Cost Cutting for Growth and Profitability.pptVIP

? COPYRIGHT 2007. ANDREW J. SHERMAN. ALL RIGHTS RESERVED. 2216810 ? COPYRIGHT 2007. ANDREW J. SHERMAN. ALL RIGHTS RESERVED. 2216810 Strategies For Cutting Cost Improving ProfitabilityFor most companies, cost cutting in a down economy means across-the-board slashing that spreads the pain of budget reductions across many departments.While that may sound like the best approach for getting critical results fast and for limiting political infighting, it is a mistake – one that will leave your company weaker, not just smaller. Instead, companies that need to reduce costs should treat the challenge as an opportunity to identify and reinforce their key capabilities, while divesting those activities that do not truly reflect the business’s strengths or long-term goals.This more strategic approach will make your company more resilient as tough times continue and more robust as recovery begins. Ensuring that your business sustains its position of strength may demand a change in approach and tone.* You may need to re-examine and change the operating model of your businessYour business model may need to be refined to address the challenge of operating in an era of scarce capital and no leverage. The best companies are anticipating this and are examining their cost structure in great detail now.* Focus on the true profitability of your businessesThis is of vital importance to emerging stronger. Many organizations grew their product lines and geographic markets in times gone by without truly understanding the costs involved. Now is the moment to focus energies on core and profitable assets.* Do not confuse cost postponement with total cost managementMany businesses stop investing in new projects and people during difficult times or reduce support teams without thinking through the implications. There is often a price to pay in terms of customer loyalty, heightened risk and future profitability. Companies still need to analyse the long-term impact before making short-te