Page 14 - Cost_Competitiveness
P. 14
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The Institute of Cost Accountants of India
R = Resources, tional Level Strategy (FLS). These were de-
and S = Individual skill. rived from tactical and research and de-
velopment centric strategies. Concept of
The basic principle is that additional unit ‘Weathering the Storm’ and ‘Fit for Future’
of the variable input should be employed was fully used to put the thoughts into ac-
only when marginal revenue product tion. Under CLS, focus was on growth, sta-
(MRP) of the last unit is equal to the cost bility and lean management.
of the input employed. MRP is defned as
marginal revenue times marginal prod- Under BLS, attention was on cost and
uct and represents the value of the extra product restructuring. Under FLS, thrust
unit of inputs. was on marketing, capital structure, fund
fow, R & D, innovation and process re-
Considering capital stock and labour as structuring. The major actions taken by
inputs, labour shall be employed when TSL are as follows:
MRPL = w (wage rate) and capital would
be employed until MRPK = r (cost of cap- Corporate Level Strategic Actions
ital). As one knows, marginal revenue
product can be written as the change in ► Increasing production capacity
total revenue per one unit change in the and focusing on performance improve-
rate of input. ment.
► Maintaining direct and unambig-
For infnitesimally small changes in the la- ous communications with the employ-
bour and/or capital input, marginal rev- ees to motivate them.
enue product is the frst derivative of the
total revenue function with respect to ► Payroll-related cost cutting through
that input. Expanding this concept, one elimination of overtime, altering shift pat-
can say that competitiveness requires terns and implementing work agree-
ments for reducing man-hours and
that isoquant function be tangent to the reducing use of third-party services.
iso-cost function and conditions for proft
maximization are MPL/w = MPK/r. There- ► Instituting skill development pro-
fore, a frm can maximize proft only when grammes for the workforce with
it operates effciently which demands payroll support of respective state
cost competitiveness. government.
► Implementing ‘Fit for Future’ ini-
tiatives by divestment, asset restruc-
Strategic Measures Adopted turing and regular overhead
by TSL to Achieve Cost review.
Competitiveness ► Downsizing manpower strength
with cooperative attitude by educat-
ing about 3500 less effcient persons who
TSL adopted three levels of strategy, opted for early separation with smiling
namely, Corporate Level Strategy (CLS), face.
Business Level Strategy (BLS) and Func-
www.icmai.
The Institute of Cost Accountants of India
R = Resources, tional Level Strategy (FLS). These were de-
and S = Individual skill. rived from tactical and research and de-
velopment centric strategies. Concept of
The basic principle is that additional unit ‘Weathering the Storm’ and ‘Fit for Future’
of the variable input should be employed was fully used to put the thoughts into ac-
only when marginal revenue product tion. Under CLS, focus was on growth, sta-
(MRP) of the last unit is equal to the cost bility and lean management.
of the input employed. MRP is defned as
marginal revenue times marginal prod- Under BLS, attention was on cost and
uct and represents the value of the extra product restructuring. Under FLS, thrust
unit of inputs. was on marketing, capital structure, fund
fow, R & D, innovation and process re-
Considering capital stock and labour as structuring. The major actions taken by
inputs, labour shall be employed when TSL are as follows:
MRPL = w (wage rate) and capital would
be employed until MRPK = r (cost of cap- Corporate Level Strategic Actions
ital). As one knows, marginal revenue
product can be written as the change in ► Increasing production capacity
total revenue per one unit change in the and focusing on performance improve-
rate of input. ment.
► Maintaining direct and unambig-
For infnitesimally small changes in the la- ous communications with the employ-
bour and/or capital input, marginal rev- ees to motivate them.
enue product is the frst derivative of the
total revenue function with respect to ► Payroll-related cost cutting through
that input. Expanding this concept, one elimination of overtime, altering shift pat-
can say that competitiveness requires terns and implementing work agree-
ments for reducing man-hours and
that isoquant function be tangent to the reducing use of third-party services.
iso-cost function and conditions for proft
maximization are MPL/w = MPK/r. There- ► Instituting skill development pro-
fore, a frm can maximize proft only when grammes for the workforce with
it operates effciently which demands payroll support of respective state
cost competitiveness. government.
► Implementing ‘Fit for Future’ ini-
tiatives by divestment, asset restruc-
Strategic Measures Adopted turing and regular overhead
by TSL to Achieve Cost review.
Competitiveness ► Downsizing manpower strength
with cooperative attitude by educat-
ing about 3500 less effcient persons who
TSL adopted three levels of strategy, opted for early separation with smiling
namely, Corporate Level Strategy (CLS), face.
Business Level Strategy (BLS) and Func-
www.icmai.
