Reduce the Rate of Cost for the Input Used to Produce the Output
Use the same type of input and the same activities, but pay less for the unit of input employed in producing the output. A reduction in rate is equivalent to a reduction in the number of inputs for the same ICD. For example, if a person who makes $10 per hour could produce the same amount of output as a person making $20 an hour, the substitution of the $10 person for the $20 person in the process would be equivalent to cutting the number of people required to do the work by 50%.
B. Reduce the quality of the input used by using a cheaper form of the input:
The reduction in quality should bring with it a reduction in the rate paid for the input.
|1||2111||2001||Some cut-rate smokes are selling for as little $1 a pack, compared with an average retail price of more than $3 for big-name brands, such as Marlboro. To feed the market for inexpensive cigarettes, tiny factories are using second-hand equipment.|
|2||2339||2006||Chinese factories are ramping up production of knock-off denim meant to compete with the expensive Japanese fabric that has become the hallmark of premium jeans. Some of the new, improved Chinese denims are woven on old machinery. One Italian mill recently joined with a Shanghai factory to produce Italian-style denim at half the price.|
|3||4512||1995||ValuJet has succeeded as a price leader with a fleet of 39 old planes that consist of just one reliable model.|
|4||4512||2004||Southwest Airlines is a short haul low price airline, which flies only Boeing 737s. Historically the company has purchased only used airplanes, which they serviced themselves rather than outsourcing maintenance. The airline flies short trips averaging 375 miles between city pairs. Most of these trips are to secondary airports.|
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