This paper is a discussion on Activity-based costing (ABC), one of the costing methodologies used in business. The methodology essentially entails assigning a cost to the various activities of an organization, which range from planning and production to quality control, logistics, and distribution (Kaplan & Anderson, 2007). It also entails determining the amount of time required to perform the activities (Kaplan & Anderson, 2004). The cost and time are then used as a basis for determining the price of the organization’s products or services. If properly implemented, ABC can deliver significant benefits to an organization, especially with respect to business performance and competitive advantage (Cokins, 2001). Focusing on Amazon, this paper discusses the use of time-driven ABC in e-commerce activities. First, a brief background of the organization is provided. Next, attention is paid to how a time-driven ABC system can be implemented in the organization and the associated benefits on business performance. The paper then examines how the ABC system can create competitive advantage for the organization in the marketplace as well as the potential impact of the system on online services compared to services provided via traditional channels.
Amazon, an American multinational e-commerce and cloud computing firm, is the largest online retailer worldwide in terms of revenue and market capitalization. Operating out of its corporate headquarters in Seattle, Washington, the company has operations in several parts of the world including Canada, the UK, Germany, Netherlands, France, Italy, Australia, India, China, Brazil, and Mexico. The company serves tens of millions of customers, providing a broad variety of online services, including an internet marketplace, advertising, audio entertainment, educational programming, social cataloguing, as well as cloud computing. The online marketplace is the organization’s major revenue earner. The website provides an e-platform for buyers and sellers to meet. Amazon offers thousands of products that can be purchased from the website, ranging from books and audio content to consumer electronics, clothing, fashion accessories, furniture, toys, video games, and household items. Founded in 1994 as an online bookstore, Amazon has become the world’s largest player in the online retailing space. The company has extensively revolutionized the world of e-commerce.
Implementing ABC and Associated Benefits
Though the ABC method is traditionally used in the manufacturing industry, it can as well be used in the service sector (Stefano & Filho, 2013). By adopting the ABC system, Amazon can reap significant benefits. Nonetheless, this can only be achieved with proper implementation. In many cases, adopting ABC ends up being a disaster largely due to poor implementation. The first step in implementing ABC is to have a comprehensive understanding of the management of the system and their role throughout the entire process (Cokins, 2001). Without management commitment and understanding of the system, is quite unlikely that the undertaking will be fruitful and sustainable in the long-term.
It is important to conduct a pilot-run first, prior to rolling out the system in full (Kaplan & Anderson, 2007). Indeed, a pilot-run is often more important for large organizations. Amazon is a large organization, which makes piloting appropriate. The pilot-run may involve one of the departments or business units, especially the least profitable one. Though targeting the least profitable department appears risky, it may provide an opportunity to improve the department through ABC-oriented management. For Amazon, the customer support department can be used to test the system, for instance. The department is involved in, among other activities, processing and responding to customer complaints. A pilot run enables the organization to gain a better understanding of the system before full implementation, especially with respect to its successes and failures. For instance, success of the system in the customer support department or unit would mean that the rest of the organization could benefit from the system as well.
To implement the system, the management can create a team to supervise, coordinate, and oversee all related processes (Cokins, 2001). Having a team would be of significant advantage in terms of ensuring accountability. At times, however, it may be more helpful to hire an independent, external consultant with extensive experience in the area. An important role of the team or the consultant would be to identify and assess the activities that require revision so as to optimize costs and profit margins (Kaplan & Anderson, 2007). This entails selecting activities that need activity-based costing, identifying aspects of the activities that involve unnecessarily huge costs, and determining the activities fixed and variable costs. More fundamentally, the unit times associated with each activity must be determined (Kaplan & Anderson, 2004). Activity identification and evaluation is a particularly important step, as some activities may not appear to be costly superficially.
For Amazon, typical activities may include order processing, shipping, customer support, and addressing complaints. These activities involve costs such as personnel, information technology, and telecommunication costs. In addition, each of the activities involves a certain amount of time. For instance, addressing complaints may take up 40% of the time, and customer support 20% of the time. With the help of an ABC application, calculations are then done to provide a basis for management decisions. The decisions may involve eliminating some activities or optimizing costs, for instance.
If properly implemented, ABC can deliver significant benefits to the organization. ABC offers a different perspective of the costs an organization incurs in producing its products or services (Kaplan & Anderson, 2007). This can be a valuable way of optimizing profit margins. In an environment where business organizations are striving to work with tighter and leaner budgets, ABC can prove advantageous. The organization would do away with non-value adding and unnecessary activities, ultimately improving the bottom line. ABC also supports product/service and customer profitability analyses, continuous improvement, and other performance management processes (Kaplan & Anderson, 2004). It is, however, important to note that ABC is not a quick-fix. The organization must be more focused on the bigger picture as opposed to short-term gains if the intended outcomes are to be achieved (Kaplan & Anderson, 2007).
ABC can be a crucial source of competitive advantage for Amazon. First, ABC pays attention to cost drivers, unlike conventional costing, which focuses on labor hours and other volume drivers (Kaplan & Anderson, 2007). This gives the organization a better understanding of its costs. With a better understanding of cost drivers, the organization can make more effective pricing decisions, thereby driving customer value. Amazon operates in a stiffly competitive environment. The company competes with equally powerful players like eBay, Apple, Netflix, and Google. Further competition comes from retailers such as Walmart, Best Buy, Sears, and Target. By adopting the ABC system, Amazon can counter competitive rivalry. The company would be better placed to offer better prices, thereby attracting and retaining customers. In an environment with multiple players, the importance of competitive pricing cannot be overemphasized. While still keen on quality and value for money, customers desire affordable prices. ABC provides a valuable way through which such a balance can be achieved.
Competitive pricing would in turn have a positive impact on business performance (Cokins, 2001). The organization would be better placed to not only attract and retain customers, but also expand market share, improve revenue performance, and increase profitability. These are crucial performance indicators for any business organization. With the immense competition Amazon faces, which may be even greater in the future, ABC may be important for enhancing the organization’s position in the marketplace.
Impact on Online and Traditional Retailing
Time-driven ABC can significantly affect management decisions regarding channels for service delivery. Traditionally, services are delivered via brick and mortar locations. With technological advancements, however, services can now be delivered online (Kaplan & Anderson, 2007). Amazon has been a leader in this regard, offering an online marketplace where buyers can purchase products at the click of a button obviating the issues of time and location. This offers the clients a great deal of convenience and flexibility in shopping. It offers even greater advantages from a cost perspective. An online store minimizes the substantial costs of operating a physical store. In recent times, however, Amazon has been opening physical bookstores, with a view to disrupting the conventional retail experience. This could somewhat be seen as a retrogressive move at a time when online retailing has been termed as the future of retailing. Nonetheless, with knowledge of ABC, the company can set-up brick and mortar stores in a more cost-effective manner. The company can optimize the related activities more effectively and costs to deliver services at even more competitive price.
Overall, ABC is a valuable way through which an organization can improve business performance and competitive advantage in the marketplace. By optimizing costs and eliminating activities that do not add value to the customer, an organization can deliver more competitive prices. This has immense potential to expand customer base, enhance customer retention, increase profit margins, and improve the bottom line. Adopting the ABC system may, therefore, be beneficial for Amazon given the intense rivalry the company faces. With the system, the company can enhance its position in the marketplace by delivering more competitive prices. Nonetheless, discretion must be exercised in the implementation of the system, with due diligence on management commitment and gradual implementation.
Cokins, G. (2001). Activity-based cost management: an executive’s guide. Hoboken: John Wiley & Sons.
Kaplan, R., & Anderson, S. (2004). Time-driven activity-based costing. Harvard Business Review, November Issue.
Kaplan, R., & Anderson, S. (2007). Time-driven activity-based costing: a simpler guide and more powerful guide to higher profits. Boston: Harvard Business School Publishing.
Stefano, N., & Filho, N. (2013). Activity-based costing in services: literature bibliometric review. Springer Plus, 2, 80.
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
There is a very low likelihood that you won’t like the paper.
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY!!!
We provide professional writing services to help you score straight A’s by submitting custom written assignments that mirror your guidelines.
Get result-oriented writing and never worry about grades anymore. We follow the highest quality standards to make sure that you get perfect assignments.
Our writers have experience in dealing with papers of every educational level. You can surely rely on the expertise of our qualified professionals.
Your deadline is our threshold for success and we take it very seriously. We make sure you receive your papers before your predefined time.
Someone from our customer support team is always here to respond to your questions. So, hit us up if you have got any ambiguity or concern.
Sit back and relax while we help you out with writing your papers. We have an ultimate policy for keeping your personal and order-related details a secret.
We assure you that your document will be thoroughly checked for plagiarism and grammatical errors as we use highly authentic and licit sources.
Still reluctant about placing an order? Our 100% Moneyback Guarantee backs you up on rare occasions where you aren’t satisfied with the writing.
You don’t have to wait for an update for hours; you can track the progress of your order any time you want. We share the status after each step.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.
From brainstorming your paper's outline to perfecting its grammar, we perform every step carefully to make your paper worthy of A grade.
Hire your preferred writer anytime. Simply specify if you want your preferred expert to write your paper and we’ll make that happen.
Get an elaborate and authentic grammar check report with your work to have the grammar goodness sealed in your document.
You can purchase this feature if you want our writers to sum up your paper in the form of a concise and well-articulated summary.
You don’t have to worry about plagiarism anymore. Get a plagiarism report to certify the uniqueness of your work.
Join us for the best experience while seeking writing assistance in your college life. A good grade is all you need to boost up your academic excellence and we are all about it.
We create perfect papers according to the guidelines.
We seamlessly edit out errors from your papers.
We thoroughly read your final draft to identify errors.
Work with ultimate peace of mind because we ensure that your academic work is our responsibility and your grades are a top concern for us!
Dedication. Quality. Commitment. Punctuality
Here is what we have achieved so far. These numbers are evidence that we go the extra mile to make your college journey successful.
We have the most intuitive and minimalistic process so that you can easily place an order. Just follow a few steps to unlock success.
We understand your guidelines first before delivering any writing service. You can discuss your writing needs and we will have them evaluated by our dedicated team.
We write your papers in a standardized way. We complete your work in such a way that it turns out to be a perfect description of your guidelines.
We promise you excellent grades and academic excellence that you always longed for. Our writers stay in touch with you via email.