s+b Trend Watch: The Profit Conundrum
Revenues go up, but so do costs — and even with overhead cuts, company leaders don’t see the expected benefits of scale.
The Profit Conundrum
As companies develop new products, expand their geographic reach, and add distribution channels, their revenues increase. But according to a new cross-industry analysis of more than 300 firms, this complexity also raises the cost of goods sold (COGS)—and often means that operating margins fail to meet expectations.
Source: “Winning with complexity: Operations capabilities that drive profitable growth,” by Rich Kauffeld, Arvind Kaushal, and K.B. Clausen, Strategy& white paper, Aug. 2014; additional analysis provided by Strategy& senior analyst Jennifer Ding
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