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.

Acquire similar organization to spread fixed cost ICDs
The acquisition of another organization with a similar business enables the company to take certain fixed cost ICDs in the form of processes and designs and use them over a larger amount of Output.

Warnings and Advice

No. Industry SIC Year Notes
1 0 2003 The winners and climbers in our study didn't treat acquisitions and partnerships casually or as one-off deals. They invested substantial financial and human resources in developing an efficient, ongoing process for deal making- for instance, establishing dedicated teams comprised of individuals with the requisite investigative, financial, business, and negotiation skills. Winning companies often codified principles- lessons drawn from experience- that enable them to more consistently choose the right partners and integrate quickly.
2 0 2003 A merger or acquisition makes sense only when the move leverages the buyer's or seller's existing customer relationships or complements both companies' existing strengths.
3 0 2003 While many of our companies engaged in some merger activity, only a small number (22%) were able to make this a winning practice. Our research indicates that companies that do relatively small deals on a consistent basis are likely to be more successful than organizations that do large, occasional deals. The winners in our study appeared to make better choices: In the deals we analyzed, they created value in most of the deals they struck, generating returns in three years that exceeded the premium paid.
4 0 2003 Internally generated growth is essential, but companies that can master mergers and acquisitions can also be winners. 1) Enter new businesses that leverage existing customer relationships and complement core strengths. 2) When partnering, move into new businesses that make the best use of both partners talents. 3) Develop a system for identifying, screening and closing deals.
5 0 2003 Companies need for their integration to occur in the area that produces a valued performance. Once a product has adequate performance, competition has only convenience, price, or customization to compete on.
6 1099 1985 Recent studies note that managers of companies just taken over or merged are leaving their companies more often than they used to. Departures are attributed to an increasing number of hostile takeovers; higher stock price premiums in buyouts and a lessening of corporate loyalty.
7 2300 2004 LVMH, a conglomerate of 60 fashion, cosmetics and liquor brands, gains 80% of its operating profits from sales of Louis Vuitton. In order to correct this balance, the company is focusing on top brands like Fendi and Celine that can be nourished. The company will also retain the option of selling off brands that are not performing. LVMH originally hoped to take advantage of synergy between the brands, leveraging its size to cut production cost, advertising and retail space. However, brands are protective of their identities and fearful of cannibalizing and little was saved.
8 3312 2006 Nucor Corp., a major U.S. steel company, has forged a winning work force using motivation. Despite its rapid growth, Nucor has managed to protect its egalitarian philosophy and team spirit is more of a challenge. A decentralized structure helps, but management makes cultural compatibility a big focus of its acquisition research. In visits to potential acquisitions, careful attention is paid to how plant workers and managers interact.
9 3312 2006 Nucor Corp., a major U.S. steel company, has forged a winning work force using motivation. It listens to its front line. Execs say almost all the best ideas come from the factory floor – and the newest workers often come up with them. In the wake of its recent acquisitions, Nucor is sending new workers to existing plants to hunt for improved opportunities and having older workers see what they can learn from newly acquired plants.
10 4513 1988 Emery, (heavy-weight packages) bought Purolator (overnight letter and document services). Service problems from merger caused loss of customers to rivals.
11 5812 1996 Boston Chicken concedes that its franchises have been incurring substantial losses, which the company attributes to the cost of rapid expansion. Expanding too rapidly makes it difficult to maintain quality and could saturate markets.
12 6021 1992 Author says that successful cost-reducing bank mergers have four things in common: 1. The merging banks have a clear overlap in products and markets. 2. In successful mergers, there's no doubt about who's in charge. 3. Major mergers are infrequent events and create opportunities to rethink "the way things are done around here." 4. the acquirer is bigger, or at least better, than the acquiree, and doesn't overpay.
13 6021 1992 Banks can save 20-25% of their combined non-interest expenses through merging. Half of the savings comes from the salaries and benefits of redundant employees; the remainder comes from closing branches and reducing the cost of rent, office equipment, systems, marketing and professional services.
14 6331 2001 As a requirement for an acquisition, Gallagher must make sure that it has a good fit when it gets a company.
15 7372 1996 Novell made a series of acquisitions meant to attack Microsoft. In 1994, bought WordPerfect for $1.4 billion. It ended up selling WP for $132 million. The company's been suffering for several years.

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