Cost cutting

For most companies, cost cutting in a down economy means across-the-board slashing that "spreads the pain" of budget reductions across many departments. Although 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 not just smaller, but weaker.

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.

Capabilities-Driven Strategy provides executives with the tools they need to rapidly and sustainably implement cost reduction. First identify and clearly articulate your company’s key capabilities — not just core competencies or skill sets, but those very few strengths that, in combination, define how your organization competes. Then use this information to create your company’s unique blueprint for effective and efficient cost reduction.

read more about Fit for Growth*, our platform for strategic cost transformation >

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Cesare Mainardi sat down with Paul Michelman of Harvard Business Publishing to discuss how executives should use a strategic approach to cutting costs — but often don't.
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In this video, experts from around the world discuss the concepts behind Cut Costs, Grow Stronger.
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Is your company ready for growth? Take the 5-minute interactive Fit for Growth index profiler to find out, and see how your company compares to its peers.

Key publications

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For most companies, cost cutting in a down economy means across-the-board slashing that "spreads the pain" of budget reductions across many departments.
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To reduce expenses for the long term and lead the way to recovery, start by taking a strategic view of your capabilities.
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A more strategic approach to costs can help you prepare for the next round of expansion.
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The study analyzed nearly 200 public companies across a wide range of industries. Each company’s index score was calculated and compared with its total shareholder return over the past two years.
Applying a Fit for Growth approach in China
As China makes the notoriously difficult transition from a low-cost to a high-value economy, both local companies and foreign multinationals can win by applying a Fit for Growth approach to develop new capabilities.

 


Further publications



* Fit for Growth is a registered service mark of PwC Strategy& LLC in the United States.