Karthik Vedagiri, PGP Class of 2014, ISB, Hyderabad
"Cost-cutting is the most potent antidote to the economic slowdown"
There are shining examples which reinforce my assertion. Air India reported a cash surplus of Rs 460 crore in the April to June quarter this year. When most people had written off the carrier, it was the grossly underestimated power of 'cost-cutting' that came to its rescue.
During the same period, Maruti Suzuki too reported a 49 per cent growth in profits over last year's figure. Maruti embarked on a process of re-invention, maximising operational efficiencies through innovative production techniques and better inventory control. Interestingly, the company achieved such unprecedented growth, even with its net sales falling 5.1 per cent, as compared with last year's same period sales.
These exemplify the role cost-reduction plays in stimulating economic growth, especially during periods of slowdown. Sadly, cost-cutting has been viewed rather myopically, as a mere slew of employee layoffs, debt restructuring and austerity campaigns. To my mind, it is an opportunity to reassess business processes and come up with innovative solutions, while providing robust, sustainable growth.