerned with how a manager should use accounting information within his or her organization. Managers need information to perform three essential functions in an organization: (1) planning operations, (2) controlling activities, and (3) making decisions. The purpose of this class is to show what information is needed with an organization, where this information can be obtained, and how this information can be used by managers to plan, control, and make decisions. It should be emphasized that there is no perfect (cost) accounting system that addresses all the needs of managers. The course will present the trade-offs between designing systems for reporting, decision-making, control and performance evaluation. The emphasis will be on how to use an internal accounting system for decision making and control. COURSE OBJECTIVES: Strategic Cost Management focuses on how managers use their organizations accounting systems to assist them in making decisions and how these systems are used to control and motivate the actions of members of the firm. This course is oriented towards training managers in how to utilize an internal accounting system, not towards training accountants in the design and operations of an internal accounting system. Therefore, one of the major objectives of this course is to demonstrate how managers use accounting information for decision making. The concept for this course is to tie cost analysis more closely to the rich field of strategic analysis and management control. The course will help student to: 1 Look in a new way to manage the old familiar problems and issues like profitability, make/buy or new product introduction. 2 Study in detail the new concepts -Value Chain Analysis -Activity Based Management -Strategic Cost Drivers -Target Costing 3 to help manage business more effectively 4 Learn to design and use measurement and incentive systems for operational efficiency and strategy implementation and for developing a sound management control system in line with corporate strategy.

Career Focus: This course provides skills and knowledge, which are highly relevant for managers and consultants. Almost all organizations are in the business of augmenting productivity, taking initiative for controlling cost, planning and budgeting, setting transfer prices and carrying out performance evaluation, taking decision regarding price, product mix, etc. Not all do it right and professionally in line with the corporate strategy. The designed course is applicable both for manufacturing and service organization. Students headed for career in corporate finance, consulting, health care, marketing, operation and planning should find the course extremely relevant. The course is also very useful for students having entrepreneurial inclination, who plan to run their own organization and business. Course Content The course is of twenty sessions (1 credit) and is organized broadly into modules. The first module of five sessions, deals with strategic cost management framework-how cost analysis help strategic analysis, identifying and implementation of chosen strategy, and in product/channel decision and in making strategic financial management decisions. The second module of three sessions deals with Managing the value chain. We learn tools and techniques like Reconfiguration of Value chain, Target Costing and also how to exploit the value chain to achieve a target cost. The third module of one session is devoted towards Economic Value Creation and helps not only to learn Life Cycle Costing concept, but also how to exploit it to create Economic Value to Customer. GRADING SCALE: Modules 1 & 2 Your final grade will be computed as a sum of total points received on all information festivals/cases/assignments/group projects/paper divided by the total possible points for the course. You must maintain a back-up copy of all the assignments/paper /assignments submitted by you or graded and returned by me. Grades can only be discussed in person. No late submissions will be accepted. In many cases the grading will be relative. Grades will not be discussed on e-mail or phone. The graded material for the course will consist of the following:

GRADING SCALE Contd.

Event Group Case Analysis Reports (at least Four Cases) Individual Assignment Report (Value added/Non-value added) Class Participation
Final Exam (Written) Total Points Available

% Points Distribution appx. 25 15 20 40 100

Class Structure Class sessions are designed to highlight key concepts, clarify areas of difficulty, and provide a general framework to address the subject matter. Required Text will be used as fundamental material and will be supported by Harvard Business Review Cases. Cases are used to simulate actual practical issues faced by practitioners while analyzing financial statements. I expect active class participation. Please do not use mobile devices during class. The most important requirements for this course are a thorough preparation and analysis of the assigned cases, reading material, and active participation in the classroom. During the course of this class, it is expected that in addition to FSA, you will also develop following softer skills. Independent and critical thinking. The real learning in a case comes from doing the case so do not be concerned or expect a lecture prior to analyzing a case study. My role as an instructor is to facilitate discussion in addition to lecture. I will push you to think on your own and will lecture only to clarify ambiguous areas and capture lessons learned. The primary burden of learning, however, is with you. Effective Communication Skills is one of the most important skills that is desired by the employers in addition to your technical knowledge. Case reports writing, case discussions, and individual and group assignments are designed to enhance your communication skills.

Teamwork and Leadership skills . Ability to work well in teams is another important skill desired by the employers in addition to your technical knowledge. I have created multiple opportunities for practicing teamwork and leadership skills.

PREREQUISITES: It is the students responsibility to be aware of and meet all prerequisites for NMIMS courses. By remaining in the course beyond the regular registration period, the student certifies that he/she has met all prerequisites. NOTE: A solid understanding of financial accounting concepts will prove highly beneficial and will make the requirements of the course less taxing (no pun intended). SPECIAL ACCOMODATION: If you are seeking special accommodation it is your responsibility to initiate the process for receiving accommodations based on the disability. If you have any questions please contact Dean Debashish Sanyal. ATTENDANCE POLICY: Class will be held on the days indicated. Attendance and participation are critical to the learning process. Your attendance will also help the team-learning process. Thanks for being in the class. Attendance norms as impacted in Student Resource Book will be followed and your grades will be imposed as per the stated norms. Thanks for being in the class. Your time is very important and you should make best use of your time. PLAGIARISM POLICY: Plagiarism is a serious act of academic dishonesty subject to the penalties including failure of a given assignment, failure of the course, and academic probation. Plagiarism consists of presenting the ideas, information, or written expression of another person without giving proper and due credit. Plagiarism includes failure to document the ideas, information, and wording of published sources. Plagiarism also pertains to presenting as one's own the ideas, information, and written expression of another person (e.g. friend, classmate, etc.) or other unpublished source. In simple words, it would be better for you not to submit me an assignment than trying to copy it from someone or somewhere, and submitting it to me. INDIVIDUAL ASSIGNMENT Identify a process in your company (OR any company) where you feel non-value added activities are taking place. Map the activities in a flow chart. Identify the non-value added activities and eliminate those activities. Re-write the new procedure using a flow chart. Prepare a report for managements attention and quantify the time and cost savings that will take place if your new procedure is adopted. Attach the old and new flow chart as attachment to your report to the management. Please make sure not to handwrite the assignment. GROUP/TEAM CASE ANALYSIS

Form teams of no more than 4 students. All teams will read and analyze the identified case. Each team will be asked to lead the case discussion for part of the class time. Please be prepared with your analysis and also the questions you would like to ask your colleagues. It is of utmost importance that you are prepared in advance. Team unable to lead a good discussion will be penalized in class participation. All teams will analyze the case. Each team will answer the questions related to the case before the class and submit a written report. I will provide a list of questions as well so that the discussions can be focused towards specific issues. Group Norms: For any group activity or case every member is responsible. You are more than welcome to change groups or majority may deselect a member from the group if the member is not a good fit with the group. Group must ensure that there is no free rider problem. Any and all problems related to group dynamics or slackers needs to be resolved by the group. Please do not approach with me with your group issues. Course Outline: Detailed and summary course outline has been provided in next few pages. Readings and cases have been identified so that you can prepare before the class. The outlines provided are tentative and are subject to change if deemed necessary by the instructor(s). Detail Course outline (Modules 1 and 2; Instructor: Dr. Suneel Maheshwari) Module One Strategic Cost Management (SCM) framework Total Number of Session 4 Learning Objectives To understand the difference between Conventional and Strategic Analysis To see how cost and financial analysis help in Identifying and implementing of strategy. Readings An introduction to Strategic Cost management, Strategic Cost Management (Shank and Govindarajan), Free Press, 1993, Chapter 1 Contribution Margin Analyses: No Longer relevant/Strategic Cost Management: The new Paradigm (Kaplan, Robert S.), Reading & Issue in Cost Management, Ed. By James M. Reeve, pp. 21-31 Session 1 Understanding the SCM concept To use Strategic Cost Management for: Strategic Decision Making On road to better decision making Pricing, decision Product Mix decision CAPAX decision Sourcing Decision

Session 2 Case: Baldwin Bicycle Case Readings: Effective Long Term Cost Reduction: A Strategic Perspective, (Michael D. Shields and S. Mark Young), Reading & Issue in Cost Management, Ed. By James M. Reeve. Pp. 11-34 Explicit Attention to Strategic Positioning, Strategic Cost Management (Shank/Govindarajan), Free Press, 1993, Chapter 6 Pricing Opportunities And How to Exploit Them (Hermnann Simon), Sloan Management Review, Winter 1992, pp55-65 Session 3 Company Session 4 Case: Berkshire Threaded fasteners Case: Brunswick Plastics

Module Two Techniques to measure and enhance profitability Total Number of Session - 6 Learning Objectives To exploit ABC, ABM and SCM concept for: Product/channel decision Customer profitability analysis Readings : Measure Cost Right : Make the Right Decision, (Robin Cooper and Robert S. Kaplan), HBR Sept-Oct, 1988, pp 96-103 The Rise of Activity Based Costing- Part Four: What Do Activity-Based Cost System Look Like? (Robin Cooper) Reading & Issue in Cost Management, Ed. By James M. Reeve, pp.32-45 Sessions 5 & 6 and case discussion Case Understanding the concept and Literature Review Sloan Styles, Inc.

To use ABC along with Theory of Constrain for determining product mix and improving Profitability Readings: The Theory of Constraints Within a Cost Management Framework, (Jack M. Rohl), Reading & Issue in Cost Management, Ed. By James M. Reeve, pp. 356-366

Session 7 Understanding the concept and Literature Review Case Lehigh Steel case To use Time Driven Activity Based Costing to improve US Healthcare Industry Readings How to Solve the Cost Crisis in Healthcare, 2011 Session 8 Case: Sippican Corporation (A) and (B)

To see how ABC and ABM can be gainfully be used in Service industry Activity-Based Costing in Service Industries, (William Rotch), Reading & Issue in Cost Management, Ed. By James M. Reeve, pp.59-70 Using ABC To manage Customer, Mix and relationships, (Robert S. Kaplan) HBR April 1997;

Reading:

Session 9 Case Allied Office Product Life Cycle Costing and Economic Value to Customers Readings Note on Life Cycle Costing and the concept of Economic Value to the Customers (EVC)- Professor John Shank Sessions 10 Case: Exam DEC and Minicomputers Final Exam (Information Festival)

Module Three (Instructor: Dr. Debashis Sanyal) Managing Value Chain and Target Costing Total number of sessions 3 Learning Objectives To conceive the Value Chain Concept and to see its effective use in a SCM framework To know how gainfully one can use Value Chain Concept to construct target cost SCM for supply Chain Reconfiguration Readings: Strategic Cost Management and the Value Chain, (John K. Shank and Vijay Govindarajan), Journal of Cost management, (Winter 1992) Reading & Issues In Cost Management, Edited by James M. Reeve, 2000, pp 185. -203 Sessions 11 Case-Levis Personal Pair case (A) Sessions 12 Mavis Machine Shop Target Costing and New product development Reading : Target Costing and How to use It-(Michiharu Sakurai), Journal of Cost Management(Summer 1989), republished in Reading & Issue in Cost Management, Ed. By James M. Reeve, pp.383-398 Session 13 & 14 Understanding of the concept and literature review and Case Montclair Paper Mill case Module Four Aligning organization performance for Value Creation Total number of sessions 2 Learning Objectives Control as a Strategy Formulation Tool How do control Systems Influence Strategy? Readings: Management Control Systems, Robert N. Anthony and Vijay, Ninth Edition, Irwin McGraw-Hill Chapter 1to2 & 8 to 9 Session 15 Creating Corporate Advantage (David j. Collis and Cynthia A. Montgomery, HBR pp 71-83)

Management Control Systems, Robert N. Anthony and Vijay, Ninth Edition, Irwin McGraw-Hill Chapter 4 & 5 Case: Porcinis Pronto: Great Italian Cuisine without the wait

Module Five Implementing techniques for balancing profit, growth and control Total number of sessions 5 Learning Objectives To understand how to balance the tension between profit, growth and control To appreciate the importance of controlling innovation and entrepreneurial activity Know to Manage business and franchise risk Readings How Risky is your Company? (Robert Simons), May-June 1999, 85-94

Sessions 16 & 17ATH Technologies Case Differentiated Control for Differentiated Strategies Reading: Entering New Business: Selecting Strategies for Success (Robert and Berry), Solan Management Review.

Sessions 18 Kinkead Equipment, Ltd Case Sessions 19 & 20 Rob Parson at Morgan Stanley

TENTATIVE SUMMARY SCHEDULE FOR STRATEGIC COST MANAGEMENT Dr. Sunnel Maheshwari (SUBJECT TO CHANGE)
Date Topic Required Team Cases/ Problems

26/06/20 12 28/06/20 12 03/07/20 12 05/07/20 12 10/07/20 12 12/07/20 12

Introduction; Strategic Cost Management and Decision Making Application of conventional v. strategic cost analysis; Relevant Cost analysis

Form Groups Baldwin Bicycle Case Berkshire Threaded fasteners Company Brunswick Plastics

Decision Making Applications Effective Long Term Cost Reduction A Strategic Perspective Activity Based Costing and Management Product and Customer Profitability Applications using ABC

Sloan Styles, Inc.

Date

Topic

Required Team Cases/ Problems

17/07/20 12 19/07/20 12

ABC and Theory of Constraints Time Driven Activity Based Application and its Application for Customer Profitability

Lehigh Steel case Sippican Corpor ation Allied Office Product DEC and Minicomputers

(Not yet finalized) (Not yet finalized) (Not yet finalized)

ABC in Service Industry Life Cycle Costing and Economic Value to Customers Information Festival (Final Exam) Expect last class to be about two hours