1.4 Cost concept
This is an accounting philosophy that “the costs will occur’’ so they should be measured correctly. The costs result from the management’s decisions. Thus, the companies should focus on the cost management to reach long-term competitive advantages. Cost decrease can result from decreasing production capacity or improving efficiency; but, if it results from decreasing production capacity, the company will be out of the competition market. Thus, cost management is definitely a competitive advantage. The focus area for reducing costs includes (Pillai 2002):
1.Financial management
2.Reducing material costs
3.Managing energy costs
4.Improvement process
5.Inventory management