12 Questions
What is the primary condition for a firm to achieve a low-cost edge over its rivals?
Its cumulative costs across its overall value chain must be lower than competitors' cumulative costs.
What is the primary effect of higher rates of capacity utilization on unit costs?
Reduction in fixed costs per unit
What are the two major avenues for achieving a cost advantage?
Internal value chain activities and/or value chain system activities
What is a key factor that can help a firm lower its costs?
Economies of scale
What is the purpose of partnering with suppliers in the context of supply chain efficiency?
To streamline the ordering and purchasing process and reduce costs
What is the result of substituting lower-cost inputs with little or no sacrifice in product quality or performance?
Reduction in costs of certain raw materials and parts
What is an example of how a firm can take advantage of experience and learning-curve effects?
By learning from its experiences and reducing the cost of performing an activity over time
What is the benefit of using a company's bargaining power vis-à-vis suppliers or others in the value chain system?
Gain of concessions from suppliers
What is a benefit of operating facilities at full capacity?
Lower unit costs
What is the primary advantage of outsourcing the performance of certain value chain activities?
Ability to perform activities at lower cost due to outside specialists' expertise and volume
What is a cost driver that a firm can use to lower its costs?
Taking full advantage of experience and learning-curve effects
What is a key consideration when deciding whether to outsource or vertically integrate certain value chain activities?
The cost advantages of outsourcing or vertical integration
Learn about the two major avenues for achieving a cost advantage over rivals, including performing internal value chain activities more cost-effectively and revamping the firm's overall value chain. Understand how to manage the value chain to reduce costs and gain a competitive edge.
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