Using activity based costing in customer profitability strategies in a South African SME environment : a South African case study

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dc.contributor.advisorChivaka, Richarden_ZA
dc.contributor.authorPotgieter, Theodorus Danielen_ZA
dc.date.accessioned2014-10-31T18:01:30Z
dc.date.available2014-10-31T18:01:30Z
dc.date.issued2009en_ZA
dc.descriptionIncludes bibliographical references (leaves 67-71).en_ZA
dc.description.abstractSmall to medium scale enterprises (SMEs) face an ever increasing competitive and unforgiving business environment. Deregulation. increased global competition. the global economic downturn and the technical recession that South Africa has entered into (SACCI. May 2009). place increased pressure on their profit margins and ability to generate positive cash flow. These tough trading conditions are likely to continue for some time to come (De Klerk. 2009) and therefore companies need to respond appropriately to these challenges in order to survive (Sartorius et al. 2007). Survival is dependant on positive cash flow generated by profitable trading. Yet. many SMEs do not have effective strategies in place to maximise their customer profitability in order to enhance their cash flows. The challenge is therefore the development and adoption of practical customer profitability analysis tools for use by these SMEs. In this research an investigative single case study in a business to business setting based on detailed field work was performed. The study focussed on a typical South African SME trading with all the major retail groups in South Africa. The case study was performed via diachronic research into the use of Activity Based Costing (ABC) in customer profitability analysis (CPA). The objective of the study was to critically evaluate whether ABC is a practical tool for conducting customer profitability analysis in a South African SME environment. This was done by investigating what might motivate a SME to adopt ABC and determining the specific benefits likely to accrue to a SME following the implementation of ABC. The research has shown that the implementation of ABC made it possible to identify customers who. despite the fact that they generate a modest gross profit. are in fact unprofitable as a result of the overheads consumed by them. This insight shaped future marketing. pricing, sales and customer support strategies. More specifically, it assisted management to maximise income by identifying areas in the value chain to which resources should be channelled for maximum profit while still maximising customer satisfaction. This led to a substantial improvement in overall profitability. Owing, firstly, to increased gross profit following enhancements in the pricing policy and secondly, to increased sales volumes as a result of revised marketing strategies and new product launches. No significant additional costs were incurred in implementing ABC. A standard desktop computer and readily available accounting and spreadsheet software were used in the CPAs. No outside consultants were used since the champion of the project was knowledgeable in the application of ABC techniques This suggests that it is both practical and cost effective to implement ABC in a SME environment provided the necessary skills and infrastructure are available or can be outsourced. Although these findings are of a single case study and cannot be generalised, the combination of this empirical case study and the literature review findings presented in this study strongly suggest that Activity Based Costing is a practical tool for the formulation and measuring of outcomes of customer profitability strategies in a South African SME environment.en_ZA
dc.identifier.apacitationPotgieter, T. D. (2009). <i>Using activity based costing in customer profitability strategies in a South African SME environment : a South African case study</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,College of Accounting. Retrieved from http://hdl.handle.net/11427/9005en_ZA
dc.identifier.chicagocitationPotgieter, Theodorus Daniel. <i>"Using activity based costing in customer profitability strategies in a South African SME environment : a South African case study."</i> Thesis., University of Cape Town ,Faculty of Commerce ,College of Accounting, 2009. http://hdl.handle.net/11427/9005en_ZA
dc.identifier.citationPotgieter, T. 2009. Using activity based costing in customer profitability strategies in a South African SME environment : a South African case study. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Potgieter, Theodorus Daniel AB - Small to medium scale enterprises (SMEs) face an ever increasing competitive and unforgiving business environment. Deregulation. increased global competition. the global economic downturn and the technical recession that South Africa has entered into (SACCI. May 2009). place increased pressure on their profit margins and ability to generate positive cash flow. These tough trading conditions are likely to continue for some time to come (De Klerk. 2009) and therefore companies need to respond appropriately to these challenges in order to survive (Sartorius et al. 2007). Survival is dependant on positive cash flow generated by profitable trading. Yet. many SMEs do not have effective strategies in place to maximise their customer profitability in order to enhance their cash flows. The challenge is therefore the development and adoption of practical customer profitability analysis tools for use by these SMEs. In this research an investigative single case study in a business to business setting based on detailed field work was performed. The study focussed on a typical South African SME trading with all the major retail groups in South Africa. The case study was performed via diachronic research into the use of Activity Based Costing (ABC) in customer profitability analysis (CPA). The objective of the study was to critically evaluate whether ABC is a practical tool for conducting customer profitability analysis in a South African SME environment. This was done by investigating what might motivate a SME to adopt ABC and determining the specific benefits likely to accrue to a SME following the implementation of ABC. The research has shown that the implementation of ABC made it possible to identify customers who. despite the fact that they generate a modest gross profit. are in fact unprofitable as a result of the overheads consumed by them. This insight shaped future marketing. pricing, sales and customer support strategies. More specifically, it assisted management to maximise income by identifying areas in the value chain to which resources should be channelled for maximum profit while still maximising customer satisfaction. This led to a substantial improvement in overall profitability. Owing, firstly, to increased gross profit following enhancements in the pricing policy and secondly, to increased sales volumes as a result of revised marketing strategies and new product launches. No significant additional costs were incurred in implementing ABC. A standard desktop computer and readily available accounting and spreadsheet software were used in the CPAs. No outside consultants were used since the champion of the project was knowledgeable in the application of ABC techniques This suggests that it is both practical and cost effective to implement ABC in a SME environment provided the necessary skills and infrastructure are available or can be outsourced. Although these findings are of a single case study and cannot be generalised, the combination of this empirical case study and the literature review findings presented in this study strongly suggest that Activity Based Costing is a practical tool for the formulation and measuring of outcomes of customer profitability strategies in a South African SME environment. DA - 2009 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2009 T1 - Using activity based costing in customer profitability strategies in a South African SME environment : a South African case study TI - Using activity based costing in customer profitability strategies in a South African SME environment : a South African case study UR - http://hdl.handle.net/11427/9005 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/9005
dc.identifier.vancouvercitationPotgieter TD. Using activity based costing in customer profitability strategies in a South African SME environment : a South African case study. [Thesis]. University of Cape Town ,Faculty of Commerce ,College of Accounting, 2009 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/9005en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentCollege of Accountingen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherStrategic Cost Managementen_ZA
dc.titleUsing activity based costing in customer profitability strategies in a South African SME environment : a South African case studyen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMComen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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