Create (Company) Cost

In the analysis of a manufacturing company's approach to managing functional costs, this term refers to the cost of designing and developing a product.
(See also
Functional Costs


Example 1:

DuPont is increasingly buying rather than developing new technology. For example, it has bought drug firms to gain their technology.
(Year 1986-SIC 2800)

Explanation: DuPont is purchasing other companies to gain new technology, in addition to developing its own. This is an example of a change in the company's approach to Create Costs.

Example 2:

Because Cooper Tire serves only the replacement market, it has ample time to reverse-engineer successful tire designs introduced in the original equipment market. As a result ,Cooper's research expenditures are less than half those of its larger competitors.
(Year 1994-SIC 3011)

Explanation: Cooper spent less in research than its competitors because it reverse engineered others' designs. This gave the company a unique and low cost approach to Create Costs.

Example 3:

Consistently spending about 7% of sales on research, Fuji has set the pace for its industry. Fuji was the first to introduce the disposable camera. And, Fuji worked with Kodak to introduce a new 24 mm "advanced photo system" film.
(Year 1997-SIC 3861)

Explanation: Fuji invests more than the rest of its industry in Create Costs. While this raises Fuji's cost, this cost has allowed Fuji to introduce new product benefits before others in the market.

Example 4:

Rapid market segmentation is forcing auto companies to design more cars than ever, making speed critical. To save time, auto makers are awarding more contracts to trusted suppliers without a lengthy bidding process. Quality is often exchanged for speed.
(Year 1988-SIC 3711)

Explanation: The auto companies are having to increase their Create Costs in order to keep up with competitors' segmentation of the market. In this case, the industry is using its suppliers to do more of the research and development work.