Strategic cost analysis: What you can learn in the UAB online MBA

View all blog posts under Articles

Students pursuing a Master of Business Administration degree recognize the many competencies required of managers and leaders in a professional setting. Financial analysis abilities are among the most important skills online MBA degree program graduates learn. A company’s operations depend on sound financial decision-making. Leaders should have a clear understanding of costs, benefits, and the relationship between those concepts, which means strategic cost analysis is a foundational strength for MBA graduates.

With a firm understanding of the concepts of strategic cost analysis, graduates of online MBA degree programs can more accurately predict the impacts of a possible decision, both positive and negative. This can help their team or department function to the best of its ability, which ultimately means improvements for the business as a whole.

That’s why the University of Alabama at Birmingham places so much emphasis on concepts like strategic cost management and cost-benefit analysis, including a class dedicated to helping students increase their knowledge of and ability to effectively utilize this broadly applicable process. Let’s review why strategic cost analysis is so vital for MBA graduates and what the Strategic Cost Analysis and Decision Making class has to offer.

MBA professionals analyzing cost

Why MBA students should have a strong understanding of strategic cost management

What is strategic cost analysis? Falling under the same umbrella as terms like cost-benefit analysis and strategic cost management, this process helps businesses gain a full understanding of how a specific decision can affect the organization in terms of finances. Strategic cost analysis covers both gains and losses, enumerating each one so all of the final components of the analysis are clearly displayed. That can include assigning a cost or benefit to an aspect of the decision that may not have a direct financial impact. Examples include a change like the implementation of a new project management system resulting in boosts to employee morale and productivity. Negative developments that may drain time from staff members’ schedules are also possible, like the need to participate in more meetings or site visits.

The opportunity cost of taking one course of action as opposed to another is also commonly seen in strategic cost analysis as a way to ensure all factors and consequences of a decision are covered. No major or even routine business decision should be looked at without factoring in the impacts it has on other areas of operation, and including opportunity cost helps place the topic more firmly in the context of the company’s complete operational scheme.

For example, a decision to improve equipment on the production line used to make a specific type of merchandise obviously includes cost related to the new machinery and possibly training staff on its use and increased needs for upkeep and maintenance. However, the investment into this project means another idea may be left unfunded. Including the potential benefits and drawbacks of choosing one over the other in a cost-benefit analysis allows everyone involved to develop a complete understanding of the project itself as well as its impact on other options currently available to the organization. The result is a decision made from the most informed position possible.

Strategic cost management and cost-benefit analysis allow for a reduction of a complicated business decision into a binary choice — something that ultimately needs a yes or no answer — while still retaining all of the granular information needed to effectively inform that decision.

Of course, a cost-benefit analysis isn’t the uncompromising end for a given project or plan. Following through on the analysis, whether informally for your own consideration or collected and shared with a group of stakeholders and decision-makers, can help identify areas where costs are too great and need to be reined in before the effort can begin. Those with a strong understanding of cost-benefit analysis may also identify potential benefits following some changes to the current plan, such as implementing a system that’s already familiar to some employees instead of using a totally new vendor and platform that requires more significant, time-consuming training for staff.

What students can learn in the Strategic Cost Analysis and Decision Making course

The Strategic Cost Analysis and Decision Making course aims to help students develop cost-benefit analysis skills. Students take Strategic Cost Analysis and Decision Making as part of the functional core of the online MBA degree program, which offers learners some of the most important information and perspectives needed to succeed following graduation.

Drawing on the financial principles developed in the Accounting and Finance for Managers course, students learn how to effectively determine and use cost data for a variety of related but distinct applications, from decision-making and control to evaluation of performance and formulation of future goals and budgets. The strategic context of managerial decision-making is emphasized, helping students learn how to take current circumstances and many other factors into account as they make decisions. This approach also aids learners as they develop the ability to recognize circumstances that can lead to vastly disparate outcomes in different situations — even when they appear similar on the surface.

Developing critical skills with UAB’s online MBA degree program

If you’re considering pursuing an MBA degree, make sure you pick a program that helps you develop a variety of critical skills that employers expect in graduates. UAB offers a well-rounded program that emphasizes cost-benefit analysis and many other abilities used regularly by MBA graduates in many different roles. To learn more about UAB’s MBA online degree program, get in touch with an advisor today.

Recommended Readings:
What online MBA students can learn about quantitative business analysis
Top 5 Industries for MBA graduates

Sources:
UAB Collat School of Business: Course Descriptions MBA
The Economist: Cost-Benefit Analysis
Investopedia: Cost-Benefit Analysis
Investopedia: Opportunity Cost