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Variabilization of costs: an especially effective strategy in a recession

Nicolas Kachaner (Paris‐based senior partner of The Boston Consulting Group (kachaner.nicolas@bcg.com))

Strategy & Leadership

ISSN: 1087-8572

Article publication date: 3 July 2009

2543

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

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