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.

Buy company in same market: For cost reduction opportunity in larger business:
Leader buys another leader

No. Industry SIC Year Notes
1 1381 1997 Texaco and Shell Oil to combine downstream operations (refining and marketing) in both Midwest/West and Eastern operations. Downstream sector has been stung by poor profitability in recent years; trend towards consolidation to cut costs.
2 2111 2004 R.J. Reynolds has agreed to buy Brown & Williamson, which would combine the 2nd and 3rd largest cigarette makers. The FTC could force the sale of two or three brands to gain approval as there is a danger of a monopsony.
3 3312 2004 Companies such as U.S. Steel that stay away from bankruptcy still must carry the heavy burdens of liabilities for pensions and health care. Although by acquiring assets in lower-cost regions such as Serbia and Slovakia and consolidating bankrupt steel makers such as National Steel without assuming defined benefit pensions and obligations, U.S. steel has improved its competitive position significantly.
4 3312 2005 The largest steel company in the world was created when shareholders approved the $4.5 billion acquisition of International Steel Group by the Mittal Steel.
5 3523 1986 Acquiring the Harvester lines spread Case's fixed costs over a wider base, and the severe capacity cutbacks that followed the merger pared total costs sharply.
6 3674 2000 JDS Fitel and Uniphase merged last July, the combined company has proposed or completed another seven mergers. The firm is the one shop stop for optical components for fiber optic communications.
7 4813 2005 Verizon acquired MCI Inc.on the heels of SBC's pending purchase of AT&T Corp. Verizon and SBC Communications control a huge portion of the market for data and phone services, leaving behind competitors such as Qwest Communications International Inc. and BellSouth Corp. which failed to join the merger frenzy.
8 4899 2005 American Tower Corp. will pay $3.1 billion to acquire rival SpectraSite Inc. in a deal to create a network of 22,600 wireless and broadcast towers and accelerate consolidation in the industry. American Tower Corp. will become the nation's largest tower operator. The company will be double the size of its closest competitor by market capitalization and number of operated sites. After the deal closes to acquire SpectraSite Inc., the new company is expected to have about 21% market share.
9 6021 1995 Chase and Chemical are expected to squeeze costs from their current combined base, as they close redundant operations between now and the end of 1997.
10 6324 1995 Blue Shield of CA looking to buy WellPoint Health Networks. Buyout would create the biggest publicly traded HMO, with revenues of $5 billion. WellPoint would bring in 700K members and more than 2 MM members in its PPO plan.
11 6411 1997 Marsh & McLennan to acquire insurance-broker Johnson & Higgins. Analysts say the acquisition of one of Marsh's big rivals makes sense because it could close duplicative offices in many cities and trim overlapping support services. Acquisition by Marsh comes at a time when insurance brokerage firms are under pressure to sharply boost computer technologies, so additional savings would come from consolidating costly infrastructural improvements.
12 8062 1993 Columbia Healthcare and HCA-Hospital agreed to merge. The merged co. will be able to get better discounts on hospital supplies, and it can afford to buy better info. systems and to pay top dollar for consultants.
13 8099 1996 MedPartners/Mullikin will acquire Caremark International, creating the largest U.S. manager of doctors' groups. Part of a trend to control medical costs through consolidations.
14 8721 1989 Possible mergers w/in big 8 accounting firms not due to globalization alone, but may be due to cost-cutting. When Peat Marwick merged w/ Klynveld Main Goerdeler, growth in revenues was high with 510 less partners, 127 less offices, 560 less employees.
15 8721 1989 Ernst & Whinney and Arthur Young to merge and form the largest accounting firm Ernst & Young. May help both firms internationally, Arthur Young strong in Europe and Ernst strong in Pacific Rim.

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