BSc as an Effective Tool for Cost Control Performance

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Customers always pay attention to prices, and that is why every company must optimize its production costs in order to offer customers high quality products at competitive prices. Balanced Scorecard is one of the tools that can be used for cost control performance. Check additional information about cost control performance.

One can hardly find a market without a tough competition. Post crisis economy is characterized by severe competition as customers are unwilling to buy, and companies have to persuade them to make a purchase. What are the best persuasion methods? These are high quality products/services, advertising, and of course, product cost. By setting prices for products and services companies enter relevant market niches. We all know that there are low cost products and elite products/services that are particularly expensive. In order to maintain competitive advantage and even improve it, every company should control cost performance. Both internal and external factors influence cost formation. For instance, even if company spends $100 to produce one unit it cannot sell it for $200 as its competitors offer the same product with the same characteristics for $150. This means that competitors manage to develop such production and business processes that make it possible to offer lower prices without suffering losses. Cost control is a must for any company that faces tough competition. Evaluation of cost formation policy can be performed as one of the elements of Balanced Scorecard implementation in the company.

Product cost should be suitable both for customers and producers. Customers are naturally willing to buy products at low cost, while the ultimate goal of every producer is to make as much profit as possible. The golden mean should be found here, and Balanced Scorecard will certainly help. Analysis of competitors as well as internal business processes will offer valuable information on how to offer customers high quality products at competitive prices.

The four categories of Balanced Scorecard cover critical success factors both internal and external environment: financial, customer, internal business processes, learning and growth. Each category consists of key performance indicators that measure company success to implementation of strategic goals. In terms of cost control, optimization of product costs can be one of such goals. The company may set the goal of lowering product cost hoping to sell more units, or just to the contrary it may increase the price but offer explanations on what customers would get by paying a higher price. For example, a satisfied customer will be eager to overpay for a new product if he or she is loyal to the producer. Just to the contrary, a customer who has never purchased products from a particular company may make the first purchase because of a low price.

It is not a secret that in order to decrease price of a new product the company should optimize internal processes in order to decrease production costs, advertising expenses etc. That's why, key performance indicators in internal business processes, such as production life cycle, directly influence production costs and product's final price. For example if the car is being produced for three months, it is likely to have a higher price as compared to the car, the production cycle of which is two months.

Balanced Scorecard does not only help control costs but also implement adopted strategy and strategic goals. Measures and indicators can be amended in course of evaluation to achieve optimal results.

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