This discussion describes the why, what and how to control the cost of private companies. Public companies continue to manage the cost, a trend that is now pushing its way inexorably in private companies. First, we discuss the dynamics that create value management is needed for these companies. Second, we provide the signaling model to help the management of private companies in deciding whether to emphasize (a) revenue growth, (b) the difference between the return on invested capital and the weighted average cost of capital (c) reducing the cost of capital, or (d) some combination of the three. Key value-driver model provides leadership in addressing issues such as: Do we have the right to grow up? Should we improve earnings before we grow? What is our performance against our cost of capital? We also describe how to obtain the data necessary for the model. Third, we present some important but under-used tools based on the cost of operations and strategic theory of cost management to assist managers in managing the cost and discuss when to apply these tools in a strategic context. "Hide
by John W. Hill, Thomas L. Zeller Source: Business Horizons 13 pages. Publication Date: November 15, 2008. Prod. #: BH305-PDF-ENG
Related Case Solutions & Analyses:
KT&G of South Korea: Analyses Concerning Privatization
Upgrading the Supply Chain Management Strategy at Sichuan Telecom
Learning to Lead in China: Michael Faye Goes to China
US Office Products (A)
Conex do Brasil
Sony PS4: Winning the Gaming War
Fargo Health Group: Managing the Demand for Medical Examinations Using Predictive Analytics
Sanford C. Bernstein Goes to Asia (B)
London’s Green Bin Program
Ambrose & Bisaro
