Definition Cost Dynamics. Description.
Cost Dynamics is a term used by Porter to indicate that in addition to Analyzing Cost behavior at a point in time (Cost Drivers), a firm must also consider how the absolute and relative cost of Value Activities will change over time independent of its strategy.
A firm with insight into cost dynamics may be able to position itself to gain a Cost Advantage by anticipating these changes and moving quickly to respond to them.
Sources of Cost Dynamics
The most important sources of cost dynamics are:
-
Industry Real Growth. For example, growth of an entire industry may open up possibilities to achieve Economies of Scale.
-
Differential Scale Sensitivity. As market or sales volumes grow or decrease, this may effect some firms more than others.
-
Different Learning Rates.
-
Differential Technological Change.
-
Relative Inflation of Costs. For example if oil prices go up, this may shift the relative cost of certain activities compared to others.
-
Aging. Older machines require more maintenance costs. An older employee typically receives a higher salary.
-
Market Adjustment. When competitors are increasingly adopting similar value activities, this may increase the cost level for these activities.
|
Cost Dynamics Special Interest Group
|
|
Special Interest Group (11 members)
|
|
Advance yourself in business administration and management
|
|
|
 Understanding Costs In-depth
|
|
|
|
| |
|
Accelerate your management career
|
Compare with: Competitive Advantage | Value Chain
|
|
|
|
Special Interest Group Leader
|
|
|
|
|
|
|
News about Cost Dynamics
Videos about Cost Dynamics
Books about Cost Dynamics
More about Cost Dynamics