Manage the Cost Structure to Reduce Unit Costs
Set reasonable targets for your costs and then improve the productivity of each cost function in the business.
What steps should I take?
We have designed StrategyStreet to work in levels. You begin with the most basic level and proceed to more complex levels only as you find the greater detail necessary and helpful.
Consider each of the steps below for your situation and then use only those that offer you immediate help.
Step 1. Watch the Three Videos in the Overview of Costs Series
These videos describe how to look at costs in your market, what to expect as your market matures and becomes more hostile, and what to do about these developments. These videos are an excellent introduction to costs and provide much needed context for your next steps.
Step 2. Answer the Costs Questions in Board of Directors
If you would like to develop a better understanding of costs in your market, begin by reviewing the costs questions, Questions 9-10, in the
Board of Directors section of StrategyStreet.
There are two questions regarding costs in this section of StrategyStreet. These are the most basic cost questions you face. Review each of these questions to determine whether you can answer them to your satisfaction. If you would like to pursue these questions in more detail, go to Step 3.
If you feel you have a good understanding of your market and simply wish to develop new ideas, skip to Step 4.
Step 3. Complete Steps 24 to 30 in the Basic Strategy Guide
Each of these steps in the
Basic Strategy Guide helps you understand costs in your market, and the company's situation in the market, in more detail. Each step outlines a specific analysis for you to do. It shows you what the completed analysis looks like, and tells you how to do it. The step explains why the analysis is important, advises you on what to expect to see, and then recommends an action or decision you might take at the completion of the step.
You may find that you need more information than these steps provide. If so, at the bottom of each step you will find a link entitled "More Information," click on this link to go to the Advanced Site of StrategyStreet, where we discuss the concepts in the greatest detail.
Step 4. Develop Entirely New Costs
If you are satisfied with your understanding of costs in your market today, you are ready to improve your cost structure. To develop new, lower unit costs, use the Improve/Costs section of StrategyStreet. Use the many ideas in this section to develop a new, more competitive cost structure in each cost function of your business.
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