Introduction
In all enterprises, effective cost management
is the primary measure of accountability, especially for business leadership.
Cost management includes a highly effective strategy implementation and also
the provision of resources and process discipline that will ensure the highest
level of quality, reliability, and productivity at the lowest cost for an
organization (Drury 3-10). Through cost management, an organization can effectively
plan and control the costs involved in their operations.
The government plays an essential role in a
market economy in numerous ways. One of these is by creating price controls on
specific products and services. Price controls are a government-mandated
maximum or minimum legal price set for particular products and services usually
implemented as a means of direct economic intervention (Lauguerodie &
Vergara 569-593).
The paper will focus on analyzing cost
management and price control. It will also highlight the application of cost
management and price control and how they are applied to the economy. It will
also outline the manner that the articles presented relate to price control and
cost management.
A brief
overview of cost management
Cost management is considered one of the most
complex tasks in business management as it generally focuses on all the various
activities such as collection, analysis, assessment and reporting cost
statistics involved in budgeting. Through the implementation of an effective
cost management system, a company can control its overall budgeting effectively
(Drury 3-10). Additionally, through cost management, an enterprise can optimize
its strategic and operational performance.
A brief
overview of price control
Price controls that set the maximum prices are
price ceilings while those that set the required minimum prices in the
specified services and products are price floors. Typical examples of price
ceilings are rent controls while on the other end of the spectrum, price floors
can mainly be imposed in the agricultural markets (Lauguerodie & Vergara
569-593). This enables effective management on the affordability of these
specified commodities and services.
Analysis
of the articles and how they relate to cost management and price control
Cost
management
The article highlighted the importance of cost
management. When budget cuts are necessary for any government institutions,
they typically rely on traditional measures for reducing costs which include
cutting back on discretionary activities, hiring freezes and reorganization of
personnel resources to save on overhead (Chew 1). All these strategies are
short-term solutions which could only lead to permanent budget constraints that
such organizations may face in the future.
A great solution outlined in the article stated
that the generation of cost management strategies that utilize digital tools
would make significant changes that can assist government agencies to transform
their entire operations (Chew 3). Using a digitally powered next generation
cost management strategy would help these federal enterprises streamline their
processes and function more efficiently with fewer resources.
Chew (4) stated that next-generation cost
management mainly focuses on digital systems in the management of costs in a
more strategic manner. This would not only reduce their budget costs but also
allow the organizations to analyze every department in terms of budget
reduction, modernization, and cost-saving processes. Such strategies are
enhanced by Artificial Intelligence systems which can help increase the
effectiveness of the institutions. Additionally, the use of Robotic process
automation can be utilized in automating and augmenting labor and also
redeploying robust talent for assignments that provide higher value (Chew 5).
Price
control
The article on price control mainly focused on
the manner that this measure affects healthcare and innovation. Price control
imposed by the government has been a significant issue primarily in terms of
delivery of patient care by medical professionals. This government
intervention, especially on older generic drugs, has increased the drug
expenses of patients and also has placed significant limits on pharmaceutical
pricing (Chressanthis 1). The pharmaceutical industry has been cast in a highly
negative light especially during the 2016 US presidential elections. These
negative views were focused on the manner that controlling drug prices by the
government would be a significant hindrance on medical innovation. Due to price
control, this restricts the access of patients to necessary medication and
treatment.
Price control measures hinder the development
of new drug technologies in healthcare. Drug technologies are highly essential
as they contribute to the advancement of patient health delivery which leads to
lower health outcomes (Chressanthis 3). Price controls decrease the incentives
for research and development and drug innovation outputs, and this diminishes
the possibilities of investments which in turn leads to lower health outcomes.
The US government has created a price control
measure whereby it attempts to balance the benefits of providing incentives
necessary or innovation while simultaneously, minimizing the adverse effects
that patents from pharmaceutical companies create for society. This has been
achieved through the development of patents of limited duration whereby it
makes it easier for generic drugs to enter the market (Chressanthis 8).
Additionally, this policy also affects government subsidies that safeguard drug
access for at-risk groups such as individuals with Medicaid and Medicare plans.
How the
articles relate to control management and price control
Control
management
From the article, cost management is a
substantially continuous process that includes the collection of data on costs,
assessments of the budget of an institution. Through the use of next-generation
cost management tools, they can offer significant savings for government
agencies and other enterprises and even more cost savings in the future.
Sound cost management emphasizes the excellent
application of the resources of an enterprise. Effective cost management plays
an essential role in the maximum exploitation of the resources of an enterprise
(Drury 3-10). Additionally, through cost management, an organization can
utilize cost management strategies such as next-generation cost management in
the assessment of facts and figures concerning the financial performance and
position of various segments of the company. This enables the evaluation of the
progress of an organization and adjusts the principles of the enterprise
positively.
Through the use of such a next-generation cost
management strategy, agency leaders must evaluate their frameworks as this
approach requires a different mindset that includes the best ways of using
digital technologies to raise the overall cost structure and effectiveness of
the institutions.
Next-generation cost management will solve all
budgetary issues that government enterprises are currently facing. Typical
approaches such as standardization and consolidation also offer significant
benefits. However, by adding such an approach to these existing cost management
strategies, numerous managers can assist in equipping their agencies to succeed
in the face of budget challenges that could become even more intense in the
future.
Price
control
For drug price control measures to be feasible,
the government must reassess the frameworks that applied in determining drug
pricing due to the public demands that new and quality drugs become more widely
available. Pharmaceutical companies must re-evaluate the typical traditional
methods utilized in generating and supporting prices of specialty medicine.
Additionally, companies must also demonstrate innovation in all their prices,
along with the entire product lifestyle, to produce better health outcomes and
lower costs of care.
From what I have learned, regulators must
evaluate whether a price control must be applied on a case by case basis as
each market represents different issues and also characteristics. Additionally,
such measures must only be established after analyzing past examples of price
controls in an industry such as health care and how they can be effectively
implemented permanently for the benefit of all the relevant stakeholders
(Lauguerodie & Vergara 569-593).
From the article concerning price control, it
is clear that this measure changes the workings of the market and may lead to
oversupply or shortages. Price control can increase issues rather than offer
permanent solutions. However, there may be occasions whereby price controls can
be useful when implemented correctly.
Additionally, the government can determine
whether intervening price increase or decrease of medications or treatments can
be highly favorable for the patients and also the pharmaceutical organizations
involved (Lauguerodie & Vergara 569-593). Price controls, therefore, should
only be initiated when necessary, and caution is essential when establishing
these mechanisms. Price controls when ineffective can lead to long-term
disequilibrium and also adversely affect the lives of consumers.
Conclusion
Effective cost management is the index of the
success of any enterprise, its existence and also its development. This process
enables a business to maximize the productivity of its resources and also, the
preparation of plans for expansion and development and their successful
executions. Through cost management, an
organization can, therefore, assess the benefits of its projects to ensure that
proper decisions are made to minimize risks involved in the project.
Price controls usually are enacted with the
best of intentions as a government measure. However, in actual practice, these
systems do not work effectively. No attempt to control prices in any economy
can withstand the fundamental economic forces of supply and demand for any
significant period. When price control is implemented effectively, it is clear
that such measures can protect both the consumers and the producers, increase
the stability of the market including the health care industry as highlighted
from the article.
Works
Cited
Chew, Bruce. Wall Street Journal. Federal CFO: Using Digital to Transform Mission Economics.
Retrieved from: https://deloitte.wsj.com/cfo/2018/11/08/federal-cfo-using-digital-to-transform-mission-economics/ 2018.
Chressanthis, George, A. The Medicine Maker. The Potential Pitfalls of Price Controls.
Retrieved from: https://themedicinemaker.com/issues/1016/the-potential-pitfalls-of-price-controls/ 2018.
Drury, Colin. Management
and cost accounting. Springer, 2013.
Laguerodie, Stephanie, and Vergara, Fransisco.
"The Theory of Price Controls: John Kenneth Galbraith's
Contribution." Review of Political
Economy 20.4 (2008): 569-593.
