Cost reduction refers to measures implemented by a company to reduce its expenses and improve profitability. Cost cutting measures are typically implemented during times of financial distress for a company or during economic downturns. They can also be enacted if a company’s management expects profitability issues in the future, where cost cutting can then become part of the business strategy.
Shareholders who seek maximum monetary returns on their investments in a company expect that management will maintain growth in profits. When the business cycle is on an upswing, companies are generally able to generate profit growth. However, on a downswing, profits may fall and if they stay down for prolonged periods, management would feel the pressure from shareholders to cut costs in an effort to prop up the bottom line.
Cost reduction measures may include laying off employees, reducing employee pay, closing facilities, streamlining the supply chain, downsizing to a smaller office, or moving to a less expensive building or area, reducing or eliminating outside professional services, such as advertising agencies and contractors, etc.
Implementing new technology can also be seen as a cost cutting method. For example, a new machine may replace a certain number of employees, cutting labor costs, where the cost of the machine is made up after a certain period of time of not incurring labor costs.
Good costs focus on the company’s growth and are aligned with the company’s customers and how to meet the needs of those customers. Bad costs are those that do not match up with the company’s growth strategy, and waste resources. When bad costs are cut, they can free up resources that can be used in a more productive capacity. Best costs are the costs associated with what makes a company unique, how it differentiates itself from the competition, and how it provides true value to its customers.
Because salaries and wages are such a large expense, many companies look to layoffs first as a cost cutting measure when times are lean. However, there are many real or potential costs associated with firing people, including severance pay, unemployment benefits, rehiring costs, wrongful termination lawsuits, lowering of morale, and the risk of overworking remaining employees.
This cost structure template will be primarily useful for company leaders when preparing a company’s cost module strategy and for presenting cost saving opportunities. You can use the slides in this template to help you prepare a general cost-cutting plan for your company.
Crisis managers can use this template when preparing activities to take the company to a profit. Financiers and economists can use this template when preparing a cost reduction report. University professors can use this template to prepare a course on cost management or cost reduction in manufacturing.
Our cost reduction slides is a set of professional and modern templates that contains five stylish and fully editable slides. You can independently change the type and size of the font, color and position of the infographic. This template will be useful for startups, financiers, economists, company executives. The Cost Reduction template will complement your old presentations and will be a worthy addition to your collection of professional presentations.