Research Purpose Statement Development
Research proposal
Topic: cost minimization as a profit maximization strategy
Introduction
Profit maximization is the sole objective of many businesses that decide to launch their operations in a given market (McDaniel, Hair & Lamb, 2008). Many businesses are increasingly concerned about profit maximization. Businesses look forward to maximizing profits in order to boost their growth prospects. To achieve this businesses have identified cost minimization policies as the best way to achieve their profit maximization objectives.
Problem statement
The idea of cost minimization has gained momentum in the business world, courtesy of increased costs of doing business. Businesses have identified escalating costs as the number one threat to their business growth and performance. Reports and statistics indicate the catastrophic business effects brought by excessive business costs. Many business experts argue that businesses should operate optimally and continually assess costs on a continuous basis to keep track of costs movement.
Company profitability depends on cost minimization strategies used by businesses within a given financial period (Blinder & Baumol, 2009). The notable aspect is that not all cost minimization policies work. Experts are concerned by redundant and outdated cost minimization policies that most businesses adopt. These cost minimization policies as they agree, do not incorporate various business fundamentals. This explains the reason for their dismal performance.
Businesses make the same mistakes over and over. Various businesses in the UK were surveyed last year concerning, how they worked on their past decisional mistakes, and the results were shocking. Most businesses admitted that due to management bureaucracy, few past mistakes were not properly corrected and this had affected their businesses greatly. Businesses repeat mistakes which affect their profitability levels. Unfortunately, business leaders have failed to address this problem time and again. Some costs are never anticipated in businesses. The business should always be ready to minimize such kind of costs. Businesses should come up with a formula which addresses techniques for identifying such kind of unforeseen costs.
The management of a business should have a sneak preview of all company costs in order to come up with an effective cost plan. It should however, be noted that cost minimization should be intertwined with the idea of optimal resource allocation. Businesses should not expect profit ‘magic’ as one investment analyst, at a leading investment bank explains. Businesses should operate optimally if results have to be achieved.
Purpose statement
The main objective of this study is identify the logistics involved in streamlining business operations in such a way that operating costs are minimized, resources are optimally used and profitability is maximized (Mankiw,2008). The study in addition, looks at various mechanisms that determine the profit prospects of a business both in the short term and the long term.
Costs should not be viewed from the perspective of internal operations of a business. Businesses should understand that costs also emanate from the external environment. The external environment should be reviewed and its cost implications analyzed. The study addresses various policy frameworks that a business organization should incorporate in its operations to attain the required turn around (Oslon, 2009).
Scope of study and research questions
The research discusses in detail various cost minimization mechanisms that have worked for businesses and how to consolidate these methods with the objectives of the business. The research design adopted includes the A to Z of business operational efficiency (Hitt, Irelad, & Hoskisson, 2009). The research design spells out working formulas that businesses should integrate into their operations to make meaningful business milestones. The research also investigates small and large business profitability indexes and the trends followed in subsequent years. Several questions concerning cost minimization procedures are attempted to be answered. These questions include:
- How to come up with a competitive cost minimization strategy
- How to consolidate cost minimization efforts with profitability
- How to optimize resources
- How to address various business performance loopholes affecting profitability
Research methodology
The research methodology identifies various qualitative and quantitative methods used in consolidating our research mechanism. The costs of operating a business are dependent on market components such as cost of inputs, interest rates, taxation policies and nature of business climate. These cost factors vary from time to time depending on various fundamentals such as market conditions and government fiscal policies.
Inflation has been a big hurdle for most businesses. Inflation has forced many businesses to embark on cost minimization procedures such as laying off workers and reducing production capacity to deal with the situation. Lack of desired credit flows in the economy has forced many businesses to halt additional capital injections into their organizations. High tax regimes have affected profitability efforts of most companies leading to foreclosure.
Literature review
Improved profit margins
The business management should always project good profit margins in their operations in order to keep the organizational objective in place. Improved profit margins do not come easily (Peritons & Adams, 2009). The company should be dedicated to improving business efficiency to achieve the latter. A total of ten companies interviewed in the UK indicated that despite high profit margins being their top most priority, a lot had to be sacrificed on their part in order to achieve the results.
Role of experts
Experts should be involved in all cost minimization efforts. Experts give valuable advice and suggestions as regards efficiency operations of a business. Experts enable a business to introduce effective cost minimization procedures that enable it to create the desired competitive edge in the market.
Elements and advantages of cost minimization
Cost minimization involves the application of business tactics that assist a business minimize its losses by optimizing its resource usage. Cost minimization enables a business to achieve desired growth and expansion plans (Langabeer, 2007). Cost minimization gives a business the required market competitive edge over its competitors by offering quality products at low prices.
Conclusion
The cost minimization strategy should be a top priority for business organizations concerned about improving their profit margins. A business cannot settle for another option less than cost minimization policies because, it would be illogical to operate a business whose cost implications affect business profitability (Hirschey, 2009). Business managers need to understand that high cost of goods and services triggered by rising cost of inputs might result to substantial customer loss because, consumers are always discouraged by high prices(Schroder & Gross, 2007). Cost minimization should come into play at this point. This is a move in the right direction.
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