Brainstorming Ideas: Increase the Output Over Which a Fixed Cost ICD is Used

Increase the Output (O) 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.

A. 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.

  1. Warnings and advice
  2. Buy company in complementary market
    1. For segment (e.g. geographic) expansion at low cost
      1. New geography outside country Examples>>
      2. New geography inside country Examples>>
    2. For price point for product family addition to product line
      1. Buy higher price point Examples>>
      2. Buy lower price point Examples>>
    3. For cost reduction opportunity in larger business
      1. Leader buys another leader Examples>>
      2. Leader buys a follower Examples>>
      3. Follower buys a leader Examples>>
      4. Followers combine Examples>>

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