Companies should start any cost-cutting initiative by thinking through whether they could restructure the business to take advantage of current and projected marketplace trends (for instance, by exiting relatively low-profit or low-growth businesses) or to mitigate threats, such as consolidating competitors. An important part of the analysis is to understand a company’s financial situation and the range of potential outcomes under a number of different external economic scenarios. Second, within the resulting strategy, take time to understand which activities drive value…and which activities do or could make the organization competitively distinctive. Organizations should invest in value-creating activities and cut costs in others while meeting clear financial goals in a set time frame.
Authors: Dennis Layton, Risto Penttinen, Suzanne Heywood
Source: McKinsey Quarterly
Subject: Management
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