Role of Effective Cost Management in the Global Economy

Interdependence of Global Economy has posed several challenges. One of them is an acute and urgent challenge of Cost Management. Time has come when countries, and particularly developing countries, have shifted their focus from 'price' to 'cost'. We have several examples. China is a cost competitive nation. Korea is also is an excellent example of cost competitiveness. For India there is a need to become aware of this trend and take immediate steps to overcome this phenomenon. One of the reasons identified and discussed in this exploratory study is the use of traditional costing system in India. This has lead to erroneous decisions my several large and small companies that are trying to make their mark in the global landscape. This paper further discusses the role of effective cost management through the use of modern costing approaches like 'Value Chain Analysis' and 'Activity Based Costing'.These approaches have been adopted my large companies all across the globe but there remains a substantial gap in their use with companies in India. This paper brings-out their contribution in making strategic decisions and their effective implementation. This is a concept review paper which can be further extended to empirical data analysis based on information collected from manufacturing and service based companies in India.