Exam2 - FC_Book Notes - The flashcards are formatted for...

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Cost Drivers Value Chain
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Provides the basic tool for cost analysis. The structural determinants of the cost of an activity, and differ in the extent to which a firm controls them.
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Cost Advantage Cost Drivers
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Determine behavior of costs within an activity, reflecting any linkages or interrelationships that affect it. A firm’s cumulative cost of performing all value activities is lower than competitors’ costs; hinges on its sustainability.
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Relative Cost Position Sustainability
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Present if the sources of a firm’s cost advantage are difficult for competitors to replicate or imitate. A function of composition of a firm’s value chain versus competitors and relative position in relation to the cost drivers of each activity.
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Control Cost Drivers Value Chain
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The basic tool for determining competitor costs. A firm can gain an advantage with respect to the cost driver of value activities representing a significant proportion of total costs.
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Control Cost Drivers; Reconfigure the Value Chain Reconfigure the Value Chain
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A firm can adopt a different and more efficient way to design, produce, distribute, or market the product; gives a firm a cost advantage. Two major ways a firm can gain a cost advantage:
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Learning Controlling Scale
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Increasing scale through acquisitions, product line extensions, market expansion, or marketing activity can lower cost; reinforce scale economies; exploit scale economies that favor firms; emphasize value Does not occur automatically, but results from the effort and attention of management and employees.
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activities driven by advantageous scale.
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Keep Learning Proprietary Controlling Learning
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Manage the learning curve, keep learning proprietary, and learn from competitors. Use backward integration to protect know-how, control employee publications, retain key employees, and have strict non- disclosure provisions.
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Throughput Level Throughput
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A firm can often increase average capacity utilization by finding ways to level fluctuations of volume through its value chain (i.e. promoting year round uses for product).
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