Many people are confused about what is the difference in terms like cost saving, cost reduction, cost management etc. This article will help you in understanding the differences in these terms.
Cost Cutting - When we reduce the cost which leads to lowering of quality, then it called cost cutting. Some experts also relate it as Cost Saving.
Cost Rationalization - When we reduce the cost while maintaining the same quality of output, but with a short term perspective, then it is known as cost rationalization. i.e. if u reduce the cost while maintaining the same quality for one time, it will be cost rationalization. Example: U r saving money by going through train, and for this travel only, train takes lesser time than flight (due to waiting time at airport) then its cost rationalization.
If it is done with long term perspective, say due to some improvement in technology, we are able to reduce the cost while maintaining the same quality, its called Cost Reduction
Cost Control is dependent on generic strategy of the company. If it reduces cost following the generic strategy of company, its called cost control. Example: Jet Airways wont compromise on quality but Deccan might do so to reduce the cost.
Cost Management is acheived when we improve the value chain. say one company is providing assembled crankshaft to another company. This company again disassembles it and uses it. So, it will be beneficial for both the companies if it is transported in disassembled form.
Comments are most welcome:)
Cost Cutting - When we reduce the cost which leads to lowering of quality, then it called cost cutting. Some experts also relate it as Cost Saving.
Cost Rationalization - When we reduce the cost while maintaining the same quality of output, but with a short term perspective, then it is known as cost rationalization. i.e. if u reduce the cost while maintaining the same quality for one time, it will be cost rationalization. Example: U r saving money by going through train, and for this travel only, train takes lesser time than flight (due to waiting time at airport) then its cost rationalization.
If it is done with long term perspective, say due to some improvement in technology, we are able to reduce the cost while maintaining the same quality, its called Cost Reduction
Cost Control is dependent on generic strategy of the company. If it reduces cost following the generic strategy of company, its called cost control. Example: Jet Airways wont compromise on quality but Deccan might do so to reduce the cost.
Cost Management is acheived when we improve the value chain. say one company is providing assembled crankshaft to another company. This company again disassembles it and uses it. So, it will be beneficial for both the companies if it is transported in disassembled form.
Comments are most welcome:)
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