Product Cost Analysis

Pavan Kumar VijayPresident, the ICSI

The Key Developments Effecting Costing Decisions

Technological Advances Globalisation – WTO and Free Economies Changing Focus from Production to Customer

– Going back to Mahatma Gandhi School of Thought

Changing Organisational Structures Social, Political and Cultural Changes Corporate Governance and Rethinking Ethics

Corporate Governance and Ethics

Creditability and Trust lead to Customer Loyalty - People prefer trusted products and companies

Transparency in Costing - leading to development of industry best practices

The Cost of Capital is lowest for well governed companies (Mckinsey Survey)

Wealth Sharing leads to growing society - thus increasing market demand and economy of scales

Reduction is Wastage saves costs as well as Natural Resources

Strategic Costing Decisions

SWOT Analysis Identifying Critical Success Factors Value Chain Analysis Cost of Adhering and Not Adhering Ethics Use of Appropriate Tool to Analyse Costs Assumptions to be made in Product Costing

Developments in Cost Analysis

QCT Based Decisions – Quality, Cost and Time Life Cycle Costing – Analyse the costs of activities

that occur over the life cycle of the product Target Costing than Cost Plus Costing – Target

Costing is the product cost that must be achieved for a product to be viable in the long term

Activity Based Costing/ Management - analysing activities, cost drivers and performance so that customer value and profitability are improved

Developments in Cost Analysis… Contd.

Value Engineering –an organized approach to the identification and elimination of unnecessary cost

Business Process Reengineering – Fundamental rethinking and redesign of critical processes

Increasing Importance to Quality Costs – – Prevention Costs– Quality Control Costs– Cost of Poor Quality

Risk Management and Pricing

The Costing Strategy

No single method is used in ISOLATION to analyse costs

There is always possibility to reduce costs and add value, so continue research

Involve employees at all levels in generating more ideas to reduce cost

Knowledge Management is key to reducing costs Ethics pay in long run so be transparent and

accountable

The Role of Professionals - CS, CWA and CA

Company Secretaries

• Corporate Governance

• Corporate and Securities Laws

• Secretarial Audit

Cost Accountants

• Cost Management

• Cost Accounting

• Cost Audit

Chartered Accountants

• Financial Management and Accounts

• Taxation Laws

• Financial Audit

isThe Company Secretary

For Strong Corporate Citizenry

Company Secretary is Vital Link

CS

BOARDMEMBERSSOCIETY

LENDERSREGULATOR

EMPLOYEESINDUSTRY

SUPPLIERSGOVTCUSTOMERS

Company Secretary at Centre Stage

Company Secretary

CORPORATE COMMUNICATION STRATEGY

SECRETARIALAND LEGAL

FINANCIAL

HRMINFORMATION TECHNOLOGYMARKETING

R&D AND PRODUCTION

Company Secretaries and Product Cost Analysis

Company Secretaries specialise in corporate governance, legal and ethical dimension of Product Costing

Company Secretaries advice Board on Strategic Costing Decisions due of multi-disciplinary Knowledge

Being Secretary to the Board and Audit Committee company Secretary consolidates all information and takes necessary approvals

Company Secretaries have access to confidential information that may be critical for Product Costing

The Future Ahead

Survival of the Fittest is punch line The WTO – Opportunities and Challenges Ahead Customer is more educated and demanding than

ever No Compromise on Quality and Ethics Shift from ‘Divide and Rule’ to ‘Unite and Rule’ Tough time ahead for Small Consulting Firms of

CSs, CWAs, CAs and Lawyers – few takers for their limited expertise

Globalisation of

Professional Services

Beyond Borders

Bor

ders

YEAR 2005

Opening of the Services Sector

Under WTO

Pessimism

Threat of Invasion of Service Sector by

145 Member Countries of WTO in India

Threat Threat

Thr

eat

Threat

Optimism

Opportunity to Invade Service Sector of

145 Member Countries of WTO by India

OpportunitiesOpportunities

Opp

ortu

nitie

s

Opportunities

YEAR 2015

We will see

Global Business Law (GBL)

Global Corporate Governance Standards (GCGS)

Global Accounting Standards (GAS)

Freedom from Economic Boundaries

Global Cost Accounting Standards (GCAS)

Global Benefits

Access to Global Markets Access to Global Suppliers Access to Global Financial Resources Access to Global Manpower Access to Global Best Practices Access to Global Research

Global Challenges

Quality of Service with Time Commitment International Operational Infrastructure High degree of competition among professionals Enhanced responsibility towards international

community International language and cross-cultural issues Key Relationships in Foreign Countries

Coming Together is Beginning

Meeting Together is Progress

and

Working Together is Success

Henry Ford

Success can be achieved globally by synergising on core competencies i.e

BrandKnowledge

InfrastructureCapital

Think C-Commerce i.e Collaborative Commerce

How about CS, CA, CWA, Lawyers, MBA and IT professionals coming together to create

multinational mega firms?

CorporateLaws

EconomicLaws

TaxationLaws

WTO & IPR

InternationalTrade Law

IT & BPOManagementConsulting

Quality of

Service

Finance and Accounting

Commerce

BrandSynergy

InfrastructureSynergy

CapitalSynergy

Collaborative Consulting Model

SingleWindowInterface

KnowledgeSynergy

GlobalPresence

Growing Revenues

Growing Customers

Growing Nations

CS + CA + CWA + LLB +

IT + MBA

Multinational Mega Firms

Global Reach of Professionals Wider Area of Expertise Active Networking and Public Relations Global Infrastructure Sharing Best Practices/ Expertise in Management of Firm

Speed of Service Delivery

Quality of Service

Make Global Brands

Effective Customer Relationship

Global Presence

Big Size of Firm

Ethics

Let Us Come Together

to

Grow Together

THANK YOU