Cost reduction is no longer merely a financial discipline exercise or a response to economic uncertainty. For a growing number of companies, operational efficiency has become the primary source of funding for investments in business transformation, digitalization, and artificial intelligence, according to a new study by Horváth, the international management consulting firm.
Based on interviews with more than 1,000 C-level executives, the study found that improving cost structures and profitability is now the second-highest strategic priority for business leaders worldwide, ranking just behind investments in artificial intelligence and digital transformation.
Against this backdrop, companies are setting increasingly ambitious efficiency targets. Manufacturing businesses expect to reduce costs by the equivalent of 3% of revenue in 2026, while companies in the services sector are targeting savings of 5% of revenue. Compared with the previous edition of the study, these targets have increased by 0.5 percentage points in manufacturing and by 2.7 percentage points in services, underscoring a shift in mindset: cost optimization is increasingly viewed as an investment in competitiveness rather than simply a cost-control measure.
For manufacturing companies, the largest cost reductions are expected in selling, general and administrative (SG&A) expenses, accounting for 28% of planned savings, followed by indirect production costs at 14%. In the services sector, the biggest savings are expected to come from personnel expenses (34%), followed by SG&A costs.
The Horváth study highlights that cost-reduction programs are no longer focused solely on lowering operating expenses. Instead, companies are placing greater emphasis on simplifying organizational structures, optimizing processes, and increasing productivity, enabling the resources generated through efficiency measures to be redirected toward investments in new technologies and business transformation.
“In recent years, cost reduction was primarily seen as a response to economic uncertainty. Today, we are witnessing a paradigm shift: companies are using efficiency gains to generate resources for investments in artificial intelligence, digitalization, and the development of new competitive advantages. Businesses that successfully combine financial discipline with transformation investments will be best positioned for the next growth cycle,” said Maria Boldor, Partner and Managing Director, Horváth Romania.
Looking ahead, manufacturing executives identified supply chain disruptions (56%) as the biggest risk facing their businesses, followed by rising energy prices (51%) and changes in trade tariffs (39%).
For service-sector companies, financial risks dominate, with inflation (59%) and higher interest rates (45%) topping the list of concerns. However, rising energy prices (37%) also rank among the top three anticipated risks for executives in this sector.
Despite ongoing economic pressures, profitability expectations remain cautious but stable. The study forecasts that operating profit (EBIT) margins will remain broadly stable in 2026. In the services sector, EBIT margins are expected to edge up from 13% to 13.03%, while manufacturing companies are projected to improve from 7.6% to 8.4%. The findings suggest that efficiency measures are beginning to deliver tangible results while creating the financial capacity for further investment in transformation initiatives.