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.
- Warnings and advice
- Buy company in complementary market
- BUY COMPANY IN SAME MARKET
- For segment (e.g. geographic) expansion at low cost
- For price point for product family addition to product line
- For cost reduction opportunity in larger business
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