The key role of customer relations in knowledge-intensive firms clearly highlights the need to control the trade-off between generating customer value - which often means offering greater quality and customization - and guaranteeing company profitability. Referring to the most common features of knowledge-intensive firms offerings (Hutt and Speh, 2004), the need to reconcile customization strategies with the containment of costs presents knowledge-intensive (K-I) firms with particularly complex issues because of a lack of a common basis – the physical product – to which costs and value drivers can be referred (Carù and Cugini, 1999). There has been a shift in perspective in strategic cost management, which explicitly addresses the issue of how to relate company costs to value-for-customer (McNair et al., 2001; McNair and Vangermeersch, 1998; McNair, 1994; Shank and Govindarajan, 1993). Drawing from previous research on target cost management and product attribute costing (Ansari and Bell, 1997; Bromwich and Bhimani, 1994; Yoshikawa et al., 1993) the relationships between costs and value drivers are identified in the product’s attributes (McNair, 1994). Such an approach is a significant advance; nevertheless, this framework is only useful for physical products, as attributes are an intrinsic feature of tangible products but not of tertiary sector activities. The present paper contributes to this emerging research stream by analyzing two case studies to highlight the cost accounting methodological choices which can impede or facilitate the management of the cost-value relationship for the client. This study addresses these issues by focusing on the service components driving value-for-customer and establishes crucial nexuses between costs arising from service production and value delivery to a given customer. The paper is organized as follows: the next section discusses the most appropriate choice of cost measurement in K-I firms. The sections 3 and 4 focus on the application of both methodologies in two K-I firms to highlight that the application of activity-based costing is the only one able to allow the companies to have reliable information about the profitability of the various clients and of the services they provide. The following section of the paper discusses how activity-based costing can provide support to the measurement of costs incurred by the K-I company in providing the value perceived by the client and finally some evidences from the analysis and the conclusions.

Costing and Customers: a Challenge in Knowledge-Intensive Firms

CUGINI, ANTONELLA
2013-01-01

Abstract

The key role of customer relations in knowledge-intensive firms clearly highlights the need to control the trade-off between generating customer value - which often means offering greater quality and customization - and guaranteeing company profitability. Referring to the most common features of knowledge-intensive firms offerings (Hutt and Speh, 2004), the need to reconcile customization strategies with the containment of costs presents knowledge-intensive (K-I) firms with particularly complex issues because of a lack of a common basis – the physical product – to which costs and value drivers can be referred (Carù and Cugini, 1999). There has been a shift in perspective in strategic cost management, which explicitly addresses the issue of how to relate company costs to value-for-customer (McNair et al., 2001; McNair and Vangermeersch, 1998; McNair, 1994; Shank and Govindarajan, 1993). Drawing from previous research on target cost management and product attribute costing (Ansari and Bell, 1997; Bromwich and Bhimani, 1994; Yoshikawa et al., 1993) the relationships between costs and value drivers are identified in the product’s attributes (McNair, 1994). Such an approach is a significant advance; nevertheless, this framework is only useful for physical products, as attributes are an intrinsic feature of tangible products but not of tertiary sector activities. The present paper contributes to this emerging research stream by analyzing two case studies to highlight the cost accounting methodological choices which can impede or facilitate the management of the cost-value relationship for the client. This study addresses these issues by focusing on the service components driving value-for-customer and establishes crucial nexuses between costs arising from service production and value delivery to a given customer. The paper is organized as follows: the next section discusses the most appropriate choice of cost measurement in K-I firms. The sections 3 and 4 focus on the application of both methodologies in two K-I firms to highlight that the application of activity-based costing is the only one able to allow the companies to have reliable information about the profitability of the various clients and of the services they provide. The following section of the paper discusses how activity-based costing can provide support to the measurement of costs incurred by the K-I company in providing the value perceived by the client and finally some evidences from the analysis and the conclusions.
2013
9788192471358
Knowledge-Intensive Firms
activiy-based costing
customer profitability
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.14087/4958
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