Share
Explore BrainMass

Cost Minimization Strategies

Cost minimization or cost leadership is one of Michael Porter's three generic strategies for achieving competitive advantage. Large businesses may use a temporary cost leadership strategy, and even operate at a loss, in order to drive out other businesses in the industry. A long-term cost minimization strategy requires a business to maintain profitability. This means that a business will aim to operate at a lower cost than its competitors.

Cost minimization includes strategies to increase asset turnover (which allows fixed costs to be spread over more units of production) and strategies to reduce direct costs (for example, by limiting differentiation and customization of projects and capitalizing on economies of scale). To reduce costs, companies may also outsource non-core activities, such as payroll, call handling, and transaction processing; aggressively control of overheads (such as banning first class travel on airlines); and use their bargaining power to negotiate better pricing with suppliers. These are cost-reduction strategies used by cost leaders such as Wal-Mart.

Benefits to cost minimization include lower unit costs, higher profit margin, higher operating profits, improved cash flow, and higher return on equity. However, cost minimization can leave companies with insufficient capacity to handle unexpected increases in demand. Cost reductions by one department may also surprise other departments if they are not properly communicated.

 

 

Reference:
Butler, J. E. & Jones, G. R. (1998). Costs, revenue and business-level strategy. Academy of Management Review, 13 (2), 202-213. 

 

Key metrics to determine total market share, revenue, cumulative

Having an issue understanding the simulation and developing the key metrics to determine total market share, revenue, cumulative profit, consumer net price, modular price, and unit cost. Once I have defined the metrics I don't understand how differentiate between the 2 simulations and the impact of the more highly aggressive pri

CVP simulation

Having difficulty understanding the analysis to determine total market share, revenue, cumulative profit, consumer net price, modular price, unit cost, etc. and the cause and effect. Developing significant data to make the determination. Determine the significance of new entrants into the PV industry, what is the impact that new

Simulation and developing the analysis based the differentiation

Run the simulation, entering the following numbers at each of the four major decision points: 1) Decision 1: For Years 2008-2012 a) Pricing - Manual b) Module Price - $0.13 c) Revenue to Process Improvement - 5% d) Years to Advance - 5 years 2) Decision 2: For Years 2013-2017 a) Pricing - Manual b) Modu

MIT Solar Power Pricing Simulation

Overview The 4-module SLP sequence for BUS599 requires that you run a simulation over an 18-year period, and that you analyze the outcome of the decisions you make at each decision point. In this course, we will be using the MIT Solar Power Pricing Simulation. Read the following introduction to the SunPower case: Th

Break Even Point for Production

The Gregory's Pie Company is facing a capacity dilemma in that the current capacity is at its limits, but at the same time, capital investment in a new line is high and, additionally, a new line might lead to a situation of over capacity. The fixed cost of investment is estimated at 600.000 Euros for a capacity of 150.000 pie

Relationship between market power and price

The simple case of pricing with market power assumes (a) all consumers are charged the same price, (b) the firm sells one product, (c) demand exists in one time period, and (d) competitors do not pursue pricing games. Economists insist on reviewing what happens as each assumption is relaxed one at a time, However, it is clear th

Analysis of Outsourcing of Capabilities

Complete an analysis of the outsourcing of capabilities to achieve optimal coordination of inter-functional operational processes and inter-organizational collaboration across the whole value chain. Consider the need for new kinds of relationships with suppliers.

Discuss: Business Analysis Topics

Hi, I need some assistance answering the following business analysis type questions. 1. What are the major differences between aggregate planning in manufacturing and aggregate planning in services? 2. How do facility location decisions differ for service facilities and manufacturing plants? 3. Distinguish between pure an

Creating a Financial Strategy for Toyota Motors

Question: Can you describe an optimal financial strategy for the Toyota company and include an evaluation of the organization's current financial model, a discussion (supported with germinal and current research) of strategic changes that could improve the organization's financial performance and allow it better interface with t

Linear Programming Used to Attain Optimum Solutions

1.1) An Operations Manager would like to understand how linear programming (LP) can be used to attain optimum solutions when allocating scarce organizational resources. He/She has the following questions: a) What is LP? How is an LP problem defined b) Define objective function, constraint, and decision variable c) Our firm

Inventory Decision Model

THe annual demand is estimated to be 15,000 units and is assumed to be constant throughout the year. Each unit costs $80. THe company's accounting department estimates that hits opportunity cost for holding this item in stock for one year is 18% of the unit value. Each order placed with the supplier costs $220. THe company's pol

Comprehensive Financial Analysis for IGT

See the attached annual report for IGT. Required: Based on these financial statements, the company's background, industry statistics, and other market and company information, prepare a financial statement analysis report covering the following points: a. Executive summary of the company and its industry. b. Detailed

marketing

To prepare your planââ?¬â?¢s positioning strategy, consider competitors in the market, and decide how your companyââ?¬â?¢s product should be positioned for the following: Brand building opportunities Brand optimization opportunities with your target markets To assist with other marketing and promotional strategie

Strategy of cost management

"If every manager minimizes the cost of the process he or she supervises, overall costs of the company will decrease." Would this be a wise strategy, Why or why not?

Sustainable energy development projects will help to resolve the present energy crisis and establish a solid foundation for reliable economic, social and political developments.

Energy plays a valuable and critical role in the economic development of any nation. The present energy crisis is a global phenomenon that needs to be addressed in such a way as to create a sustainable economic development that will help to build a strong and reliable economic system. This study examine the roles of culture and

Transformation & Throughput for National Presto Industries

See attached file. I am having an exceedingly difficult time in researching National Presto Industries for the purposes of this assignment. My area of focus is in Finance, so I'm familiar with quarterly/annual reports and the like, but finding this type of internal organizational information is beyond me. Additionally, the Bu

Mixed Methods Research

Post a brief synopsis of the mixed methods studies you found and provide the full APA citation, as well as a brief paragraph that explains the contribution the study makes to Managing multicultural workplaces, either directly or tangentially. In the text of your posting, introduce and summarize the mixed methods studies as a co

Complete the following sections of a Strategic Audit

See attached reference files. Part 1 Research the Dell website. Using your readings, the Library, and the Internet, and any additional resources necessary, you are being asked to complete the following sections of a Strategic Audit (See examples starting on page 78 and pages 179-185 following appendix 11.C): 1. Anal

Identify common income Tax Minimization strategies.

Library Research Assignment You and your spouse are preparing your first income tax return as a married couple. You want to save some money and prepare the tax return yourself, so you need to gather information on the possible credits and deductions that are available to married couples and decide the best way to file. You know

Organizational Structure Presentation

Can you help me get started on this assignment? Organization: Showtime Evaluate how organizational functions (e.g., marketing, finance, human resources, operations) influence and determine the organizational structure of your selected organization.

Survey Instruments

This assignment should form the basis for how the identified project will be implemented. This will facilitate the completion of the project. Implement survey instruments. Organize the data into a spreadsheet or a tool of your choice that will help you analyze the data by first putting this data into charts and tables.

Tactical Assessment Paper

Resources: Managing Emerging Technologies and of Strategic Management of Technological Innovation (see attached) Write a paper in which you consider the various tools and techniques to promote disruptive innovation of Managing Emerging Technologies and of Strategic Management of Technological Innovation. o Evaluate how they

Operations management for a Wholesaler

[8] 5. You are a retailer who buys a widget at a wholesale price $3.00 from a supplier and retails it for $4.00. It costs your supplier $2.00 to make the widget. Unsold widgets are marked down and sold for $1.50. Demand is uncertain and uniformly distributed between 6 and 10 units. That is, it is equally likely that dema

Export payment risk minimization

Export payment risk minimization The final hurdle to successful exporting is actually getting paid. In the past a sizeable % of small to medium Irish exporting firms has admitted that securing payment was a weakness in their export performance. Successful completion of the export cycle involves an extensive knowledge of: &

Performance: 'decision model' and 'performance evaluation model'

See attach file. 1. Consider these data regarding Douglas County's photocopying requirements: Old Equipment Proposed Replacement Equipment Useful life, in years 5 3 Current age, in years 2 0 Useful life remaining, in years 3 3 Original cost $25,000 $15,000 Accumulated depreciation 10,000 0 Book value 15,000 Not acqu

Marketing Competing Concepts and the Exchange process

Our study group is getting off to a rocky start and we need your help. Thanks. 1. The competing concepts under which organizations have conducted marketing activities include: the production concept, product concept, selling concept, marketing concept, and holistic marketing concept. Evaluate the advantages and disadvanta