Variabilization of costs: an especially effective strategy in a recession
Abstract
Purpose
During a recession, fixed costs can threaten a firm's survival or severely limit its options. This paper aims to show how fixed costs can be transformed into variable costs through an innovative process known as “variabilization.”
Design/methodology/approach
The paper provides examples of applying the technique within an organization (back‐end variabilization) and creating value‐added solutions for customers (front‐end variabilization).
Findings
The researchers suggest that managers approach major suppliers and ask them to consider buying back the overhead assets they have sold the firm. Then imagine negotiating contracts that require a firm only to pay for those assets as they are used or, even better, as a percentage of sales.
Originality/value
In many cases, embracing variabilization means that companies will sell their current assets back to their suppliers. By doing so, variabilization enables a firm to move from being a supplier to being a business partner.
Keywords
Citation
Kachaner, N. (2009), "Variabilization of costs: an especially effective strategy in a recession", Strategy & Leadership, Vol. 37 No. 4, pp. 33-36. https://doi.org/10.1108/10878570910971610
Publisher
:Emerald Group Publishing Limited
Copyright © 2009, Emerald Group Publishing Limited