Activity-Based Management

Running head: RESEARCH PAPER

Brenda Thomas

LeTourneau University

Research Paper

In partial fulfillment of MBAC5213

Dr. Fred Carlson

August 26, 2012

Abstract

Activity-based management is a technique used by companies to identify and evaluate activities using activity-based costing and value analysis. Activity-based management focuses on managing activities to reduce costs and improve customer value. This paper focuses on the techniques and processes a company uses to remain competitive in the twenty-first century.

The History Behind ABC and ABM

In Peter B.B. Turney’s book Activity-Based Costing, the techniques of activity-based costing and activity-based management can be traced back over thirty years. These two approaches were being used in countries other than the United States in 1984. Different organizations and companies started executing these approaches after their systems were not effective. In 1987, articles started appearing in the Harvard Business Review and the Journal of Cost Management which changed the expectations of companies. These articles familiarized companies with accounting based costing. These concepts were beginning to be universally implemented within the business world. Large firms that had changed to ABC and ABM were encountering exceptional results over the past four years. Software was finally made available to assist with accounting based costing in 1990 (Turney 4).

It looked as though these techniques were going to flourish and develop. However, in the early to mid 90’s, the media changed the view of these. The information was proved to not always be accurate and people were given wrong information about different aspects of the system. In 2000, accounting based costing was becoming accepted again. This was due to the increase in technology. Companies were beginning to rely on the internet and cell phones. Most of the errors that had occurred previously were errors in overheard...