Downsizing

Description of Downsizing. Explanation.

Definition Downsizing. Description.

Downsizing is a euphemism referring an organization's need to streamline its operations, often combined with layoffs, in order to cut labor costs by reducing the size of the company. Downsizing can occur at any time, but becomes epidemic in difficult economic times.

A downsizing strategy can be considered for 2 main reasons:

1. Offensive: Increase a company's profits. This usually occurs when there are other firms in the same industry who are performing better, or when a company needs to reduce excess capacity during times of lower volumes.

2. Defensive. Because of difficult economic circumstances and macroeconomic forces. In this case, a company determines that its workers can no longer profitably produce products at current market prices.

Compare also: Outsourcing  |  Restructuring  |  Business Process Reengineering  |  SG&A  |  Turnaround Management  |  Exit Strategy

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End of description Downsizing. An explanation.