Cost cutting – misunderstood?

How do you increase profits in times of economic slow downs or increased competition?  There are important elements to consider if strategic cost reduction is to be implemented.   

To avoid the negative connotations that employees may have with cost cutting, it is necessary to differentiate between simple cost cutting and strategic cost reduction (SCR). At its core, SCR eliminates waste and conserves resources in order to reinvest the savings in critical business assets including employees, technology, and R&D. 

 SCR does not mean unnecessarily reducing quality, poorer service, or anything else that could undermine a company’s market position.  Instead, strategic cost reduction takes advantage of every opportunity to better leverage existing and new assets to bring value to customers and shareholders. 

It is vital that SCR initiatives be conceived and deployed in concert with the overall business. SCR is something every business should be thinking about. A good SCR methodology primes your organisation to enact value creating and sustainable cost savings by ensuring that the cost reduction initiative has buy-in from company managers and employees, is aligned with the company vision, that it is applied in the right business area, and that the results are attainable and measurable.

David Stafford

David Stafford is the Executive Consultant at DC Strategy.

DC Strategy is the region’s leading specialist consulting and legal firm. Our specialist teams in Strategy, Franchising, International and Legal have developed the networks and brands of many of the region’s most successful businesses. Contact David Stafford at david.stafford@dcstrategy.com