Strategic Cost Management and Business Performance A Study of SME S in Karnataka

Abstract

This current exploratory and descriptive study is conducted to investigate the effectiveness of newlineimplementation of Strategic Cost Management practices, tools and techniques from a business newlineABSTRACT newlineGlobally, Small and Medium Enterprises (SMEs) play a most important role in most economies, newlineespecially in developing countries. Formal SMEs contribute up to forty five percent of overall newlineemployment and up to thirty three percent of national income (GDP) in developing economies. newlineThese numbers are considerably higher when informal SMEs are included. According to newlineestimates, 600 million jobs will be required in the next fifteen years to absorb the increasing newlineworldwide workforce, mainly in Asia and Sub-Saharan Africa. In emerging markets, most newlineformal jobs are with SMEs, which also create eighty percent of 5 new positions. newlineIndian SMEs segment has emerged as an extremely vibrant and active sector of the Indian newlineeconomy over the fifty years. SMEs not only play a critical role in providing large employment newlineprospects at fairly lower capital cost than big industries but also help in industrialization of rural newlineareas. SMEs are complementary to big industries as ancillary units and contribute extremely to newlinethe socio-economic development of the nation. The Segment consisting of more than thirty six newlinemillion units, as of today, provides employment to over eighty million persons. This segment newlinealso contributes about eight percent of GDP, in addition, more than forty five percent to the newlineoverall manufacturing production and more than forty percent to the exports from the nation. newlineDespite their contribution to the economy, studies conducted on these SMEs reveal that more newlinethan half of the SMEs close their business within four years of their inception. One of the key newlinereasons for these failure is their cost management system. These SMEs are under pressure to newlinereduce or cut their costs in the short term. These short term cost cutting without considering the newlinelong term business strategy have resulted in very negative effect. Organization should newlineunderstand the cost management is not a short term and tactical in nature. It requires a strategic newlinefocus and hence cost management is a strategic issue. There is an urgent necessity have a newlinestrategic approach towards cost management in the perspective of complete business model of newlinethe company. newlineperformance perspective of SMEs in Karnataka. Accordingly, the study analyzed the growth of newlineSMEs in Karnataka, Cost Management Practices adopted by SMEs with special emphasis on newlinetheir transition to modern Strategic Cost Management (SCM) practices, impact of this transition newlineon their business performance and examine the relationship between the SCM Practices adopted newlineby SMEs and their Business Performance newlineBased on the outcome of the study, it is observed that SMEs after implementing SCM practices newlinehave benefitted significantly on their business performances. Accordingly it has been newlinerecommended that SMEs to adopt to the SCM Practices to be competitive, sustainable and grow newlinein the current market scenarios. newlineKeywords: Small and Medium Enterprises, SMEs in Karnataka, Cost Management, newlineStrategic Cost Management, SCM, Business Performance, Balance Score Card newline