The need to cut costs in any business may be driven by external factors or internal factors. Very often, it may be a mix of both.

The dominant external pressures to reduce costs include economic cycles, major market changes, changes in the political or regulatory environments etc while Strategic initiatives, changes in corporate structure, rationalizing or streamlining operations including procurement and supply organization include the internal drivers of cost reduction.

Companies expect to improve one or more of the following with cost reduction initiatives:

• To better respond to negative macroeconomic and market changes
• To improve business efficiency and effectiveness
• To sharpen their competitive edge within the industry
• To prepare and launch a system for continuous improvement