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.

Use input with lower Performance: Less Convenience:
Less access to customers

No. Industry SIC Year Notes
1 4512 2004 Whenever possible, Southwest flies out of secondary airports such as Love Field, Chicago's Midway, and Detroit City Airport. Southwest has been very deliberate in its expansion of routes.
2 5331 2005 Tuesday Morning signs flexible leases that allow easy outs, and targets out-of-the-way stores near upscale towns. By avoiding fancy shopping centers, Tuesday Morning can open a new store for $100,000, less than half of what specialty stores pay.
3 5411 2004 Dollar stores are gaining in popularity as a growing legion of shoppers find Wal-Mart too pricey or too hard to get to. Whereas Wal-Mart can only open their huge stores on the outskirts of towns, discounter chains can put up their stores right in the downtown neighborhoods where people live. Parking is easier, product prices are sometimes lower than Wal-Mart's, and shopping can be faster. Wal-Mart competes on price and assortment while dollar stores compete on price and convenience. Dollar stores can beat Wal-Mart's prices for a number of reasons. First of all, they offer even less frills, thus having very low overhead costs. They also open stores in second-tier strip malls and pick-up cut-rate leases when other retailers go out of business. To save money, the discount stores basically don't do any marketing and employ only about four people per store. All the discount chains rely on closeout and overstocked merchandise for a portion of sales. Dollar General and Family Dollar generally sell items that are $10 or less. Dollar Tree Stores Inc. prices all their goods at $1, while Dollar General prices most goods in round numbers under $10.
4 5632 2005 Steve & Barry's University Sportswear has become one of the fastest growing retailers due to their mantra of low costs. As large chains have retrenched, disappeared, or combined to save themselves, mall operators are desperate to find anchor tenants, which is perfect for Steve & Barry's. The retailer isn't choosy about the size of the space it rents, as long as it's somewhere between 25,000 and 150,000 square feet. In return, the company can insist on certain inducements. In one deal, the chain received $35 per square foot towards improvements, leaving the landlord with only a rent of $5 a foot.
5 7311 2005 Kmart recently turned to new media ad agency Not Traditional Media to raise its profile in nine markets. The agency connected Kmart with the Active Network of San Diego, which provides online registration and Web services to sports and recreation departments. The Active Network got Kmart to donate a new scoreboard marked with its logo for the gym at an Illinois high school, among about a dozen community improvement projects. The efforts put Kmart's name out to 85,200 people and cost less than $500,000.

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