Leaking business value
It was frustrating to sit with the General Manager and the owner's representative at a business in the Middle East earlier this week. They're leaking tremendous value from the business and don't seem to realise it. The General Manager was trying to drive down production costs, say by an extra 5% year on year. He'd already got piece costs down to 22 cents per item compared to European costs of more than 70 cents. He was trying to argue that he couldn't invest in new stuff because his prices weren't as high as the Europeans'. Instead of holding prices and cutting costs to give him the margin for his investment, he was just cutting sales prices, while costs might well be rising... I soon realised it wasn't worth pointing out he was comparing apples with oranges: I'd guess that factoring in the difference between regional wage, tax, property and utilities rates would bring the numbers more in line between the European and Middle Eastern regions. ...