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Characteristics of cost reduction
1) Cost reduction must be real : said through increase in productivity change in product design improvement in technology etc.
2) Cost reduction must be permanent : temporary reduction in cost due windfalls change in tax rate changes in market prices etc do not come in the purview of cost reduction.
3) Cost reduction must not impair : the suitability of products or services for the intended use. In other words cost reduction should not be at the cost essential characteristics of the products or service.
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