Hi and welcome to this week’s question of the week! First of all, we wish you a happy Easter! Now for this week, the word ‘frugal’ will be covered in the following question:
How can companies apply frugality as a strategy for cost reduction?
The word frugal stands for not being wasteful, lavish, or extravagant, and being economical and sparing. For instance, when a person decides to change from a post-paid mobile phone plan to pre-paid, with the reason to control the number of minutes used and texts sent, he or she is said to be frugal. Another example of being frugal is when a person decides to buy an electric car rather than a conventional car, with the idea of minimizing fuel costs and tax.
Companies can also apply frugality by implementing the ideology in company culture. When all employees are given the responsibility and moral obligation to minimize costs, it is then possible for a company to reduce unnecessary expenses. Examples of these include taking economy class flights rather than taking business, first, or even chartered flights. Also taking public transportation rather than fleet cars.
For companies to implement frugality, it is possible to do periodic checks of employee expenses, benchmarking costs for specific positions, have employees conduct due diligence for specific high cost purchases, or have incentives for the employees that saved the most. These are just some ideas.
In short: Frugal stands for being economical, not spending lavishly, buying things that are only necessary, and minimizing costs. Companies can be frugal if the ideology gets passed on to all employees, meaning that the employees themselves actively think of minimizing expenditure. Putting a moral obligation on employees to not overspend can help implement frugality, and having periodic checks, incentives, or have employees perform due diligence, can help maintain it.
If you have any questions or doubts, then please don’t hesitate to leave a comment!
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