Don’t assume that cost reductions will leave sales unaffected: Take the time to consider what will probably happen before making cost cuts. When is a cost reduction lead to a cost increase? When the cost reduction drives too many customers away! Whenever you read in the financial press about a company making a large cost reduction, try to remember whether or not the same firm has done this before in recent history. Chances are that the latest announcement is just the latest in a series of such cuts. If layoffs and facility shut-downs are such a good idea, why didn’t the company make all of the changes sooner? The usual answer is because the company didn’t achieve its sales targets following the last round of cost-cutting. |
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