5.2 The great challenge of cost competitiveness

Who has not trembled to hear about cost savings?


Why do I have to live under this constant threat?


Increase my prices and ended up the story. I can recover margins and voila!


Guarantee the profitability of my business forcing the team to recover commercial prices.

Who has not awakened to the strength of the competitive market, the bargaining power of customers, the need to reduce costs, or have closed their businesses or are in the process of closing your business for loss of cost competitiveness.

Not sufficient to use some trickery-type aggregates to improve the services it delivers to the customer prefers my company, without having to reduce my costs?

Who knows if an excellent customer service could not "hold" my price increases along to customers and so keep me as a supplier? Perhaps hiring a new business manager, experienced and good relationships with my clients, to get him in the competition, it would help me?

My experience shows that none of this solves the problem. I regret to say that if you are not competitive in cost and operates in a competitive market, there is only one solution: REDUCE, REDUCE and reduce costs permanently.

Know also that no customer is yours. He may be with your company, but have in mind that his stay is temporary and subject to constant threats.

Therefore, I suggest you create a culture of cost reductions in your company.
Analyze the major costs and keep them under control and reduce them forever.

But what if my customers are happy with my products and services, if my company is experiencing good returns, why I have to cut costs?

For a simple reason: to reduce costs is something that is always and especially when we are with good profitability. This is the best time to talk in cost savings since customers are satisfied and its satisfactory profitability, but it lasts much longer? Do you really think your competitors are happy with this situation and are doing nothing? Know also that every time you tell a client that is well he may think you're paying too much for their products and services since it maintains them. It ensures its profitability.

I always remember a period of "difficulties" here in Brazil, soon after the opening of the Brazilian market imports when we were subjected to foreign competition and that just traveled to the United States seeking solution to reduce our costs of raw materials by imports I would deal with imports of my clients that compete with products manufacturable in Brazil. On this trip, for self-determination despite the company's directors authorized travel business class because of the need for cost reductions, we traveled in economy class. What was my surprise to see that our main supplier of raw material traveling in the same plane in business class. Despite all our efforts to reduce costs always, our primary supplier "spend" our margin for international travel in business class. I spent the whole trip thinking about it and surprised our supplier as soon as the morning when he arrived, asking him to reduce their prices. What happened told me he still slept through the trip? I told him in loud and clear, his company has not yet become aware of the pressing need we all have to reduce costs. If we keep paying them these prices, we kill our business and consequently, their well. I'm doing you a favor to ask you this demand by reducing prices because it will make you come back to reality and keep your business active.

To do so only with the main raw materials?

Start with them and in descending scale, keeping the cost reduction at all levels. This is the only way to stay in the market to stay alive in a competitive environment.

What are you doing to reduce your costs? Do you know your major cost items? Your team is aware of this fact?

If you answered negatively to at least one of these questions, hands to work!

It's time to start!



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