【正文】 ? Customer understanding segmentation and “Discovery” conjoint analysis multidimensional scaling ? Pricevolume curves and elasticity ? Demand forecasting technology/substitution curves Wrapup FACTOR COSTS USUALLY DON’T REQUIRE ANALYTICAL TOOLS, BUT CAN RESULT IN DIFFERENT COST POSITIONS Factor cost differences can affect most elements of the cost structure ? Raw materials ? Energy ? Labor (direct and overhead) ? Capital Factor cost differences are generally additive or multiplicative and can be incorporated directly into the cost analysis FACTOR COST EXAMPLE Forest Products Industry, 1981 United States Canada Sweden — — — France — — Brazil Labor Rate ($/Hour) Oil Gas Coal Other Average Energy Prices ($/MMBTU) TABLE OF CONTENTS Introduction General analytical techniques ? Graphs ? Deflators ? Regression analysis Supply side analysis ? Cost structures ? Design differences ? Factor costs ? Scale, experience, plexity and utilization ? Supply curves Demand side analysis ? Customer understanding segmentation and “Discovery” conjoint analysis multidimensional scaling ? Pricevolume curves and elasticity ? Demand forecasting technology/substitution curves Wrapup SCALE, EXPERIENCE, COMPLEXITY, AND UTILIZATION HAVE DISTINCT COST EFFECTS 1 Scale, experience and utilization tend to be confused ? All are conceptually separate Scale ? Relates unit cost or price to production volume ? Generally applies to machines or facilities of different sizes at a point in time Experience ? Relates unit cost or price to cumulative production ? Best to think in terms of entire industry experience over long periods ? Arises for a variety of economic reasons ? Is used a lot less frequently than you may think Complexity ? Relates unit cost to some measure of plexity ? Either over time over different facilities at a point in time Utilization ? Relates unit cost or profitability to utilization as a percentage of capacity ? Applies to different volumes or output from given facilities over time SCALE, EXPERIENCE, COMPLEXITY, AND UTILIZATION HAVE DISTINCT COST EFFECTS 2 BCG SLOPE DESCRIBES THE RELATIONSHIP BETWEEN UNIT COST AND VOLUME BCG Slope Equals Percent of Base Remaining When Independent Variable Doubled Scale ? Two similar facilities with parable utilization, but one four times the production of the other ? Unit cost of smaller facility $ and larger facility $ ? “Slope” = 90% Experience ? Cumulative output increases from 100K units to 200K units ? Unit cost falls from $ to $.97 ? “Slope” = 81% Utilization ? Output increases from 750 to 1,500 ? Amortizable fixed costs of $5M ? Fixed cost per unit falls from $6,667 to $3,333 ? “Slope” = 50% b is ? Slope (negative) of log Y = a b Log X ? Elasticity (negative) of Y with respect to X BCG slope = 2b Therefore log BCG slope log 2 FROM MATHEMATICAL SLOPE TO BCG’S SLOPE AND VICE VERSA BCG Slope Value of b 90 .152 80 .322 70 .515 Note: You can use log (base 10) or ln (base e). Answers are unaffected. BCG Slope Takes LogLog Form BCG Slope Mathematically Implies b Value b = CALCULATING NEW COST FROM OLD COST AND VOLUMES Example Old Cost BCG Slope Old Volume New Volume New Cost Yt Xt? ? Xt?1Yt?1100 70% 4 7 ? Or Yt + 1 = Yt Xt + 1 Xt log BCG Slope log 2 ( ) ( )Yt + 1 = Yt Xt + 1 Xt ( b ) ( )CALCULATING BCG SLOPE FROM COSTS AND VOLUMES Example Old Cost 100 New Cost 60 Old S Volume 4 New S Volume 10 Slope ? BCG Slope = Antilog Yt + 1 Yt ( ) log 2 * Xt + 1 Xt log )(log SCALE MEANS COST PER UNIT IS LOWER FOR LARGER SUPPLIERS Typically Charted on Log vs. Log Cost/Unit 0 . 111010010 100 1 , 0 0 0 1 0 , 0 0 0Volume 100% Slope 75% Slope 50% Slope Economies of Scale Observed in Most Cost Structure Elements Element Manufacturing scale ? Automated line ? Job shop Advertising ? Television ? Direct mail Selling ? Fragmented customers ? Concentrated customers Engineering ? Standard product ? Custom product Effect of Scale High Low High Low High Low High Low Example Engine blocks Assembled ponents Food Mailorder specialty apparel Books to bookstore Truck ponents Automobiles Hybrid microelectronics SCALE EXAMPLES Paper Machine Labor Advertising Costs Manhours/ Ton 40 60 100 200 400 800 58% BCG Slope Advertising/ Sales 8 16 24 32 Machine Capacity (TPD) Sales ($M) 60% BCG Slope LARGE SCALE PLANTS HAVE A SIGNIFICANT UNIT COST ADVANTAGE Overhead Cost/ 000 Equivalent 32’s ($) 25 20 15 10 7 500 1,000 2,000 4,000 Annual Capacity (000 Equivalent 32’s) Danville Old Saybrook Los Angeles Glasgow Mattoon 70% Slope HOWEVER, THINK BEYOND THE DATA First Cut of Data Would Show Wide Dispersion Salaried and Indirect Employees/ Sales ($M) 2 5 10 20 50 100 200 100 30 Plant Sales/Product Family ($M) = Traditional Approach = Costbased Management Approach = Timebased Management Approach Source: BCG Analysis 70 Automotive Component Suppliers DIFFERENT VOLUME LEVELS CAN JUSTIFY SUPERIOR TECHNOLOGIES 1 Hydraulic Component Casting Price/ Unit 40 20 10 8 6 4 50 100 500 1,000 5,000 Monthly Volume Note: Includes full amortization of tooling costs Slope across technolog