Drivers of costs Under the conventional approach, managers control costs by bringing them
into line with some predetermined goal, such as budgeted or standard costs. The focus is
on cost results or outcomes. Cost management reduces costs by identifying wasted
resources and eliminating this waste through identifying the factors that really drive costs.
Strategic perspective The primary focus of conventional approaches is on controlling
costs within the organisation, an internal perspective. Contemporary cost management
is also concerned with achieving value for the customer, a strategic perspective.
Process perspective Conventional systems control costs by reporting results for
responsibility centres based on functional areas of the business, such as production,
marketing and administration. Contemporary cost management recognises that
customers’ needs are met by processes, which flow across the business and may cross
functional areas.