Industrial cost curve
Benefit
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Reveals the balance of power between competitors in a cost-driven market.
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Decodes the interactions between demand, price, capacity and unit costs.
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Indicates further developments in the industry under investigation.
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Identifies the first supplier to get into difficulties in the event of a fall in price or demand.
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Gives an indication of future price trends in the industry under review.
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Provides decision-making aids for the establishment or closure of locations.
Applications
If your company is in a cost-driven industry: Do you know the balance of power of competitors in your market? Are you familiar with the interactions between demand, price, capacity and unit costs in the market segment you serve? If not, this chapter will help you answer these questions. The industry cost curve can be applied where the company's differentiation power is weakened by industry-specific and cross-company standardization and norms. It is based on the four strategic levers according to which cost-driven industries generally function. Once this data is known, the industry cost curve can be used to run through scenarios on the basis of which strategic decisions can be derived. The procedure is explained in detail, including scenarios, using a practical example. The chapter ends with a few tips on how a commodity manufacturer can differentiate itself from its competitors despite simple business logic.