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Rethinking Cost Structures
Results of KPMG global cost study provide roadmap for Canadian industry to improve profitability
The vast majority of businesses today are missing out on major opportunities to boost profits because of their inattention to cost reduction, according to the results of a global study initiated by KPMG LLP.
The research study, entitled: Rethinking Cost Structures: Creating a sustainable cost advantage, was conducted by the Economist Intelligence Unit (EIU) on behalf of KPMG International and was based on the replies of 427 senior executives, half of which were C-level, representing a cross section of industries and large, mid-size and small organizations.
As profits and revenues rise, companies increasingly lose some of their focus when it comes to controlling costs, according to the 427 senior executives questioned by the EIU. Nearly half of all the companies admitted that they did not know what drives costs and profitability at a business unit level. In addition:
- Almost two thirds of companies set themselves cost reduction targets of no more than three per cent a year.
- Those targeted cost savings are also proving difficult to achieve, with only eight per cent of respondents actually reaching or exceeding their targets.
- Nearly three quarters (74 percent) predicted that in the next three years, the biggest rise in costs would be salaries and benefits associated with recruiting and retaining top talent.
- Rising costs of raw materials (66 percent) and the need to invest in technology (64 percent) were identified as the next two biggest factors behind increasing costs.
These results serve as a timely wakeup call for executives,” said Diane Jeffreys, KPMG’s National Service Line Leader for Operations Improvement in Canada. “Executives around the world admit that companies experiencing higher growth place a lower priority on cost control. For these companies, high profits and revenues may be masking an unnecessarily inflated cost base that could leave a company at risk of hostile takeover.”
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For further information or to set-up a meeting please contact:
Diane Jeffreys
National Leader - Operations Improvement
416.777.8411
djeffreys@kpmg.ca
Stephen Spooner
West Leader - Operations Improvement
403.691.8403
stephenspooner@kpmg.ca
John Herhalt
GTA Leader - Operations Improvement
416.777.8778
jherhalt@kpmg.ca
Guy Langlois
East Leader - Operations Improvement
514.840.2164
glanglois@kpmg.ca
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