Barometer

Cost Management
2014
Financing Investments and Growth

Barometer

Cost Management
1

Table of Contents

Management Summary

Foreword EBS Business School

Foreword Expense Reduction Analysts

4
4

Introduction 5
Understanding of a Comprehensive Cost Management
5
Procedure and Sample
6
Barometer Cost Management

Cost Management in Practice

Cost Categories with Greatest Potential for Savings
Processes for Cost Reduction Are Effective

10
10
11

Financing Investments and Growth

Investments
Financing

13
13
17

Bibliography
List of Graphs

19
19

Imprint
Publisher:
Expense Reduction Analysts
Suite 24, 40 Churchill Square
Kings Hill
West Malling
Kent, ME19 4YU
United Kingdom
Strascheg Institute for Innovation and
Entrepreneurship (SIIE) EBS Business School
Burgstrae 5
65375 Oestrich-Winkel
Authors:
Ulf Diefenbach
Thomas Lwer
Christoph Schneider
Nominal fee: 390

Management Summary
To a large extent, companies use their own resources
to finance investments
Companies draw primarily on their internal finances to
fund their investments. 33% of financing needs are generated from profits and depreciation 22% from cost savings. Only 12% of financing needs are covered by bank
loans.

33
Profits
Depreciation

22
Cost savings

12

Machinery
Equipment

34,4
Research
Development

Cost Management is a CEO and CFO's responsibility

Cost management is a high priority for most companies. It
is the CEOs responsibility in 42% of companies surveyed,
and that of the CFO for a further 28%..

42CEO

28CFO

Bank loans

Companies are investing more

Since 2012, the proportion of companies that have increased their volume of investment has risen by around
57%. Companies invest primarily in machinery and equipment (71.4%), research and development (34.4%) and
staff (29.1%). The main objectives for these investments
are to enhance the companys growth as well as increase
revenue and rationalisation.

71,4

a company with an annual turnover of 50 Million Euros,

this represents 2.8 Million Euros. The highest savings are
achieved in Logistics, whereas the lowest are in the Pharmaceutical/Chemical industry.

29,1
Staff

Diversification investments have increased sharply

whilst founding and start-up investments have
greatly declined
In comparison vs. last year, the diversification investments
have seen a major increase, whilst foundation and startup investment decreased substantially. Many companies
have apparently benefited from the economic recovery in
2013 to expand their business, whereas in 2014, there was
evidence of a greater trend towards capital maintenance.
In terms of general turnover, companies generate
an average of 5.6% additional financial resources
through cost reduction measures
A growing number of companies, especially from the
Automotive and Pharmaceutical/Chemical industries apply cost reduction measures, which in comparison to last
year are also more successful. Through cost optimisation,
the companies surveyed save an average of 5.6% of their
turnover, which can be used towards reinvestment. For

The index of the Barometer Cost Management is

stagnating
In spite of this preferential treatment, cost management
has, in many companies, seen less focus since the survey
conducted last year. The Barometer Cost Management index has fallen from 66.0 to 65.4 points, and only one of
the key fields, Culture, has seen a slight improvement. In
contrast, the key fields of Organisation and Strategy have
reduced.
Companies see the greatest savings potential in
Energy, IT and Logistics
Companies see the greatest savings potential in the cost
categories of Energy, IT and Logistics, and specifically in
the Automotive as well as in the Pharmaceutical/Chemical industries where large savings potentials are expected
in Energy.
Environmental analysis and corrective measures of
budget variances are important factors of success in
cost management
Cost leaders are established in the context of cost management based on an ongoing environmental analysis, to
identify risks and opportunities early, and to be able to
take the appropriate measures in a dynamic and sometimes volatile competitive environment. The direct counteractions for budget variances by developing corrective
measures has proven to be a success factor.

Foreword EBS Business School

Foreword Expense Reduction Analysts

Cost Management is often seen by companies as a necessary chore, as efficiency efforts in organisations carry potential for high conflict. However, a functioning cost management with a view to the companys success is essential
if not crucial.

Healthy growth is the objective of every company. In order

to achieve this growth, investments are crucial whether
in people, equipment or knowledge.

On the one hand, cost management strategy with its core

function the efficient use of the companys resources
can help strengthen the competitive position of a company in price-sensitive markets. On another hand, the funds saved
through cost optimisation processes can
go into investments, which in turn can
contribute to the organic growth of the
company.
The results of this study demonstrate this clearly: 22%
of investments planned by companies in 2014 will be financed by cost reduction programmes. This study is part
of a series dealing since 2011 with issues related to cost
management, and called since 2012 Barometer Cost Management, also showing time-related evolutions.
According to the Barometer Cost Management, a slight
decrease can be found in 2014 after last years increase,
which is probably due to the economic recovery and to the
resulting reduced pressure for action with cost efficiency
measures.
In addition to general insight in operational cost management, the key topic of this years Barometer Cost Management is the relationship between the financing of investments and cost management.
The underlying concept of the Barometer is that cost management can only operate optimally when it is implemented systematically and comprehensively. The results in cost
reduction processes show what effects a comprehensive
cost management has. Companies with a stronger cost
management culture are increasingly successful in their
process of cost reduction and expand the scope of action
to their respective companies.
We hope you will enjoy an inspiring read with valuable insights for your activity in cost management.
On behalf of the whole SIIE team,

In this third edition of the Barometer Cost Management,

we investigate how European companies invest and how
these investments are financed. The results show that almost all companies invest in their future in staff, new
equipment, R&D, to name but the most
important investment fields. Only one
out of ten companies is not planning any
investment. The objective is quite clear.
Increasing revenues is the top priority.
It is interesting to note that only 12% of
investment needs are covered by bank
loans. There are many reasons for this, and the restrictive
contractual practices of banks after the financial crises and
in the context of the ECB stress tests in particular play an
important role.
Businesses cover a third of their needs with their profits
22% are generated through cost reductions. With over
1/5th of funding obtained through cost reduction programmes, it is not surprising that cost management is
viewed as a priority for top management. This is where it
should be anchored.
The results of the Barometer Cost Management also show
that companies must hold the reins tighter. While in the
past years the efforts to manage the cost structure in the
most optimal manner had risen sharply, the index value
has this year decreased slightly. Companies should always
keep in mind that cost management should always be actively conducted, and not used as a response to external
circumstances such as loss of revenue or sales, or missed
targets. The present results show that cost management
can be an important driver of growth and investment for
businesses. This is how companies should measure their
approach.
I hope you will enjoy reading the results of the study and
trust you can draw some valuable conclusions for your
business.
Best regards,

Fred Marfleet

Prof. Dr. Ronald Gleich

Introduction

Understanding of a comprehensive cost management

Despite record levels of profits and turnover in 2013 and

of brilliant quarterly figures at the beginning of 2014, the
automotive manufacturer BMW has announced recently
rigorous cost reduction measures. The same applies to
competitors Mercedes and VW, who have announced significant measures to increase efficiency in spite of the previous years good figures.

Our understanding of a comprehensive, systematic cost

management consists of five related key fields: Strategy,
Organisation, Information, Tools and Culture1: The key
field Strategy comprises the planning of company-specific cost targets and cost targets based on internal and
external business analysis. These determine, in accordance
with the companys strategy, which cost categories will be
primarily analysed and the extent of cost reductions to
achieve. The key field Organisation means the way the
company formally anchors cost management. Structural
and organisational rules (institutions, responsibilities) and
the coordination between all the companys functions are
allocated to this key field. Information includes the specific configuration of reporting within cost management
as well as the business indicators used here. The key field
Tools refers to the methods and means used by the company to collect and analyse the cost situation. It is possible
to gather a broad range of tools. "Culture" includes topics
such as the motivation of all parties involved in or affected
by cost management, the companys attitude with regards
to internal communications, the level of participation from
the companys management in cost management, employees individual responsibility with regard to a cost-oriented
behaviour, staff competency in cost management as well
as their individual training opportunities.

Reasons are almost the same for all manufacturers: it is

about securing sustainable business competitiveness in an
international environment with additional strains caused
by environmental policies or particular challenges through
alternative power units such as electric mobility. Finally,
there are necessary investments to make in order to modernise and expand the production facilities which in turn
should lead to a reduction of production costs and therefore an increase of profitability. This is ultimately the core
mission of cost management, which ideally anticipates
instead of reacting: the sustained guarantee of efficient
and effective use of financial and material resources in the
company.
The present study Barometer Cost Management 2014
which addresses the topic of Financing Investment and
Growth is part of a series of studies that since 2011 and
deals with the development of cost management. The first
report focused on the analysis of overhead costs (Sustainability of Reduction Processes on Overheads), the 2012
study was extended to the broader topic of cost management, whereby every year, there is a focus on a specific
current topic. In 2012, the focus was on energy and energy
efficiency (Barometer Cost Management 2013: Cost efficiency in Companies and Success Factors) and in 2013
the effects of the financial and euro crisis on cost management were highlighted (Barometer Cost Management
2013 Cost Management in times of crisis). This year, the
study investigates the investment projects of companies,
the way they are financed and how cost management can
contribute.
Fig. 1 | Expense Reduction Analysts

Operationalisation of Cost Management

Organisation

Information

Tools

hard
factors

The Key Fields of the Barometer Cost Management

Cost Efficiency
Culture

Cf similar concepts in Himme (2008), p. 7ff., Himme (2009), p. 1055 ff. and
Kajter (2005), p. 80 ff.

soft
factors

Strategy

Procedure and sample

Methodological Approach
Similarly to the 2012 and 2013 surveys, a standardised
online survey was designed for the Barometer Cost Management 2014. Significant parts of the questionnaire were
carried out from the previous year, in order to track developments over time.

Position (in %)

55,3

29,1

Head of
Management
Department/
Board of
Division
Directors

8,0
Employees

3,8

1,7

Line
Assistants
Management to Management

2,1
Others

41,8

The survey was conducted over a period from April 7th

to July 6th, 2014. Companies from Germany, Finland, the
Netherlands, Austria, Denmark and Switzerland were included. Overall, 251 companies were interviewed2. The
previous year, 215 companies were interviewed, which
represents an increase of almost 17%, and an increase of
almost 36% (n = 185) in comparison vs. 2012.
Structural Features of the Sample
The underlying sample for the present study includes
companies of all sizes and from various industry sectors.
As shown in Figure 2, the Financial services sector is the
largest group with 23.5% followed by companies in the
Manufacturing sector with 22.3% (excluding Automotive
industry, Mechanical/Plant Engineering and Pharmaceutical/Chemical industries), Mechanical/Plant Engineering
with 18.7%, and Retail at 13.5%. Other industries such as
the Transport and Logistics sector (6.8%), Pharmaceutical/Chemical (4.4%) and other businesses are proportionally represented in the sample with less than 10%.

Fig. 2 | Expense Reduction Analysts

Sample distribution of respondents and companies
Departments (in %)

45,1

32,1

13,1

7,2

2,5

Management

Controlling

Procurement

Others

Finance

Cost Management is a topic for the top decision-makers

Amongst the companies surveyed, most participants were
people from senior management levels such as: Managing Directors, Board of Directors, Head of Department/
Division (a total of 84.4%). A further 3.8% had held a line
managers position, 1.7% were assistants to management
and 8 responded as an employee of a department.
The CEO has predominantly the responsibility for
Cost Management
A further result also illustrates how prominently the topic
of cost management is treated in companies. When asked
who is in charge of cost management within the company, results show that the issue is primarily the responsibility of CEOs (41.8%), then of CFOs (27.9%). Only in
24.7% of companies cost management is the responsibility of heads of department such as controlling (see fig. 3).
With the increasing size of companies, the responsibility
is shifted from the CEO to the CFO (no figure).

Sectors (in %)
Fig. 3 | Expense Reduction Analysts

23,5
Financial
services

6,8
Logistics

22,5
Manufacturing
sector

6,0
Others

18,7
Mechanical/
Plant
Engineering

4,8
Automotive
industrie

13,5

Responsibility in Cost Management

Retail
Area (in %)

4,4
Pharmaceutical
Chemical

41,8

27,9

5,6

7,2

17,5

CEO

CFO

CPO
Head of
Purchasing

Head of
Controlling

Senior
Department
Employee

N=251, information in %

To make the current Barometer Cost Management data comparable with the previous year, the records were equally weighted based on the previous years
distribution. The variables company size and industry sector and country were used as weighting criteria.

Barometer Cost Management

The index of the Barometer Cost Management remains static
The Barometer Cost Management, which captures the
level of activity and implementation of a holistic and comprehensive cost management in practice3, has increased
by 3 points from 2012 to 2013. This year however, a slight
decrease of 0.6 can be seen (see fig. 4). If we follow the
hypothesis that in times of crisis, the activities in cost
management increase due to the external pressure and
in periods of relative stability the sensitivity to cost measures decreases, the decrease of the barometer can be regarded as an indication that the effects of the Financial
and Euro crisis have lost some of their force. However, it
can also be an indication that companies apply their cost
management in a reactive rather than pro-active manner,
which can be dangerous in the event of a new crisis.

Large companies are better placed than small ones

with regards to cost management
The significance of cost management increases alongside
the size of the companies, with the exception of middlesized companies with 5001,000 staff who achieve the
highest value. These companies operate on the threshold
between small and large companies. On the one hand,
they have enough resources to professionalise their management system, but on the other hand, they have no bureaucratic structures.

Fig. 5 | Expense Reduction Analysts

Barometer Cost Management by company size

Barometer Cost Management

Indexpoints
70,2

70

67,9

68,9

64,8
62,5

62,5

60
Fig. 4 | Expense Reduction Analysts
Barometer Cost Management
50
Max. 100

2012

2014

73,2
74,0
71,0

Strategy

67,8
69,0
65,7

Organisation

Information
61,1

64,2
64,6
64,9
64,2
67,6

Culture

55,2

>5.000
N=251

Greater need for optimisation in the Pharmaceutical /

Chemical sector

2013

Tools

100-250
251-500 500-1.000 1.001-5.000
Size of companies by number of employees

65,4

66,0

63,0

<100

58,8
59,4

A differentiated analysis by sector reveals that, as in the

previous year, companies from the Manufacturing sector
and Automotive industry have on average the most developed cost management. The Pharmaceutical & Chemical
sector, as well the Machinery and Equipment sector have
the greatest need for optimisation (see fig. 6). The Pharmaceutical industry is in spite of turnovers currently rising worldwide, faced with significantly declining margins,
which can be attributed to enormous price and cost pressures, regulatory changes (e.g. government price restrictions), higher R&D costs and expiring patents.
The same applies to the Chemical industry, which is above
all struggling with sustainability issues, ever shorter product life cycles and with problems regarding the supply
of raw materials. Many companies from these industries
react with the relocation of production, in particular in

For details of the methodological construction of the Barometers Cost Management: Expense Reduction Analysts / EBS Business School (2012).

the emerging Asian countries; however an alternative approach could be in an efficient and ongoing cost management.

Concrete examples for the activities of companies in the

five individual key fields of a comprehensive cost management are illustrated in the graph below, in which various
aspects are shown according to their average score in the
companies and in relation to the cost efficiency (fig. 7).
An environment analysis and corrective measures
carried out on an ongoing basis against plan variances provide cost advantages for companies

Fig. 6 | Expense Reduction Analysts

Barometer Cost Management per sector

67,8

67,5

67,4

Automotive
industry

Other industrial
sectors

66,9

Others

65,4

Financial services

65,1

Overall

65,0

Logistics

61,2

Retail

An environment analysis carried out on an ongoing basis

has in the key field Strategy the strongest relation with
cost efficiency of all aspects considered to identify risks
and opportunities (2). Thereby anticipated or potential
changes can be detected early in a competitive environment and give companies valuable time to promptly take
the relevant alternative measures. Similarly, a strong effect can be observed in the preparation of corrective
measures for plan deviations (8) in the key field Tools.
Both processes are taken into account in the majority of
companies surveyed.

59,2
Pharmaceutical /
Chemical

Machinery /
Equipment

N=251, information in %

Fig. 7 | Expense Reduction Analysts

Companies characteristics

7
5

2
8

10

0,0

Low specificity
Strong action

Low specificity
Low action
0,1

0,2

Relation to cost efficiency*

N=251; *Correlation coefficient , p 0,01

3 All relevant operational areas are included

in cost management
4 The staff levels for cost management are
sufficient
5 There are clear objectives/values planned
for the KPIs in cost management
6 Regular adjustment of the KPIs in cost
management
7 Use of IT-base MIS
8 Elaboration of corrective measures for
plan variations
9 Employee individual incentives to contribute to the increase of cost efficiency
10 Staff in controlling benefit from regular
training seminars

Strategy
3

Organisation

High specificity
Strong action

Information

High specificity
Low action

Tools

1 External benchmarks taken into account

2 Ongoing environmental analysis for the
detection of risks and opportunities

Culture

Activity of companies in the five key fields in relation with cost efficiency

0,3

0,4

0,5

Further factors with an influence on cost efficiency are

taken into account in external benchmarks in the key field
Strategy (1).
On the one hand, the existence of clear objectives and
planned values for indicators in cost management from
the key field Information must be mentioned here, with
which the success of products and processes can be controlled, and on the other hand, the periodical adjustment
of indicators to new requirements (6), are for example visible from the environment analysis. These factors also apply in most companies. Lastly the inclusion of all relevant
operational areas such as purchasing, production, sales,
marketing, finance, etc. (3) is a critical factor from the key
field Organisation.

Comparatively, companies use IT-based information systems (7) to monitor cost efficiency and to evaluate (field:
Information). The staffing situation (4) in cost management is mainly described as sufficient (field: Organisation). For both factors however, there is only a moderate
relation to cost efficiency to be seen.
Two aspects from the key field Culture were highlighted,
but these are achieved only in practice by a minority of
companies: the creation of individual incentives for employees to contribute to the increase of cost efficiency (9)
and regular visits of the employees to training seminars
in the field of controlling (10). Both aspects have only a
relation to cost efficiency moderate to mild, which can
be attributed to the fact that cultural patterns aimed at
peoples behaviour achieve the desired effects not on the
short but on the long term.

Cost Management in Practice

The Automotive and Pharmaceutical/Chemical industries especially see savings potential in Energy

Cost categories with the greatest potential for

savings
Companies see large potentials for cost savings in
Energy, IT and Logistics
The savings potential of different cost categories was analysed in the survey. Specifically, the question was about
what were the three different cost categories with the
greatest savings potential. Energy, IT, Logistics, Travel and
Marketing were here identified as the categories with the
greatest potential savings (see fig. 8).4

According to their specific characteristics, companies

are confronted to the various cost categories in different
manners. Across all sectors large savings potential are
seen with Energy, in particular for companies in the Automotive, Pharmaceutical/ Chemical and Logistics sectors.
In the Services sector, optimisation options are especially
in IT and Travel costs; in the Machinery/Equipment sector, in Retail, as well as the Automotive industry Logistics
costs are a special focus. In addition to Energy, the largest savings potential in the production sector are almost
equal to a group of various cost categories: Maintenance,
Logistics, Travel, Marketing, Fleet and IT.

All other cost categories are mentioned at less than 20%

by companies, with Fleet Management (19%) and Maintenance (18%) the most likely to have savings potential.

Fig. 8 | Expense Reduction Analysts

Fig. 9 | Expense Reduction Analysts

The cost elements with greatest savings potential

19

18

15

12

11

11

Automotive
industry

Pharmaceutical 55 45 18 9 27
& Chemical

Packaging

Insurance

Print costs

Office supplies

Services

Logistics

Waste
Management

Cleaning

Security

Merchant
cards

Machinery /
Equipment

Retail

Uniforms

Other
industries

N= 251; information in %, up to 3 entries

10

Telecommunications

Equipment
Factory consumables

Facility Management

8 8 25 25 25 0

Freight

TeleFleet Maintenance Facility

Equipment
commuManagement
Management Factory
consumables nications

In 2012 and 2013, questions were asked regarding the most important cost
categories; this year it was decided to ask questions about the cost categories where the biggest savings potential lies.

Maintenance

Fleet

67 33 50

Marketing

25
Marketing

Energy

25
Travel
Managment

Travel management

30
Logistics

Logistics

30
IT

IT

31
Energy

Most important indirect cost categories per sector5

0 18 18 45 9

21 39 0 32 29 23 14 21 4 23

41 24 29 18 12 35 18 24 12 12

30 26 45 40 19 9 19 2 15 9

19 31 53 13 16 34 13 22 9 13

32 19 26 23 23 19 28 6 15 6

Significant variations from the average are highlighted. Upwards variations

are in red, downwards variations are in green.

Cost reduction processes becoming more efficient

The success rate of cost reduction processes has increased in recent years

The institutionalisation of a comprehensive cost management, thanks to professional structures, significantly

boosts the optimisation efforts in organisations: companies with increasing levels of activity in terms of a comprehensive cost management (index Barometer Cost
Management) are increasingly satisfied with the results of
the cost reduction processes (see fig. 11).

Fig. 11 | Expense Reduction Analysts

Satisfaction with cost reduction processes and
comprehensive cost management

Barometer Cost Management

In order to increase their productivity, 92% of companies

surveyed have implemented cost reduction processes
over the last three years, 6% more than the previous year.
Only 8% of companies have no activity to that end (see
fig. 10, upper graph). The reduction processes bring the
desired results for over two thirds of companies, and the
success rate has risen continuously over the past three
years. On a scale of 1 to 5, the average satisfaction score
has risen from 3.2 in 2012 to 3.6 in 2013 and currently to
3.8 points (see fig. 10, left scale).

Companies with a comprehensive cost management

optimise their cost structure more successfully

Fig. 10 | Expense Reduction Analysts

Reduction processes and satisfaction
Reduction processes in the last 3 years

70

46
32

1
Not at all
satisfied
No 8%

73

59

5
Very
satisfied

Yes 92%

Satisfaction with the reduction processes

68%

Average value: 3,8

(2013: 3,6)
(2012: 3,2)
52

27

N=215

5%

16
5
0
Not at all
satisfied (1)

Very satisfied
(5)

11

All companies surveyed in the Automotive and Pharmaceutical/Chemical industries perform cost reduction processes

that savings of over 10% of turnover are due not only to

cost management programmes but also to changes in
staff structure.

When cost optimisation is part of day-to-day business in

most companies, there are also differences between industry sectors. Whilst on the one hand, cost reduction
processes can be seen in all Automotive and Pharmaceutical/Chemical industries, on the other hand, the proportion in Retail is of 88% and in the Services sector 92%.

The Logistics sector achieves the highest saving rates

Fig. 12 | Expense Reduction Analysts

Reduction processes per sector

100
Automotive
industry

100
Pharmaceutical
& Chemical

93
Other industries

94
Logistics

92

94
Machinery /
Equipment

88

Overall

Retail

87
Others

The highest saving rates, measured as percentage of

turnover, can be seen in the Logistics sector, where the
average rate is 6.8% (see fig. 14). The Logistics sector is
exposed to huge competition and cost pressure as a result
of globalisation and the dynamics of technological development more than almost any other economic sector. In
addition, they will be burdened with the increase in fuel
costs, new and increasing toll costs, or from increased
safety standards in the international supply chain.
The Financial sector and the Automotive industry are,
with 6.6% and 6%, also reducing their cost drastically
through cost reduction programmes. In the Automotive
industry, the savings are mainly offset by innovation processes and the reduction in material costs. In comparison,
the lowest savings are found in the Retail industry and in
the Pharmaceutical/Chemical industry6.

N=251

Companies generate on average 5.6% additional financial resources based on their annual turnover
through cost reduction measures

Abb. 14 | Expense Reduction Analysts

Savings per sector

On average, companies surveyed were able to reduce

their costs by 5.6% of turnover. Almost a third of companies generated between 6% and 10% of their turnover,
and sometimes over 10% (see fig. 13). However, it is likely

6,8
Logistics

6,6
Financial
services

6,0
Automotive
industry

Fig. 13 | Expense Reduction Analysts

Number of companies in %

Volume of savings from the reduction processes

5,9
Others

5,6
Overall

38,8
29,3

24,1
7,8

5,2
Other industries

0-2%

3-5%

6-10%

5,1
Machinery /
Equipment

4,8
Pharmaceutical
& Chemical

4,4
Retail

>10%

Savings in percentage of turnover

N=251

N=251

Cf. ZEW, Statista (2014).

12

Financing Investments and Growth

Fig. 15 | Expense Reduction Analysts

Variations in investments compared to previous years

50
44

+57%

39

40

Number of companies in %

Business efficiency is a prerequisite for companies in order to survive within a global and dynamic competition. It
is also one of the main goals of cost management, where
activities are directed to use valuable resources such as
materials or staff as efficiently as possible. The companys
liquidity will increase through savings and the level of
prices of their own range will remain competitive. At the
same time, the scope for the financing of investment increases. In our 20117 study on overhead costs, we found out
that funds generated through cost reduction programmes
were however less used for investment than to increase
the companys profit. The topic of financing investment
and growth will form a more extensive analysis in the current Barometer Cost Management than in the previous
one, where the purpose, object and goal of investment
projects and the financing methods used are at the centre
of the observations.

30

28

20

17

19
13

10

2012

2013

Decreased
Increased

2014
(planned)

N=251

Investments
The volume of investments has risen sharply since
2012
The total volume of investments for the companies surveyed has risen sharply since 2012: in 2012, 28% of companies report higher volume of investments, in 2014 there
are 44% already, which represents an increase of 57%.
Then again, 19% of companies have reduced their investments, when in 2012 it was 17% which represents an
increase of 12% (see fig. 15).

Cf. Expense Reduction Analysts (2011), p. 21.

13

The bigger share of investments flows into tangible

and intangible investments

Strong decline in foundation and start-up investments

Types of investments may be categorised according to

various criteria. One of the most common thus most obvious distinctions is the categorisation by investment target, i.e. if there was purchase of equipment, investment in
funds, or if intangible investments were made. In the case
of corporate takeovers, investments are made simultaneously in all categories8.

A further breakdown of investments is based on the goal

or the action with which it will be followed: Investments
that are necessary for maintenance (replacement investments), and those which are made to increase the capital
stock (net investments)9. The results of the survey show
that many companies have used the recovery in 2013 to
expand their business, whereas in 2014 the greater trend
towards capital preservation is evident. Whilst the share
of the net investments in the previous year was 26%, only
21% of investments in this area are planned in 2014, which
represent a decline by 19% (see fig. 17). These changes are
almost entirely due to the reduction of 56% in foundation
and start-up investments.

The results of this years survey show that companies

make most of their investments in the fields of tangible
and intangible assets and primarily in machinery and
equipment (71.4%) and in research and development
(34.3%). Over one in ten companies planned financial
resources for corporate takeover; in big companies with
more than 1,000 employees the proportion is almost one
in five (18.2%). With just under 10%, financial investment
only plays a minor role (see fig. 16).

Fig. 16 | Expense Reduction Analysts

Proposed investment projects in 2014

Investment in
tangible assets

71,4

Machinery / Equipment
16,4

Property

8,9

Shares

Financial investments

Stocks

0,9

Acquisitions

Research & Development

Intangible investments

34,4

Personnel
Patents
Licences

11,3

29,1
3,3
1,4

N=251, multiple entries

Cf. Ermschel/Mbius/Wengert (2013), p. 29.

14

Cf. Olfert (2012), p. 31.

Automotive and Pharmaceutical/Chemical industries

invest mainly in measures of rationalisation

Diversification investments are on the increase

For the current year however, companies are planning a
stronger focus on diversification investments: compared
with 2013, 28% more companies want to invest in this direction. Diversification strategies are frequently pursued
by companies when the markets are saturated with the
current products, when competition has the upper hand
or when there would be better market opportunities for
new products.

Whilst diversification investments are found almost equally in all industry sectors, the Automotive and Pharmaceutical/Chemical industries focus on rationalisation investment for their machines or systems. In the Service
sector and in other Manufacturing industries replacement
investments are primarily observed. Logistics, Retail and
Machinery/Equipment have planned increased expansion
investments in 2014.

Fig. 17 | Expense Reduction Analysts

Main purposes of investment projects 2013 und 2014

Expansion investments
e.g. increase in production capacity,
additional retail space

Net investments

17
17

Foundation investments / Start-up investments

e.g. Launch of a new business, a subsidiary or construction of
a permanent place of business

4
9

Pure replacement investments

e.g. replacement of a defective system

Replacement investments

24
26

Rationalisation investments
e.g. replacement of a technologically obsolete machine
or system

17
16

Diversification investment
e.g. addition of new product lines Entry into new markets such
as regions

18
13

Other investment purposes

2014 planned

2013
14

No investment projects

13
N=251

Fig. 18 | Expense Reduction Analysts

Planned investments 2014 per sector

Automotive
industry
Pure replacement investments

17

Diversification investments

25

Expansion investments

Pharmaceutical Services
& Chemical
27

33

18

19

Logistics

Retail

12

13

Machinery /
Equipment
19

Other
industries
21

24

20

21

13

29

33

26

16

Rationalisation investment

42

55

18

19

18

Property /
Construction investments

10

No investment projects

17

18

13

11

20
N=251, information in %

15

Rationalisation and increasing the companys turnover are the main goals of investments

The fulfilment of compliance standards, such as regulatory requirements, does not affect all companies in
equal measure. With increasing regulatory requirements
passed by legislation, the Finance and the Logistics sectors are confronted, since the financial crisis, to increasing requirements regarding emissions and safety aspects,
something also reflected in the investment objectives per
sector (see fig. 20).

The investments are primarily targeting the increase of

revenue e.g. the companys turnover (71%) and rationalisation of ongoing processes for cost reduction (48%). Just
under a third of companies focus on technological innovations (32%) or Research & Development (31%). Fulfilment
of compliance standards such as regulatory requirements
(12%) or environmental aspects (8%) play only a minor
role (see fig. 19).

In addition to the common objective of revenue increase,

the investments in the Automotive and Pharmaceutical/
Chemical industries are strongly focused on research &
development; in all other industry sectors, the main focus
of investments is on measures of rationalisation.

Fig. 19 | Expense Reduction Analysts

Investment objectives

Revenue increase

71

Rationalisation / Cost reduction

48

Technical innovation

32

Innovation / R&D

31

Fulfilment of compliance standards

Environmental aspects

12
8

Other objectives

9
N = 251, information in %, max 3 entries

Fig. 20 | Expense Reduction Analysts

Investment objectives per sector

Automotive
industry
Revenue increase

67

Rationalisation / Cost reduction

Technical innovation
Innovation / R&D
Fulfilment of
compliance standards
Environmental aspects
Other objectives

Pharmaceutical Services
& Chemical

Logistics

Retail

Machinery /
Equipment

Other
industries

100

65

50

82

71

71

50

36

44

43

36

64

51

50

36

33

32

33

27

58

73

25

0
8
0

13

9
0
0

14
0

14

41

20

21

14

16

18

21

4
13

4
14

13
4

N = 251, information in %, multiple entries

16

Companies resort mainly on internal financing tools

(profits, depreciation and cost savings) to finance
their investments

Financing
In order to finance their investments, companies have
various options at their disposal, which can be systemised
according to different criteria. Besides the duration of provision of capital, the sources of capital and the legal status
of the investor are the most common classification criteria
to differentiate the types of financing. As to the sources of
capital, there is a distinction between external financing
i.e. external investors lead the company to financial resources, and internal financing, i.e. the financial resources
generated by the company itself.

The results of the survey make it clear that companies

have a strong tendency to use their internal financial resources for investments (see fig. 22). 95% of all companies use the leeway they have from profits and depreciation for their investments. It is also worth noting that 87%
of companies actively use their cost savings as financing
tool, of which 27% intensively and 14% very intensively.
When external funding is requested, this usually applies
to financial tools such as leasing (60%) and traditional
bank loans (55%). However contracting, which mostly
applies in relation to energy efficiency, is used by almost
a third of companies (see fig. 22). Equity capital (23%),
the issuing of shares (14%) or the production of bonds
is mostly found in larger companies with over 1,000 employees. Finally, 39% of companies use public subsidies.11

A further type of systemisation distinguishes the companys perspective from that of the shareholder. This is
where the criterion of the legal status of the investor is
based, i.e. whether the company will have financing from
equity or borrowed capital. Similarly, we speak in this context of self-financing and external financing. A classification
arranged according to these criteria is shown figure 2110.

Fig. 21 | Expense Reduction Analysts

From shareholders perspective

Types of financing and financing tools

Internal financing

External financing

Self-finance

Financing through Profits

and Depreciations

Equity financing

Self- and borrowed finance

Finanzing through
issues of shares

Public funding
Financing through
mezzanine capital

Financing through
rationalisations / savings
Borrowed finance

Financing through accruals

Bank loans
Leasing
Contracting

Fig. 22 | Expense Reduction Analysts

Financing of investments
Self-finance

1 (little used)
Venture capital
Issuing of shares

Self- and
borrowed
finance
Borrowed
finance

6 9 5 3 23

4 (very often used)

5 5 22 14

Profit / Depreciation 1 12

33

Cost savings

14

32

Public funding

13

Leasing

14

Bank loans

12

Contracting

10

15

15
14

Cf. Grfer/Schiller/Rsner (2014), p. 35 and Becker (2013), p. 129.

95

49
27

14

87

Internal
financing

10 1 39

19

Issue of bonds 3 6 3 2 14

10

Cumulative value for individual categories

16
17

60

11
11

55

External
financing

6 2 32
Increasing intensity of use

N = 251, information in %

Cf. Grfer/Schiller/Rsner (2014), p. 176f.

11

17

Cost savings provide a strong basis for the financing

of investments

Only 12% of funding requirement are covered by

traditional bank loans

Translated into the proportional volume of the individual financing tools12 33% of the overall funding is covered through profits and depreciations; 22% from cost
savings(see fig. 23). These results underline the high importance of internal financing in the provision of capital.

Borrowed financing makes overall 31% of the financing

mix; the comparatively low significance of the traditional
bank loans is to be noticed. The proportion of this type
of funding is only 12% and almost equivalent to that of
leasing. This relatively low percentage is due to the increasing reluctance of banks to provide loans, which results
from increased requirements in equity ratios as well as
the continuous stress test from the European Central Bank
(ECB)13. Companies are therefore obliged to find alternatives for their funding needs, such as leasing or contracting.
The high proportion of financing from cost savings illustrates the value of comprehensive cost management: as
seen above, companies with comprehensive cost management are more successful with their measures of
cost optimisation (see p. 18) which is ultimately reflected
in greater freedom for necessary investments.

Fig. 23 | Expense Reduction Analysts

Distribution of types of funding in percentage

Self-finance

Profit / Depreciation

33

Venture capital
Issuing of shares
Self- and
borrowed
finance
Borrowed
finance

= 39%

4
2
22

Cost savings
6

Public funding

= 28%

12

Leasing

12

Bank loans
5

Contracting
Issue of bonds

Other financing tools

= 31%

N = 251, multiple entries

The intensity of use of individual financing tools was extrapolated to

100 per company, so that the scope in % of each tool can be determined
approximately.

12

18

Cf. Deutsche Bank Research (2014), p. 3.

13

Bibliography
Becker, Hans Paul (2013): Investition und Finanzierung:
Grundlagen der betrieblichen Finanzwirtschaft, 6. Aufl.,
Wiesbaden.
Deutsche Bank Research (2014): Argumente fr eine
quantitative Lockerung der EZB, Frankfurt/Main.
Ermschel, Ulrich/Mbius, Christian/Wengert, Holger
(2013): Investition und Finanzierung, 3. Auflage, Springer,
Berlin/Heidelberg.
Expense Reduction Analysts GmbH/EBS Business
School (2011): Nachhaltigkeit von Reduktionsprozessen
im Gemeinkostenbereich Studie zur Umsetzung von
Kostenreduktionsprogrammen und Nutzung der eingesparten Potenziale, Kln/Oestrich-Winkel.
Expense Reduction Analysts GmbH/EBS Business
School (2012): Barometer Kostenmanagement 2012. Kostenmanagement in Krisenzeiten, Kln/Oestrich-Winkel.
Expense Reduction Analysts GmbH/EBS Business
School (2013): Barometer Kostenmanagement 2013. Studie zur Kosteneffizienz im Unternehmen und deren Erfolgsfaktoren, Kln/Oestrich-Winkel.
Franz, Klaus-Peter/Kajter, Peter (Hrsg., 2002): Kostenmanagement Wertsteigerung durch systematische
Kostensteuerung, 2. Auflage, Schffer-Poeschel, Stuttgart.
Gleich, Ronald/Michel, Uwe/Stegmller, Werner/
Kmmler-Burrak, Andrea (2010): Moderne Kosten- und
Ergebnissteuerung, Haufe-Lexware, Mnchen.
Grfer, Horst/Schiller, Bettina/Rsner, Sabrina (2014):
Finanzierung, 8. Auflage, Erich Schmidt, Berlin.
Himme, Alexander (2007): Erfolgsfaktoren des Kostenmanagements Empfehlungen fr Kostenmanagementprojekte, in: Projektmanagement aktuell, no. 4, p. 16-23.
Himme, Alexander (2008): Erfolgsfaktoren des Kostenmanagements Ergebnisse einer empirischen Untersuchung, Arbeitspapiere des Lehrstuhls fr Innovation,
Neue Medien und Marketing der Universitt Kiel.
Himme, Alexander (2009): Kostenmanagement Bestandsaufnahme und kritische Beurteilung der empirischen Forschung, in: Zeitschrift fr Betriebswirtschaft,
79. Jg., p. 1051-1098.

einer branchenbergreifenden Feldstudie, in: Zeitschrift

fr betriebswirtschaftliche Forschung, 57. Jg., Heft 2, p.
79-100.
Olfert, Klaus (2012): Investition, 12. Auflage, Kiehl, Herne.
ZEW, Statista (2014): http://de.statista.com/statistik/
daten/studie/255009/umfrage/kostensenkung-im-automobilbau-in-deutschland-durch-prozessinnovationen/

List of Graphs
Fig. 1: The Key Fields of the Barometer Cost Management, p. 5
Fig. 2: Sample distribution of respondents and companies, p. 6
Fig. 3: Responsibility in Cost Management, p. 6
Fig. 4: Barometer Cost Management, p. 7
Fig. 5: Barometer Cost Management by company size, p. 7
Fig. 6: Barometer Cost Management per sector, p. 8
Fig. 7: Activity of companies in the five key fields in relation with cost efficiency, p. 8
Fig. 8: the cost elements with greatest savings potential,
p.10
Fig. 9: Most important indirect cost categories per sector, p. 10
Fig. 10: Reduction processes and satisfaction, p.11
Fig. 11: Satisfaction with cost reduction processes and
comprehensive cost management, p. 11
Fig. 12: Reduction processes per sector, p. 12
Fig. 13: Volume of savings from the reduction processes,
p. 12
Fig. 14: Savings per sector, p. 12
Fig. 15: Variations in investments compared to previous
years, p. 13
Fig. 16: Proposed investment projects, p. 14
Fig. 17: Main purposes of investment projects in 2013
and 2014, p. 15
Fig. 18: Planned investments 2014 per sector, p. 15
Fig. 19: Investment objectives, p. 16
Fig. 20: Investment per sector, p. 16
Fig. 21: Types of financing and financing tools, p. 17
Fig. 22: Financing of investments, p. 17
Abb. 23: Distribution of types of funding, p. 18

Kajter, Peter (2005): Kostenmanagement in der

deutschen Unternehmenspraxis Empirische Befunde

19

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20

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