Managing the dilemma of balancing revenue growth and cost containment

Abstract

The primary objective of any profit-driven organisation is to maximise the share of the economic value or profit it generates. Conventional business theory asserts that this can be achieved by either increasing sales revenues or containing operational costs. However, as firms seek to secure sustainable competitive advantages, the imperative has emerged for managers to find methods of achieving revenue growth and cost containment simultaneously. This presents a dilemma to managers as there are trade-offs between revenue growth and cost containment. The aim of this research is to explore the key factors which influence the manager s ability to find an optimal balance between growing revenues and containing costs, with a view towards maximising economic profits. In examining the quandary of balancing revenue growth and cost containment, an exploratory, qualitative research study was conducted through a series of 20 in-depth interviews with business leaders and management experts who are actively engaged with the dilemma. The unique insights uncovered during the expert interviews were collected and analysed using inductive content and frequency analysis techniques, designed to extrapolate the emergent themes into a general management framework for navigating the dilemma. The research results show that managers are able to pursue strategies which simultaneously grow revenues while containing costs, by leveraging the relation between revenue and cost through innovation. Technology and employee engagement were identified as the key enabling factors which drive innovation in a firm, and the resultant productivity gains allow the firm to grow revenues disproportionally higher than costs. As long as the gap between revenue and cost is expanding consistently, the balance between the two is optimised, and the economic profits for the firm are maximised.