Cost Drivers - An Influencing Attribute in Profitability and Strategic Cost Management Decision Making

Abstract

Every company’s underlying objective is to earn and sustain profitability. It is an inevitable sense of duty of the Management to understand the factors that affect their profitability and cost. This requires a re-visit on their strategies at regular intervals to modify its strategies in order to align with the changes keeping them on par with its competitiveness in the market and to maintain the profitability. Effective financial decision making of an company lies in increasing its operational efficiency by identifying, analyzing and allocating Resources and Cost Drivers as per the requirements. The main concern of a business is to identify key cost drivers within their operations which influence the operating expenses. Cost Drivers play a major role in calculating the accurate Profit Margin, providing information about the company’s profitability. The Changes in the business environment, economic changes and changes in the Market condition as well as the associated risk can be hedged by the Cost Drivers. The company’s competitive pricing and ability in sustaining the profitability decisions are connected to the Cost Drivers. This study envisages the influencing attributes of Cost Drivers in Strategic Management Decision Making.