The impact of major cost reductions on long-term company profitability

Many articles have been written on the effect and potential benefit of cost reduction, downsizing and expense management. Most of these articles have conflicting messages, some even internally within the same article.The objective of this research was to critically evaluate these articles and to see if there was any evidence of the economic effects of cost reduction from the South African experience. The evaluation of the articles was done by a process of deductive reasoning with some help from the principles found within the application of the Theory of Constraints. The research further used a quantitative design to analyse the effect of a cost reduction event on certain ratios and the share price performance relative to an appropriate index over a period of six years after the event.The research has shown that at least some of the academic articles on this subject made different implicit assumptions during the research process. The results from the quantitative research have shown that there were no significant evidence of any effect on the ratios and share price performance from the South African market experience.

Grantor dc:publisher

University of Pretoria

Year dc:date.issued

2013

Advisor dc:contributor.advisor

• Pretorius, Pieter

• UCTD
• Cost reduction
• Share price

Statement dc:rights

• © 2012 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Dc Identifier Other

F13/4/241/zw

OAI identifier oai:identifier

oai:repository.up.ac.za:2263/22811