A Brief Analysis on the Cost Reduction Methods in the Market Economy System

殷茹

摘要：As all enterprises under the market economic system face increasingly fierce competition， they are trying various devices to improve their economic benefit to maintain sustainable development. Starting from the analysis on the significance of cost reduction in the market economic system， the author has studied the effective channels and methods of lowering the cost under market economic system. Conclusions are mainly drawn from the following aspects： strengthening management， improving production technology， and reducing additional cost to product; broadening channels and reducing procurement cost of raw material; strengthening product quality control and avoiding intangible loss of products; making full use of information technology to reduce marketing cost incurred by enterprises.

關鍵詞：market economic system， cost reduction， method

All enterprises under the market economic system are trying various devices to improve their economic benefit to maintain sustainable development due to increasingly fierce competition. Starting from the significance of cost reduction， the author has studied the methods and channels of lowering the cost.

I. Significance of cost reduction in market economic system

1. Promoting the cohesive force in enterprise

To reduce costs， it is necessary to start with all the links involved， contact all departments， set up common goals， establish incentives and punishments， and improve the enthusiasm of employees， thereby enhancing the cohesive force in enterprise. The management plan of cost reduction aims at making enterprise and employees get more benefits. In order to reduce costs， enterprise will prepare unified goals and requirements， which will be the leading mark for all employees. In this process， everyone will have the sense that unity is strength. Although one man’s strength is weak， majority of people join into the group， fight together and move forward to this common goal. Moreover， all departments will also contact and cooperate with each other so that the overall structure of enterprise and different departments can be brought together. Therefore， cost reduction is conducive to enhancing the cohesive force in enterprise.

2. Promoting the core competence of enterprise

In the rich economic market many consumers always choose cheap but nice goods， no matter how the society develops. Therefore， only by reducing the product cost on the premise of ensuring product quality， can the product price in the market be relatively low， and the market share be guaranteed， so that enterprise will have core competitiveness in the market. The decision makers of the market are always consumers， so enterprises should fully understand the consumer preferences， understand what consumers need， and strive to make their products dominate the competitive market.

3. Enhancing the economic benefit of enterprise

Only by reducing costs can enterprise get greater economic profits. Cost is directly related to the profit of goods. In the same kind of market， those who incur lower cost will have a strong competitiveness and obtain more profits. Therefore， enterprises should reduce the cost of goods， which is also an important way to improve the economic efficiency of enterprises.

4. Expanding the scope of enterprise

Cost reduction is conducive to enterprises to achieve higher profits and enhance their economic strength. Only when the economic strength is strong， can enterprise purchase more means of production， develop more advanced production technology， and employ more workers， so as to continuously expand its scale.

II. Effective channels for cost reduction under market economic system

1. Strengthening management， improving production technology and reducing additional cost to products

Strengthening management and designing scientifically is helpful to reduce the additional cost to products， which require enterprises to pay attention to advanced production technology， absorb the quintessence and discard the dregs. More importantly， enterprises should select what is right for them， rather than blindly follow suit. Only by constantly updating technology and making effective use of resources to produce products， can enterprises avoid more additional production costs. Enterprises should take innovation as the core， optimize production chain， produce qualified products， improve product quality， pay attention to product safety and environmental protection， avoid unreasonable wastage， and effectively reduce the additional cost of production products. The better the product quality is， the lower the additional cost is. To realize this goal， it is required to put waste an end， standardize design and production chain， so as to effectively avoid additional cost to products.

2. Broadening channels and reducing procurement cost of raw material

As a saying goes， “shopping around”， so only by broadening their own procurement channels can enterprises reduce the cost of raw materials. When there are more channels， enterprises can initiatively find inexpensive but good raw materials for production. Therefore， enterprises should use modern information platform to broaden their procurement channels， so that the procurement department has more choices， in order to avoid unnecessary expenditure and reduce procurement cost.

3. Strengthening product quality control and avoiding intangible loss of products

Since the relevant departments may lack attention on the quality， enterprises should not only reduce the product cost， but also strengthen the quality awareness of the relevant personnel in order to reduce costs. Ignorance of the product quality will cause intangible loss of the product.

Therefore， enterprises should strengthen product quality control and strengthen the sense of responsibility of production personnel who should grasp the quality of each product to avoid the substandard products prior to causing intangible economic losses.

4. Making full use of information technology to reduce marketing cost of enterprises

With the rapid development of information technology， the application of information technology is expanding. Enterprises may also use information technology to reduce the marketing cost of their products. Unnecessary expenses can be saved by improving information technology and applying network marketing platform. In the use of information technology， enterprises should combine with its actual conditions， to bring greater benefits to enterprises.

III. Conclusions

Enterprises should ensure product quality and understand the importance of reducing product cost in the process of development. Under the background of market economy， the competition among enterprises is more and more intense. Only by using advanced production technology to produce products and advanced management technology to manage costs， can enterprises have competitiveness. While paying attention to economic interests， enterprises must also pay attention to the product quality. Only in this way can enterprises have strong economic and business strength and achieve sustainable development.

References：

1. Wei Wei; A Study on the Cost Reduction Methods of Enterprise under Market Economic System [J]; Modern Economic Information; Issue 13， 2013

2. Zhang Ming; A Study on the Cost Reduction Methods under Market Economic System [J]; Modern Business; Issue 05， 2014

3. Wang Fang; Ways to Reduce the Business Costs [J]; Modern Property Management （periodical appearing once every middle ten days）; Issue 02， 2015

4. Liu Cuiling; Cost Reduction - the Fundamental of Enterprise Management under Market Economic System [J]; Modern Business; Issue 06， 2013

5. Xue Yueqin; A Study on Cost Reduction of Enterprises [J]; Modern Economic Information; Issue 22， 2014