Cost cutting article review

Essay by sseguchiUniversity, Bachelor's June 2005

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Article 1 reviews "Cost cutting in a downturn".

This article states that "according to a study of 377 large businesses by the consultant Bain & Company, sharp managers respond to a downturn by tightening their alliances with stakeholders, not just cutting costs". Aggressive cost management is extremely important during a downturn. However, many executives overreact to disturbing economic reports. Layoffs, for example, are often implemented as a way of holding down costs. Costs have to be carefully managed. The key is consistency. A company should not act one way in good times and another way in bad times. Otherwise, employees, suppliers, and other business partners will lose confidence in the company, and morale, cooperation, and productivity will all decline.

Another thing that some company's focus on is short term goals and forecast. This is no way to run a big company. In Japan the focus seems to be on long term goals and this style of management seems to work very well.

Stock will be stable and employees stay longer. Earlier I mentioned consistency during good and bad times. Consistency will keep everyone associated with your business loyal. Loyalty is a very important thing over a period of time. Loyalty also builds trust and loyal employees work with a company longer and with more effort. American companies seem to cut cost in all the wrong ways in bad times. Lot of times companies will lay off large amounts of employees just to make their quarterly earnings, and then they try to hire people back. That type of approach is very unstable and can result in a bad company reputation. When a company gets a bad reputation for laying off too many people, it's hard for them to hire new employees when business is better and they need lots of employees.