Cost Structure 08-18

Cost Structure

•      Describes all costs incurred to operate a business model

•      Can be easily calculated after defining

–     Key activities

–     Key resources

–     Key partnerships

•      What are the most important costs inherent in our business?

•      Which key resource are most expensive?

•      Which key activities are most expensive?

•      Is our business model Cost Driven .vs. Value Driven?

•      Cost driven business model

–     Focus on minimizing cost

–     Use low price value proposition

–     Maximum automation

–     Extensive outsourcing

•      Value driven business model

–     Focus on value creation

–     Premium value proposition

–     High degree of personalized services

•      Cost structures can have the following characteristics:

–     Fixed cost: Constant cost despite volume of production

–     Variable cost: Proportional cost with output volumes

–     Economies of scale: Cost advantages as output expands and average cost per unit drops

–     Economies of scope: Cost advantages due to large scope


Please read the main article about innovative business Models  Here