Cost Control Measures and Operational Performance of Pharmaceutical Firms in Nigeria: Evidence From Selected Costing Methods

Abstract

 This study examines the relationship between cost control measures and operational performance in Nigerian pharmaceutical firms. Cost control is proxied by three costing methods, namely Activity-Based Costing, Traditional or Full Absorption Costing, and Standard Costing Techniques, while operational performance is proxied by brand loyalty, customer satisfaction, and market share. The investigation responds to a gap in the Nigerian literature, where prior empirical work on cost control has focused on broader manufacturing sectors rather than the pharmaceutical industry, and on financial rather than customer-facing performance dimensions. A cross-sectional survey design was adopted. Structured questionnaires were administered to management-level personnel at three listed pharmaceutical firms, namely Fidson Healthcare Plc, GlaxoSmithKline Consumer Nigeria Plc, and May & Baker Nigeria Plc. Of 150 questionnaires distributed, 142 valid responses were retrieved, giving a response rate of 94.7 per cent. Three simple linear regression models were estimated. The results show that Activity-Based Costing has a statistically significant positive effect on brand loyalty (β = 0.826, t = 13.163, p < 0.05), explaining 55.1 per cent of the variance. Traditional or Full Absorption Costing has a significant positive effect on customer satisfaction (β = 0.772, t = 11.563, p < 0.05), accounting for 48.7 per cent of the variance. Standard Costing Techniques are significantly and positively associated with market share (β = 0.694, t = 10.415, p < 0.05), explaining 44.1 per cent of the variance. The findings indicate that cost control practices function not only as instruments of financial discipline but also as drivers of customer-facing performance outcomes. The study recommends that pharmaceutical firms align their choice of costing system with the operational outcome they most need to improve, and that managerial investment in costing capability be treated as a strategic priority. 

Keywords: cost control, activity-based costing, absorption costing, standard costing, operational performance