Cost Reduction Strategies for a Company
This policy is aimed at minimizing the company's expenses on those types of activities that are unprofitable. As a rule, the company's profitability is at a minimum level, the profitability is very low or negative. The main task of the company's manager in this case is a complete reorganization of the company's work, restructuring of types of activities and a gradual transition to stabilization and growth strategies. If this plan is not implemented, the task of leaving the market and liquidating the company with the lowest possible losses comes to the forefront.
The growth, stabilization and liquidation of a company can be achieved through the following strategies:
Concentration is an increase physician database in the production volumes of the main product or service line. This strategy of managing an organization has several subtypes. Horizontal concentration involves opening or purchasing enterprises that produce similar products. Unification based on a product line is implemented by improving the quality of manufactured goods and expanding the line. Concentration based on market development is aimed at increasing the current market share and strengthening the company's positive reputation.
Vertical integration is the strengthening of a company's control over its customers and suppliers by opening or buying companies that are at the top and bottom of the technological production and sales chain. Forward integration involves the acquisition or creation of companies from the top link (for example, a metallurgical plant acquires a machine tool company), and reverse integration involves the acquisition or creation of companies from the bottom link (for example, a company producing fruit juices buys a company that creates cardboard packaging for food products).
Diversification is the release of products or services by a company that differ from its main product line. Coherent diversification involves the production of products that are analogous to the basic range. Uncoherent (conglomerate) diversification is the release of products that are not related to the main activity of the enterprise (for example, a company that creates skin care cosmetics organizes the production of chocolate bars). Concentrated diversification is implied in a situation where an organization opens production in new areas for it, but the goods and services produced remain close to its main activity.
TQM (Total quality management), or the strategy of comprehensive quality, involves using the characteristics of goods and services as a criterion by which the growth and expansion of the organization is assessed. This type of management policy applies completely to the entire staff of the company. Any innovation is considered by the management from the position of how positively or negatively it will affect the quality of the products sold. At the same time, the company carries out daily quality control.
The main task is to minimize the level of defective products as much as possible. To achieve this goal, the company uses a comprehensive system of strategic planning, quality control of manufactured products at all stages of their creation, careful selection of suppliers and development of terms of cooperation with them. An integral part of the implementation of this policy is also the constant training of the organization's employees and the conduct of audits of all departments and divisions.