by James Dubreze

Created on: January 27, 2010

You should cut down on the items that do not yield good return

In a tight economy where money is hard to come by, most business makes appropriate measure to reduce operational cost as a mean to balance their budget. Companies that have engaged in cost cutting initiatives which have led employees to be layoffs and their product quality to be reduced, have projected a sign of weakness. This weakness implies to their competitors as well as their shareholders, a sign of fatigue cause by this recession.

These companies can't any longer continue surfing the wave of this economy. Their purchasing power has weakened alone with the value of their shareholders. Although these companies have laid-off workers and cut on product quality to keep their stocks values in competition with their competitors, doesn't mean they have overcome their weaknesses.

However, any attempt to reduce in cost to keep their market shares up is advantageous in the sense that if the reason for the cut is not noticeable by investors, then their weaknesses would have gone undetectable. If this were to happen, it would have helped avoid a sudden drop in stock prices because then investors would not have noticed that the true reason for the layoff is because of a loss in profit.

However, companies that are strong enough to increase their profit margin under this recession, should now takes the advantage of their competitor’s weakness to increase their market shares. They should then promote to their competitor’s shareholders, their strength for having battled this economic wave.

They should pronounced publicly, they growth strategy, strengths & opportunities to their share holders as a mean to reduce the company's threats & weaknesses. Investors are afraid of layoffs, usually when companies laid-off workers it means that they’ve been a drop in profit.

The reason for the layoff is an attempt to compensate for the loss. But very often this tactic doesn't work, especially if the loss may have been the result of miss-management or wrong strategy employed. In this case, even if employees are laid-off, the miss- management continues.

In the case of the small business, employee's being layoff does not affect their stock as much as the corporation. Whereas the small business can lay off workers to accommodate their loss, the corporation must be careful if they must go that route. The only cases where corporation layoffs do not affect their stock prices is when the company lay off

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