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DOES COST CUTTING WORK?

March 12, 2014

When a business is losing money, instead of investing in solving a broken business or marketing model, many businesses rush to cut costs, starting with marketing.  This can work for a while. Barnes & Noble returned to profitability in their recent third quarter, “thanks to new steps taken by its cost-conscious CEO, but a decline of its e-book sales and stagnant retail performance renewed questions about its future,”  reported the Wall St. Journal. Best Buy also returned to a profit in their fourth quarter and topped Wall Street expectations as it cut costs to offset declining sales. 

Now, why should you care about Best Buy or Barnes & Noble?  Because it is a classic tale of businesses focusing on short-term profits (thanks to the power of the stock market), than long-term solutions. Are you just trying to make a profit without regard to long-term strategies to make your business grow? If so, as Bob Newhart said in a classic TV skit, “Just stop it!”.

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