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The importance of cost reduction programs within a company cannot be overstated. Companies that are losing money, need to increase profits, or must become more competitive need to cut expenses in order to succeed. Knowing how to implement effective cost reduction strategies can be the determining factor in the survival of a business.

Keeping a Competitive Advantage

A good manager understands the importance of cost reduction to the health of a company. Bloated expense accounts can eat up profits quickly. A cost reduction plan is one that focuses on lowering costs in every business activity. The activities vary by type of business but the concept of cost reduction does not vary.

The importance of cost reduction plans is related to the most common reasons why expenses must be cut in a business.

  • Need for increased profits
  • Improved competitive standing
  • Preserve company resources
  • Reduce waste
  • Improved productivity

It is not easy to compete in the market today. Rising prices, shifting fuel rates, global competition, varying labor rates around the world, and spiraling health insurance costs have made cost control a moving target. Sometimes it seems that a company gets one set of expenses under control, and in the meantime, another area of the company begins experiencing cost overruns. It is a never ending battle to maintain company profitability.