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Government subsidy: cost cuting measure or revenue enhancement?

Public funds
Recent activity on Sep 17, 2017
1 Answer
2.5 k Views
Marie
Proficient
asked on Sep 16, 2017
Looking for experienced partners preparing for top tier firms

Hello all,

Just to clarify one point: is it wrong to mention public funds as a way to cut down costs?

Technically this would be another revenue stream, but can be justified by specific cost cutting purposes (ex: subsidy for the investement costs of a company willing to enter the renewable energy market)?

Thanks you very much for your insights,

Best

Marie-Eve

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Vlad
Expert
replied on Sep 17, 2017
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

It depends on who is your client.

  • For a private company, it will be just a part of revenues that otherwise would be paid by the end user.
  • For a government-owned company or a public-private partnership, it may be a decrease in revenues. Imagine government subsidizing the subway tickets for veterans. If the subway is not privately owned - government most probably will subsidize less than a regular ticket price.
  • I can't imagine a case when government subsidies will be a cost-cutting tool

Best,

Vlad

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Vlad

McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
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