When Companies Face Difficult Times, Many Turn Their Strategic Focus to Aggressive Cost-Cutting and Benchmarking

When Companies Face Difficult Times, Many Turn Their Strategic Focus to Aggressive Cost-Cutting and Benchmarking

  • Submitted By: SteveyyyC
  • Date Submitted: 10/12/2013 10:25 PM
  • Category: Business
  • Words: 1273
  • Page: 6
  • Views: 107

Strategy as a means of gaining an advantage in an industry has rapidly evolved over the past half century, and today is management’s greatest weapon when it comes to making competitive decisions within a business. A company’s strategy is management’s approach to expanding the business, attracting and pleasing customers, gaining a competitive advantage, and achieving target objectives. When formulating a company strategy it is important that it closely fits with the core competencies, and objective of the business. However when companies face difficult times, many turn their strategic focus to aggressive cost-cutting and benchmarking. These changes are often applied haphazardly with only short term objectives being considered, but when these changes are made strategically, it helps to ensure both survival in the short term, as well as recovery over the longer term.
Aggressive cost cutting is an effective short term survival technique when a business is facing imminent danger. Cost cutting focusses on reducing non-value adding departments or activities, which often means reducing training and development expense, as well as across the board labour reductions. In time critical situations aggressive cost cutting strategies are preferred by management, as they show that they are capable of achieving their short term performance targets. However as suggested by Hofer (2012), management consider any actions available to them that help to achieve their targets, regardless of whether they make long term strategic sense. This is further supported in The Importance of Strategic Cost Cutting, where Rothburg (2012) states that, “Unfortunately, many companies implement cost-cutting strategies haphazardly and don’t take into account the potentially damaging long-term impacts. Undisciplined, company-wide cost cutting can severely damage a company’s core competencies and diminish its strategic advantages, limiting its ability to take advantage of new opportunities in the...

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