Increase the Output Over Which a Fixed Cost ICD is Used

This action reduces the quantity of a unique fixed cost ICD used to produce a unit of Output by increasing the units of Output. For example, a new product design, or a new process patent, are both ICDs that have virtually limitless capacity for use. These are fixed cost ICDs. You pay for them once and you can use them over a virtually unlimited amount of Output. Their ICD/O ratios are limited only by the current demand level for Output.

B.
Use fixed cost ICDs with more customers

By using fixed cost ICDs with more customer volume, the unit cost of the ICD declines as a component of the final Output cost.

Warnings and Advice

No.	Industry SIC	Year	Notes
1	0	2008	A company should join a multi-partner alliance (MPA) after carefully weighing the risks and benefits. The ideas and needs of companies can clash with so many other member partners. Through ruling boards, typically composed of a handful of powerful companies, MPAs effectively constrain the strategic option of partners by enforcing common rules for governance and operations that aren't always in a partner's best interest. Also, Partners may find themselves subsidizing rivals if their proprietary knowledge leaks to their competitors through the MPA.
2	0	2008	A company should join a multi-partner alliance (MPA) after carefully weighing the risks and benefits. When considering whether to join or not, some companies may be better off alone. If a company owns a superior technology and has exclusive market access, it may not need to join an MPA, or it could start its own MPA. A company should consider the direct costs of joining and staying in the MPA. An MPA might require a committee to commit their most talented engineers for joint research. If a company can't get on the ruling boards, then it might be a good idea not to join.
3	0	2008	A company should join a multi-partner alliance (MPA) after carefully weighing the risks and benefits. When deciding which MPA to join, obviously go for the clear winner in the market. But if there is no clear winner, compare MPAs based on benchmarks. In general, the benchmarks should focus on the relative strengths of the specific technologies, the ability to release products on a timely manner, and the extent of interoperability with other products and systems. Consider joining several MPA as there is no exclusivity.
4	0	2008	A company should join a multi-partner alliance (MPA) after carefully weighing the risks and benefits. When considering when to join, joining early or late in an MPA is best. When a company joins early, they set the rules and procedures to best fit their own needs and have access to the information that comes in. A later joiner can minimize investments in technologies that turn out to be unsuccessful. Thus they can fully concentrate on exploiting the opportunities provided by an established alliance rather than contributing to the collaborative effort.
5	0	2008	A company should join a multi-partner alliance (MPA) after carefully weighing the risks and benefits. When you're deciding whether or not to leave an MPA, evaluate whether or not your company is receiving less profit from the MPA because of an increased number of partners or a slow down in new technology.
6	0	2008	A company should join a multi-partner alliance (MPA) after carefully weighing the risks and benefits. MPAs offer their members important benefits, especially in industries where levels of risk, the need for product interoperability, and the cost of R&D investment limit the ability of any single company to independently gain success. MPA members can share resources and costs while limiting the downside of their platform being ultimately rejected by consumers.
7	0	1988	Smart companies make sure their patent lawyers are in the R&D process early.
8	3149	2004	K-Swiss prefers to sell its shoes at specialty retailers like Sports Authority and Foot Locker. Discount retailers and department stores want the shoes. K-Swiss refuses them. Using specialty retailers helps K-Swiss produce high margins (in the 42-45% range). When the company does tweak its styles, there are no inventory markdowns. Demand is so high that K-Swiss has averaged 31% sales growth over the past two years. The company is debt-free and has $70 million in cash.
9	3531	1986	A strategy of global cost leadership or differentiation exploits global configuration and coordination by selling a wide line of products to buyers in many countries. Examples include Komatsu and Caterpillar.
10	3537	1998	Toyota's overwhelmingly large unit sales help to keep its incentive expenses low relative to its competitors, thereby heightening the company's domestic profitability.
11	3571	2003	While some nonlinear strategic actions turn out well for companies, others cause problems. IBM entered the industry by basing its PC on a Microsoft system. Microsoft was however allowed to sell the system to third parties which gave competition to IBM.
12	3661	2001	Motorola could lose its competitive edge by selling away its handset technology because it won't be able to call its handsets 'superior.' "They're saying there's no difference in functionality between their phones and other brands using their parts."
13	3674	1998	Most evidence suggests that U.S. Firms have reaped considerable technical and commercial benefits from alliances through a two-way flow of technology and managerial know-how.
14	3711	1986	Part of the discrepancy in productivity is that the Jeep plant makes a wide variety of cars with a wide variety of options, while Honda stamps out long runs of nearly identical cars.
15	4833	1997	Because USSB and DirecTV share the same proprietary system, USSB is dependent on larger DirecTV.
16	4924	2001	Wal-Mart tried to broaden its products by selling low-cost gas and therefore had to try to convince state legislators to overturn a law requiring a markup above the cost for gas.
17	6036	2003	Washington Mutual has made a critical decision in its expansion. It has chosen to remain a retail bank instead of offering insurance or mutual funds. That keeps WM's overhead costs low.
18	6211	2000	In the summer of 1998 E*Trade spent vast sums of money on advertising, making the company into an unprofitable one overnight. However the company acquired about 400,000 new accounts last year as a result.
19	7500	1989	Jiffy Lube wanted to grow to have economies of scale (including an alliance with Pennzoil) and national advertising. Now many of its franchisees are generating more costs than profits.

<<Return to Increase the Output