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Cutting Down Cost: Efficiency is the King

When the cost of your product is 50 US dollars, you sell it at 70 US dollars, and then 20 US dollars will fall into your pocket, are these 20 US dollars your profit?
From the perspective of finance, 20 US dollars are your margin. However, when it comes to business, they are barely dividends.


Dividends are something that only exists when there is little competition in the market.
When more and more new competitors enter the industry, there will always be someone who may sell the product at a much lower price to occupy the market, and once much lower prices appear in this market, the competition will be fierce, and then the dividend will disappear.
True profit doesn’t simply equal to selling price minus cost.
The key to making a profit is your ability to cut costs through innovation.
There are two ways to cut costs, one is the management and the other is technology innovation.
Efficiency can be improved through management. You can use management tools to make your employees more dedicated to their jobs, thus ensuring your production process more streamlined. Also, you can optimize your production process through technology innovation. And the biggest difference between management and technology innovation is duplication. Duplicating code is hassle-free and you can just “copy” and “paste”, however, it will take months or even years to duplicate talented, skilled and experienced management personnel. In the meantime, the competitiveness for technology innovation will be stronger than that of management in the long run.
When your efficiency is increased, your cost will be cut, for example, formerly two people are needed to complete one task, but now through management or technology innovation, one person can finish all the tasks. Also when you work more efficiently, you will gain your competitive advantage, for example, you can offer 24 hours lead time while it takes 3 days for others to finish the project.
In a world of business, only those who embrace innovation and increase efficiency will be rewarded.


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