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"

Monday, October 15, 2001

Europe's way?

  • 'Who are my (company's) clients?"
  • "What are my (company's) "products" (or "services")?
    (i.e. "What business is my company really in?")
  • "What are my (company's) "core competences"?

In times of trouble, these questions become even more crucial than they normally are.

In view of the extra-ordinary circumstances, the temptation to "dodge" these issues is significant. Yet, in these times, clarity of vision is essential.

Like individuals, corporations have their energy limitations. Focusing the corporate energy to pursuing the right objectives, under the appropriate strategies, is a key success factor.

Europe's way of dealing with economic recessions seems constrained by its distinct "cultural" heritage (i.e. the "European Social Model"). One opportune question is "how is this model pertinent to the current situation"? Keynes' supporters have strong arguments for intervention. But are they strong enough?

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