Cost of Doing Business

EXTERNAL ANALYSIS

Cost of Doing Business

Cost of doing business is oftenly left out in the analysis of external environment as they are not traditionally considered to be part of business planning. However, studies made on SMEs reveal that the cost of doing business is a significant cost factor in their operations. The "costs of doing business" are the costs that are not normal in the course of doing business and "illegitimate" but necessary. While the costs of doing business vary from industry to industry or enterprise to enterprise, nevertheless, they should be substantially considered.

Added costs of doing business oftentimes are results of the enterprise's inability to do honest and prudent practices.Penalties, fines are common. Others include bribes and gifts to get contracts. Extorsion from government authorities as well as from bandits are also included.

It is important that enterprises should avoid these as much as possible since they add to expenses and drain company resources. Since they are also unprogrammed, they may disrupt expense budgets.

Guide Questions:

Identify the sources of added costs of doing business in your company. Describe them.

Quantify these costs.

Compare your added costs of doing business with similar companies?

How can you reduce the costs of doing business. Explain..