Cost reduction could save companies in a down economy

Cutting back on expenses may help companies that are struggling to make it in the uncertain economy. Reducing operational costs, implementing strategic sourcing policies and slashing unnecessary expenses could be key to business survival while the market continues to perform erratically and the fiscal cliff looms ahead.

Reuters recently reported that several large corporations, including Caterpillar, United Tech and FedEx, have commented that the world's economic growth is slowing down. The companies are preparing for some underwhelming growth until the market picks up once more.

Hard times
Companies that are struggling to stay afloat are announcing budget cuts to keep their doors open. Even large global corporations are considering slashing expenses in order to stay profitable or experience any kind of growth.

While the global economy slows, the United States is also faced with a fiscal cliff that has many business owners worried. If Congress can't agree on a budget deal, $600 billion in automatic spending cuts and higher taxes will be automatically implemented in January. Because some companies are fearful of what the future will bring, they're already getting a head start on cutting their excess costs and trimming budgets in every area possible. This will help them prepare for the uncertain economic future they face if no deal is reached.

Cost cutting measures important for some
Some corporations fearful of what the future will bring are implementing serious budget cuts to remain profitable while they wait for the economy to improve. Reuters reported that FedEx revealed a plan to slash costs over the next four years. The company doesn't expect to keep up with its current growth rate and needs to cut back - the air-express operation will be lowered by about $1.7 billion. Even with these drastic cost savings, Reuters reported that analysts still expect FedEx's profits to remain flat in 2013.

Manufacturers aren't expected to fare much better than FedEx. Wall Street has lowered its expectations for the industry from 3.7 to 1.9 percent earnings growth. If the numbers hold true, the sector's growth would be severely restricted.

However, not all businesses expect the sluggish economy and fiscal cliff to hurt their bottom lines, and haven't announced plans to drastically cut spending. The source reported that General Electric expects its growth to expand next year, citing a high demand for jet engines, electric turbines and other equipment.