Glamor Economics

Chapter 66

Chapter 9 Section 6 Thrift Shapes Enterprise Competitiveness——Cost Minimization
Wang Yongqing, who is known as the God of Taiwan's management, said that the business philosophy of the company is to recognize human nature. Mental indicators.

Wang Yongqing has always had the habit of drinking coffee, but after pouring out the creamer, he will definitely "flush" it back into the creamer box with a little more coffee, making sure to use up the last drop of creamer.

The reason why Formosa Plastics has achieved today is inseparable from Wang Yongqing's frugal spirit.From Wang Yongqing's frugality, we think of the concept of enterprise cost minimization in economics.If an enterprise wants to maximize profits, it must optimize the composition of input factors to minimize costs.Therefore, if we want to maximize profits, we must follow the principle of cost minimization.The cost mentioned here is actually a concept in accounting, which is also widely used in the analysis of economics.There are different classifications of costs, including production costs, management costs, transaction costs, etc.Enterprises are the microcosmic subjects in the market, and their purpose is to make profits. Therefore, when studying enterprise problems, the cost issue is the most considered.

How do companies control costs to minimize costs?
First, strengthen control measures to reduce ineffective consumption.

From the point of view of the relationship between product consumption and consumption, in the total consumption of enterprises, one part is effective consumption, which is the necessary consumption to obtain social products (that is, qualified products); the other part is ineffective consumption, which should not occur when obtaining products. consumption, such as waste consumption, waste caused by poor management, etc.

The effective consumption for obtaining a certain product is fixed under certain production conditions and is relatively fixed; the ineffective consumption for obtaining a certain product is relatively variable and universal.The latter is the object to be controlled, and this consumption should be controlled through a series of measures to minimize it.

Second, strengthen enterprise management and promote the unification of economy and technology.

What enterprises need is not pure technology but economic technology. Starting from the mutual influence and mutual restriction relationship between technology and economy, paying attention to technological progress plays an important role in reducing costs.On the one hand, new technological achievements can be widely used in production only when the economy requires them and conditions for their adoption exist; on the other hand, technological progress also promotes economic development.

In many aspects, cost control engineering puts forward requirements for technical work from the aspect of enterprise economy, such as new product development, quality improvement, etc., so it can promote the transformation of science and technology into productivity; at the same time, it puts forward higher requirements for management level through technological progress , so as to achieve the unity of economy and technology.

Third, strengthen internal control and promote external control.

Generally speaking, the cost control work of an enterprise is carried out step by step from low to high.In summary, it can be divided into two stages: the first stage, the stage of connotative cost control.This is the initial cost control stage, mainly to lay a solid foundation.The second stage is the extension cost control stage.This stage is the perfect development stage, mainly system control.At this stage, the control measures have changed from economic management to technical management, and a qualitative leap has taken place.This is because with the sharp increase in the prices of external raw materials and the increasing factors of increasing expenses and reducing profits, purely relying on connotative control can no longer meet the requirements of the development of the economic situation.

Therefore, enterprises must shift from focusing on connotation control to focusing on extension control, and gradually form an extension control system, thereby greatly improving the company's ability to adapt, digest and develop, and gradually minimize costs.

[links to related words]

Circular economy is a material closed-loop flow economy, which refers to the linear growth of the traditional dependence on resource consumption in the whole process of resource input, enterprise production, product consumption and its disposal within the large system of people, natural resources and science and technology. The economy of the country has been transformed into an economy that relies on ecological resource circulation for development.

(End of this chapter)