MARKETING PLAN EXPLORER

Copyright 2002, Professor Jerome M. Katrichis

 

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III. EXTERNAL SITUATION ANALYSIS

F. Cost Structure of the Industry - Fixed vs. Variable Costs

The cost structure of any particular industry will largely define the scale and scope of marketing activities in an industry. Marketing costs can be seen in general as investments in volume building and lead to greater fixed costs to an organization but hopefully lead to lower per unit average costs.

In general, the higher variable costs are in proportion to total costs, the less an organization will spend on marketing activities of any sort. There is simply less incentive for an organization to build volume because it isn't spreading any costs out over the volume. Higher volume will not lead to lower per unit average costs.

The higher fixed costs are the more incentive an organization has to spread those costs out over higher volume. So the organization will want to build volume to spread the costs out to have a resulting lower average per unit cost.

 

 

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