Variabilization of costs: an especially effective strategy in a recession

doi:10.1108/10878570910971610

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Variabilization of costs: an especially effective strategy in a recession

Document Information:
Title:	Variabilization of costs: an especially effective strategy in a recession
Author(s):	Nicolas Kachaner, (Paris-based senior partner of The Boston Consulting Group (kachaner.nicolas@bcg.com))
Citation:	Nicolas Kachaner, (2009) "Variabilization of costs: an especially effective strategy in a recession", Strategy & Leadership, Vol. 37 Iss: 4, pp.33 - 36
Keywords:	Assets, Corporate strategy, Fixed costs, Recession, Variable costs
Article type:	Conceptual paper
DOI:	10.1108/10878570910971610 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
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.