The Impact of Economic Austerity on the Cost Cutting Strategies

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The Impact of Economic Austerity on the Cost Cutting Strategies in KSA
In every given region, there is bound to be economic changes over time. The changes could tilt to the positive, whereby there is an economic improvement, or to the negative where the region experiences economic downturns. Improvements of economies emanate from deliberate efforts of the states and also external factors. On the other hand, economic downturns, much as they may have external forces, call for strategic actions that ought to curb unnecessary expenses while embracing the methods of creation of more wealth. In this paper, there is an in-depth discussion of various growth rate economic issues due to war in the Kingdom of Saudi Arabia. There is explicit indulgence into the exploration of the strategies of implementing the right sizing in cost cutting measures in the region.
Economic issues in KSA
The Kingdom of Saudi Arabia comprises mainly a desert. As such, many people would expect that it is an emerging country and it is comparatively not. It constitutes the bulk of the Arabian Peninsula. The Kingdom of South Arabia borders the Red Sea and the Persian Gulf coastlines. It is the birthplace of Islam which is highly significant in the economic discussion of the region because Muslims are known to be highly industrious and do quite well in business, (Hasan, Hanaa, 109). Despite the realization that the country is a desert, it has possessions of excellent natural resources which include petroleum, natural gas, and iron.

In the economic deliberations of a region, different factors can contribute to the growth rate. Some factors contribute to positive growth while others lead to financial crisis. Other factors are economically ambiguous in the sense that they bring both powerful and adverse impact. In KSA, the war in Yemen, Syria, and the surrounding region has resulted in serious problems in the economy. Every time there is an outbreak of war, there is bound to be some negative implications for the economies of the surrounding regions, ranging from mild to severe consequences, (Mazaheri, 304). The war in Yemen, Syria and the surrounding region has had significant blows on the economy of the Kingdom of the Saudi Arabia. As an impact of the war in those countries, there have been experiences of political stalemate as there are efforts for looking out for political leaders who can bring down the ills of the war and the extents of the economic implications.
There is an escalation of violence and labor strife which adds to the economic downturns.. There is an impact to the central bank foreign reserves whereby there is the experience of drawing downs in the reserves, (Hasan, Hanaa, 108). Other implications include fuel shortages due to the minimal production. When there is a lack of fuel, much of the pinch goes to the industrial production whereby; the cost of production goes high; hence, the price of commodities get high to the detriment of the ordinary citizens, (Jiménez-Rodríguez, Rebeca & Marcelo, 21).The economy suffers inflation, and the chain continues until there is a replication of the primary cause of the stalemate. At some points, in the efforts of rescuing the economy of a country following stalemates such as those in Yemen and Syria, there are usually efforts of attempting diversification. This notion denotes the attempts of divulging in other forms of economic engagements other than those that have had damages from the issue affecting the economy.
Following the war, there has been diminishing oil revenues. Oil being the primary economic resource of the KSA is very crucial when it comes to the economic sustenance. Following the decline in the oil production, the revenue from oil keeps dwindling. With the dwindling of the revenue, there is bound to be significant microeconomic imbalances. For example, it becomes difficult for the balancing of government spending to the various sectors, for instance, the learning institution. There has been an increased devaluation of the currency which consequently leads to spiraling inflation of the imported goods.
Inflation of imported goods is a notion that significantly affects every facet of the economy. When there is an increment in the cost of the importation, the pinch is poured on the consumers hence; making it difficult to purchase items, (Jiménez-Rodríguez, Rebeca & Marcelo, 22). There is also the implication in the attainment of other needs such as sustenance of education. There is also a reduction in the indulgence in importing goods which reduce the revenue that goes to the government. There has been much increase in poverty following the war and the economic austerity.
Measures to curb the effect of the drop in vision 2030
Following the economic austerity, there have been realizations that there are significant impacts on the various sectors of the economy. There is a dire need to make sure that there is every effort of countering the effects in the different areas. There is a realization of the anchoring of the development of the field in the vision 2030. The KSA Vision 2010 has its anchoring on pillars which have a close connection to economy hence; a blow to the economy is a blow to the vision. Thus, there is a great need to address the adversity to pave the way for reaching out to the vision. The pillars of the vision 2030 include the attainment of a vibrant society. Here there is the focus to see a region that is capable of depending on itself in a satisfactory manner such there can be the attainment of self-actualization for every individual following the abilities.
Another pillar is that of a thriving economy. Here, there is much focus on the achievement of the aspects that sustain the economy to the extents that there is an improvement in the living standards of all people as well as allowing the government to fulfill its duties in a manner that is satisfactory. Attainment of a thriving economy would take much effort in the different sectors as each usually has an impact on the economy in one way or the other. The other pillar is that of an ambitious nation. The attainment of this pillar of the KSA Vision 2030 pillar lies in the creation of an environment that is capable of giving room for every individual to partake in engagements of a fulfilling life in all sectors be they economic, social or educational.
Cost cutting measures in education institutions
There has been cutting down on the industry bonuses in the KSA following the financial crisis occasioned by the oil prices, (Mazaheri, 304). The economic austerity has led to the provocation of measures of cutting down costs in the KSA institutions and other segments of the society. One of such institutions is the education sector whereby; there have been different measures of ensuring that there is bringing down the costs in a bid to ensure sustenance of the economy. Following the economic downturn occasioned by the falling of oil price in the KSA, there is an adoption of increased efforts of diversifying the economic segmentation.
There is an immense struggle to triple the revenues collected from the non-oil engagements. Such efforts have implication through indirect taxation as well as fees for public service. One of such areas which have been a great focus in the bids of cost cutting for curbing the economic austerity is the education sector, (Onsman, 523). There has been the introduction of VAT and in the education sector. It is vital to make a note that there are various sectors which are in the same category as education in the KSA when it comes to the introduction of the VAT as a measure of cutting the austerity of the economy. Such other sectors include the mining and tourism.
Despite the measures of curbing the economic downfall effects, there is every effort of ensuring that there is funding for the education as a means of sustaining the human resource development which is essential in the long term sustenance of the economy. For instance, there is the allocation of 25% of the budget towards the education sectors. This move implies the concern of the government over the education and sustenance of the human resource.
Many of the impacts of the measures for countering the effects of the economic downturn are in the higher learning institutions. Due to the reduction of the government reserves, there has been a realization in the higher education institutions that the solution lies in the foreign investment. There is an understanding that; for foreign investment to be effective there has to be the creation of conditions that are quite attractive for consideration. There is, therefore, a deliberate effort in the higher education institutions to work on the current obstacles which are likely to obscure the attraction of the foreign investment in the education sector. Thus, there is the attraction of quality teachers, improvement of the living conditions as well as the operating environment.
There has been a deliberate effort to instill and sustain professional management in the higher learning institutions as a measure of ensuring foreign investment which goes a long way in curbing the impacts of the austerity of the economy. This effort is opposed to the past kind of management whereby; there was the omission of professionalism considerations in the running of the affairs of the higher education institutions, (Onsman, 523). For example, there could have been the management of funds by people with little or no schooling on matters of finance and accounting. There is adoption of much advancement in the training of the national teachers to bring a positive difference
Recommendations for right sizing in cost cutting
In the realization of the impact of the austerity of the economy, it is essential that there is the right sizing in the cost-cutting attempts. The recommendation touches on the embrace of flexible right sizing. This notion denotes sophisticated workplace flexibility whereby; there is daily flexible scheduling of the work hours. When there is the adoption of the flexible right sizing in cost cutting, there is the attainment of the optimal functioning work environment, (Flati, 226). Another recommendation for success in the right sizing is the adoption of ‘home-shopping-network’. This notion refers to a kind of adjustment whereby; there is the embrace of telecommunication programs hence allowing people to work from home, as long as they are capable of achieving the stipulated targets.
There has been a success of the adoption of these recommended right sizing in other countries such as the UK, US, and also Canada and KSA.
Examples
Bath Spa University in the UK is an example of higher education institutions which have adoption of the right sizing in cost cutting Since the year 2004, there has been right sixing in the university as a way of addressing the need for high success. As a result, there has been attainment high creativity in the university among the British high learning institutions. There has also been achievement of collaboration with other educational colleges.
King Saud University in the KSA is another example of high education institution adopting right sizing and home shopping network notion. The high adoption started in 2013, though before there were uncoordinated efforts of the same. Since then, there has been achievement of high success in the diversification of the courses offered in the university.
King Khalid University in KSA has adoption of the right sizing in cost cutting measures. Following the adoption of the cost notion in 1998, there has been much success in the distribution of the university over several towns in the Asir province in South West India.
The graph below shows the increasing amount of success when there is adoption of the flexible right sizing in the various countries, with specific regard to the UK. Aspects such as the flexible management give satisfaction to the workers hence, increased productivity and overall success.

The implication of this graph is that; when there are low levels of adoption of flexible right sizing, there is inadequate planning. With increase of the levels of flexible right sizing in cost cutting, there is attainment of higher strategic planning as well as proper planning for the future in the higher learning institutions.

This pie shows the increasing success of the adoption of flexible right sizing and notion of working from home. At first, the implication is slow due to the adjustment struggles. However, there comes improvement in cost cutting and efficiency as there is continued adoption of the rightsizing. As time goes by; there is attainment of high success as there is stabilization following the adaptation of the staff to the new mechanisms. However, there is arrival to a stagnant phase whereby; there is no attainment much improvement due to saturation.
Works Cited
Flati, Zachary J. “A Modest Proposal: Right-Sizing Exchange Immunity.” Journal Of Securities Operations & Custody 7.3 (2015): 218-233. Business Source Complete. Web. 18 Dec. 2016.
Hasan Esmail, Hanaa Abdelaty. “Factors Of Economic Growth In KSA An Empirical Analysis From 2000:2014.” International Journal Of Business & Economic Development 3.3 (2015): 106-114. Business Source Complete. Web. 18 Dec. 2016.
Jiménez-Rodríguez, Rebeca, and Marcelo Sánchez. “Oil Price Shocks And Real GDP Growth: Empirical Evidence For Some OECD Countries.” Applied Economics 37.2 (2005): 201-228. Business Source Complete. Web. 18 Dec. 2016.
Mazaheri, Nimah. “The Saudi Monarchy And Economic Familism In An Era Of Business Environment Reforms.” Business & Politics 15.3 (2013): 295-321. Business Source Complete. Web. 18 Dec. 2016
Onsman, Andrys. “It Is Better To Light A Candle Than To Ban The Darkness: Government Led Academic Development In Saudi Arabian Universities.” Higher Education 62.4 (2011): 519-532. Professional Development Collection. Web. 18 Dec. 2016.