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 a follower

No. Industry SIC Year Notes
1 0 1993 Johnson milks mature markets by gaining share through acquisitions, and fattening profit margins by pressing for operating efficiencies. It institutes quality programs to get continuous improvement that drives costs down.
2 2043 1992 General Mills is considering acquiring RJR Nabisco's cereals. Would be a low-cost way of having new products: rolling out a new cereal costs millions of dollars.
3 2273 1996 Mohawk does not pursue hostile takeovers, instead notifying candidates of their interest to acquire. From the signing of a definitive agreement, it sets up cooperative teams with the acquisition target to analyze every cost center and identify cost saving.
4 2911 2005 Valero Energy has built its strategy around buying relatively inexpensive refineries and often upgrading them to process heavy, high-sulfur crude oil. Both this crude and the more desirable light, sweet crude are used to make gasoline, jet fuel and heating oil, although the heavy crude costs a bit more to process. But it also costs much less to buy than the lighter oil, easily offsetting the additional production costs and leaving the refiner with a hefty profit.
5 2911 2005 Valero Energy's potential acquisition of refiner Premcor would bring Valero's annual revenue to about $70 billion. Premcor is strictly a wholesale supplier. Valero expects to realize cost savings of $350 million a year annually in the second year after closing the deal.
6 3944 1992 Hasbro has reduced costs after having acquired the Tonka Corporation in 1991.
7 4111 1987 Greyhound agrees to acquire all routes and some assets (450 of 1200 buses) of Trailways. Trailways failed to sell stock, company earlier.
8 5149 1995 CPC agreed to acquire the baking business of Philip Morris Co.'s Kraft food unit for $865 million. Kraft's distribution system will help expand sales of CPC's baked goods.
9 6021 1995 When NationsBank takes over a bank, it boots local management, rips down signs, fires workers, and absorbs the victim.
10 6324 2003 Coventry grows through acquisitions. "These guys are typically buying health plans owned by hospitals."
11 6331 1996 Travelers has bought the property-casualty unit of Aetna and combined the businesses. It hopes to chop $300 million in costs.
12 8011 1997 Management expects cost savings of a little more than $1 million from the merger with OccuSystems, which include the elimination of certain administrative and duplicative services, such as annual reports, investor relations, lawyers, accountants, etc.
13 8062 1986 When NHI acquires small money losing hospitals, it reduces staff and fixes lax accounting, employment, and inventory control.

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