To be competitive in 2024, companies will have to reduce their expenditures by at least 15%

2024 will bring new taxes, tax increases, inflationary pressures, the decline of the eurozone and a tense geopolitical context. To overcome the difficulties, the first step a company should take to remain profitable is to optimize costs by at least 15%. Key categories that companies need to address this year include utilities, fuel, logistics, insurance, fleet management and working capital related costs.

"In every industry, a challenging year and a volatile environment follows. Therefore, cost reductions of at least 15% may become necessary, but this depends heavily on each company’s industry and the customer segment that each business targets. For example, to avoid passing on increased costs to the end consumer and to maintain growing sales volumes, companies in the FMCG sector may need to decrease their spending by around 20-25%. A certain fact we can point at is that 2024 will be the year of intelligent resource optimization," says Remus Hîrceagă, Country Manager of Expense Reduction Analysts (ERA) Romania.

Factories in the eurozone significantly reduced their production in December and economic activity contracted for the 18th consecutive month. This is according to a recent S&P report, which indicates that the economy is almost certainly in recession.

2024 will undoubtedly be a year of significant growth, but also volatility and uncertainty. Only entrepreneurs who understand how to adapt to the rules of the game will remain on the winning side. Remus Hîrceagă adds that intelligence will be the word of the year in business, both in the implementation of AI-based technologies as well as setting ambitious yet achievable goals for companies. Additionally, the ability of business leaders to make quick decisions in favor of cost optimization will make a difference in terms of success, in an unprecedented competitive environment.

To be effective, cost optimization — a multi-step process that ultimately aims to minimize costs and maximize profits — must be performed by specialists, in order to bring measurable value for a business. Identifying and eliminating sources of loss involves various changes to current business processes, which may take time. Thus, a cost optimization process in a company can take from a few weeks to several months or even years, depending on the economic context, the circumstances the company operates within and the specific objectives of the organization.

"At each stage, all causes of low profitability are identified and eliminated. Infrastructure and maintenance costs are also reduced, allowing the company to save numerous resources in various areas (energy, logistics, packaging, waste management, insurance, working capital, etc.), which finally leads to growth," added Remus Hîrceagă.