Global Economic Watch


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  • Stategic Cost Cutting as a Means, Not an End

    Karl Stark and Bill Stewart Co-founders, Avondale Strategic Partners , seem skeptical about any strategy that is touted as increasing profits while cutting revenues. And so they are wary of cost-cutting as a path toward growth. At Inc. , they share three questions that executives should ask when embarking on a cost-cutting plan: 1. What costs and investments are required to maintain the existing or projected revenue base? 2. Which costs or investments will impact revenues in future years – positively or negatively? and 3. Will your cost cutting necessitate further cuts in the future, creating a snowball effect? When cost reductions cut to the bone and beyond, the inevitable result is a snowballing sequence of profit declines. The lack of critical sales, marketing, R&D, and other investments will likely reduce revenues, which leads to additional cuts. As the pace of revenue declines increase, profits will eventually evaporate and the business will not have the ability to recover. In short, Stark and Stewart recognize the need to cut costs. But if cost-cutting is the goal rather than growth, then, as many newspaper executives have found out over the last decade, the need for cost cutting may never end. Read You Can't Cut Your Way to Growth here .
  • Top-Down Approach to Cutting Costs and Generating Cash

    As signs point toward recovery, companies need cash on hand to facilitate a rebound from the recession. And for some that means continuing to cut costs. Here's an instructive video from Knowledge@Wharton in which experts from Wharton and The Boston Consulting Group advocate a top-down approach to streamlining. This advice seems to run counter to advice we have posted from other experts, who advise getting employee participation in cost cutting strategies . Take a look:
  • To Cut Costs Without Cutting Services, Start in the Back Office

    Amanda Mesler , CEO of the IT oustourcing firm Logica North America , says that when it comes time to cut costs, managers need to look internally. Mesler says to avoid cutting anything that has to do with the business's relationship with customers, and instead figure out how to reduce expenditures "back office first." At her company, they went to employees and challenged them to help figure out how to cut costs without reducing services for customers. Get employees to recognize that they benefit from the growth of the company, and then they will get involved in finding solutions. Mesler explains in this BigThink video: