DEVELOPING COST MANAGEMENT STRATEGIES AND PROFITABILITY IN MANUFACTURING SMES IN IRAQ: THE ROLE OF MARKET COMPETITION AS A MODERATING VARIABLE

Abstract

Effective cost management strategies are essential for fostering profitability and ensuring the long-term sustainability of manufacturing SMEs, particularly within highly competitive and volatile environments such as Iraq. This study aims to investigate whether strategic cost control techniques—specifically cost-volume-profit analysis, activity-based costing, and lean management—confer measurable benefits to Iraqi manufacturing SMEs. Adopting a quantitative research design, data were gathered from 314 managers representing manufacturing SMEs across Iraq and analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM). The results indicate that sound cost management practices significantly contribute to enhanced profitability (β = 0.665, p < 0.001). Furthermore, market competition was found to exert a positive moderating influence on this relationship (β = 0.152, p = 0.008), suggesting that the advantages of cost control are amplified in more competitive settings. These findings underscore the importance for Iraqi SMEs to implement customised cost management strategies responsive to prevailing market conditions. It is recommended that policymakers establish supportive frameworks that enable the wider adoption of such practices to promote financial resilience across the sector.