what is activity based management 
activity based management abm is a system for determining the profitability of every aspect of a business so that its strengths can be enhanced and its weaknesses can either be improved or eliminated altogether activity based management abm which was first developed in the 1980s seeks to highlight the areas where a business is losing money so that those activities can be eliminated or improved to increase profitability abm analyzes the costs of employees equipment facilities distribution overhead and other factors in business to determine and allocate activity costs activity based management abm is a procedure used by businesses to analyze the profitability of every segment of their company enabling them to identify problem areas and areas of particular strength understanding activity based management abm activity based management can be applied to different types of companies including manufacturers service providers non profits schools and government agencies abm can provide cost information about any area of operations in a business in addition to improving profitability and the overall financial strength of a company the results of an abm analysis can help that company produce more accurate budgets and long term financial forecasts examples of activity based management abm abm can be used for example to analyze the profitability of a new product a company is offering by looking at marketing and production costs sales warranty claims and any costs or repair time needed for returned or exchanged products if a company is reliant on a research and development department abm can be used to look at the costs of operating the department the costs of testing out new products and whether the products developed there turned out to be profitable another example might be a company that has opened an office in a second location abm can help management assess the costs of the running that location including the staff facilities and overhead and then determine whether any subsequent profits are enough to make up for or justify those costs special considerationsa lot of the information gathered in activity based management is derived from information gathered from another management tool activity based costing abc whereas activity based management focuses on business processes and managerial activities driving organizational business goals activity based costing seeks to identify and reduce cost drivers by optimizing resources both abc and abm are management tools that help in managing operational activities to improve the performance of a business entity or an entire organization activity based costing can be considered an offshoot of activity based management by mapping business costs like supplies salaries and leasing activity to business processes products customers and distribution activity activity based costing helps improve overall managerial effectiveness and transparency 