Downsizing/Fixed Costs

There are a number of industries that have downsized their fixed costs. Most manufacturing industries, for example, have downsized fixed costs by offshoring work, reducing the size of their workforce or by making adjustments to their pension commitments. Industries such as auto manufacturing, airlines and banks have all taken advantage of the opportunity to lower their fixed costs. Government agencies have also undertaken downsizing in recent years, again with an eye towards lowering fixed costs.

A reduction in fixed costs does not necessarily impair a company's ability to meet the needs of its customers. In many cases, the restructuring was necessary to modernize the way the company does business. In other cases, firms like Eastman Kodak have downsized because they have fewer revenues. This means that the downsizing will not affect their service levels because there are fewer customers to serve. Companies like the automakers that have restructured...
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