There are many things that a business can do to be more profitable, price increase here or a reduction in service there can make all the difference. Changing a small thing can lead to a very big number. If, for example you happen to own a factory that produces a million widgets a year you would only have to increase the price of the widget by a cent to increase profits by $10,000. Nice work if you can get it, and of course providing that the other guy who makes widgets doesn’t reduce his price by one cent, putting you out of business and doubling his market share almost overnight.
American Airways saved an estimated $40,000 in 1987 by reducing the number of olives on the salad served to first class passengers by one. American Airlines are still in business so it would appear that the cost cutting strategy was a successful one. On a more serious note this action by AA heralded a major change in airline philosophy. The carriers realized that they didn’t have to provide anything beyond the seat itself if they were competing at the cheap end of the market and this freed up money that could be spent luring the first and business class passengers.
In 2009 OfficeMax, the office suppliers, came up with a novel twist on the cost cutting front. They decided to cut down on the number of deliveries made by its fleet trucks. The Monday to Friday schedule became a Tuesday to Friday one. Nothing particularly novel about this but the reasoning provided by the company was a little different. Rather than being upfront about their motives they tried to pass the economic measure off as a green initiative intended to improve the city environment. It was a pity that no one told them that people are much more likely to put up with economic cutbacks than are likely to put up with being treated as naive at best and stupid at worst.
Other cost cutting measures target employees rather than customers and done well, a tiny cutback on the level of an individual employee can earn a company thousands of dollars of more. Done badly though, these cuts can sap moral causing productivity to plummet. Not a great trade off for what may only be an initial saving of pennies a day. Paperclips and Post-it notes are examples of cost cutting measures that may look great in the accountants office but that translate very badly in the work area.
Bear Stearns, one of the biggest names on Wall Street used to give its new employees a bag of paper clips on their first day with the message that the firm will never buy the aforementioned items. This measure was instituted by then CEO Ace Greenberg. Bear Stearns, of course, was the bank at the center of the 2008 government bailout controversy after losing $195 billion. It would take a lot of paper clips to make a dent in that number. Many companies are also looking to cableinternetbundles.com to help reduce their internet costs, also.
