Sunday, October 21, 2001

All about Management: Follow your Strategy

In cost cutting periods, the value of the Management Accounting function becomes more apparent than usual.

Business school case studies are full of cases where companies cut allocated joint costs from one product, only to find out later that the full costs were now accumulated on the revenues from the other remaining product(s).

All management functions are important to corporate value creation. This corporate value cannot easily be allocated/attributed to each function (e.g. Marketing, Sales, HR, IT, etc.). Moreover, there are no "productive" vs. "staff" functions.

This traditional thinking becomes even more dangerous when radical corporate cost reduction decisions have to be made, often under intense psychological pressure for corporate cost cutting, brought about by the financial markets

Keeping one's costs high at the expense of maintaining a particular profit expectation "market trend" should be justified if this "investment" can be expected to yield a sufficient ROI.

Thus, when the "common market sense" says "cut, cut , cut", going against this "pack" mentality can yield extraordinary returns. Of course there are risks. But, "follow your strategy"

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