This document discusses different types of costs businesses face including fixed costs like salaries and rent, and variable costs like materials and distribution. It explains how businesses can achieve economies of scale through bulk buying and mass production, and economies of scope through marketing and distribution. The document also distinguishes between capital expenditures (capex) which are long-term investments in assets, and operational expenditures (opex) which are daily running costs. Finally, it notes that businesses must find a balance between being purely cost-driven or value-driven in their operations and pricing.

2. costs: proportional or not
fixed costs
• salaries (fixed
contracts)
• rent
• machines
variable costs
• production materials
• distribution costs
• salaries
(outsourced)
# mosfets Price/unit % discount
1 0,21
10 0,19 10%
100 0,17 19%

3. cost advantages
economies of scale
– bulk buying
– mass production
can add value by lower price, but also by …
economies of scope
– marketing
– distribution
can add value of status, convenience, …

4. cost & management decisions
capex (capital expenditure): investments,
long term, assets that go on the balance
sheet of a company, depreciation
opex (operational expenditure): running
costs, day-to-day, “used up”, expenses
e.g. 3d printer is capex, materials, electricity
and maintenance are opex

5. cost and value proposition
• cost driven > race to the bottom
• value driven > money is not an issue
Playing field lies between the extremes

6. Many service industries e.g. hotels, restaurant,
airlines, have both budget and luxury operators and
a range of options in between