Posted: June 3rd, 2021
Companies must remain effective and efficient in order to compete in today’s business word. Organizations, even non-profit organizations, must remain cost effective and efficient to remain viable. In order to be cost-effective, a company sets a budget and goals and uses the company’s assets to meet those goals. As long as they remain within the budget, they can focus their attention on meeting the goals of the company.
A cost-effective company meets its goals with the funding provided; a company that is not cost-effective either fails to complete the goal altogether or requires additional funds in order to do so. This company must also be cost efficient, meaning that they cannot spend four dollars when two dollars is sufficient. In addition, they must put the company’s finances ahead of all else, including job stability. A cost effective and efficient company stays within a budget while still meeting its goals.
It is more important for any organization to be cost effective than cost efficient. In the overall picture, an organization must seek to meet its goals above all else. They must focus on using their resources to meet the goals, rather than setting the goal at saving money. Shareholders expect a return on their investment, which absolutely cannot happen if the company does not focus its attention on getting the best value for its dollars.
For example, Volvo strives to make the safest cars in the world; for the most part, it has succeeded in this goal. The company uses its resources to maintain an image of safety while remaining profitable. For this reason, consumers view Volvo as the “safe” car brand; this is why the company is cost-effective rather than cost-efficient. In order to be cost-efficient, Volvo would have to put the product second and the cost of producing the product first. Safety would give way to economy, and this would completely undermine the branding strategy.
Place an order in 3 easy steps. Takes less than 5 mins.