Proactive Cost Management in a Modern Company

Abstract

Globalization, technological changes, intensive competition, fluctuating consumer demand, economic and political changes encourage company managers to act proactively, assume a bigger risk and choose suitable strategies. Unfortunately, insufficient cost management is a problem of most companies. A substantial part of cost in the companies is incurred “automatically”, i.e., due to inertia while conducting routine work which does not demand economic substantiation and create unnecessary cost for the company. A successful and proactive cost management could be a key to business success, and an effective cost management system in a company is directly and positively related with its competitive advantage. This research solves a research question of elimination of casual cost management decisions from the business model of the company and integrating it into proactive cost management which directly correlates with benefits created by changes of current principles and practices. The necessity of demand of proactive cost management was driven by two aspects: firstly, increasing competition and global financial crisis are increasingly signaling that effective cost management system is one of the most important management issues necessary to reach strategic organizational goals; secondly, the literature and practice more often identify cost management as a representation of incurred cost and less often with cost control and proactive management.