Opportunity cost

Examples of Opportunity cost in the following topics:

• Employee Development

  • Talent development refers to an organization's ability to align strategic training and career opportunities for employees.
  • What this essentially means is that human resources departments, in addition to their other responsibilities of job design, hiring, training, and employee interaction, are also tasked with helping others improve their career opportunities.
  • Therefore, talent development is a trade-off by which human resources departments can effectively save money through avoiding the opportunity costs of new employees.

• The Challenge of Competition

  • Low-cost suppliers often benefit largely from economies of scale.
  • The opportunity cost of efficiency is associated with quality, which generally sees higher price points.
  • Quality is therefore a strong antithesis to the low-cost strategy.
  • Companies generally achieve either a cost or a quality advantage (very rarely, both).
  • In panel B, both companies' products have the same value, but Company I's product has lower cost.

• Making Strategy Effective

  • One method of assessing suitability is using a strength, weakness, opportunity, and threat (SWOT) analysis.
  • A suitable strategy fits the organization's mission, reflects the organization's capabilities, and captures opportunities in the external environment while avoiding threats.
  • One method of analyzing feasibility is to conduct a break-even analysis, which identifies if there are inputs to generate outputs and consumer demand to cover the costs involved.
  • The break-even point (BEP) is the point at which costs or expenses and revenue are equal: there is no net loss or gain, so the company has "broken even."

• The Importance of Fringe Benefits

  • As the search for high-quality workers becomes more difficult and health care costs increase, it has become important to offer fringe benefits to gain a competitive advantage.
  • Healthcare costs have risen at a rate that makes it difficult for governments, businesses, and individuals to keep up.
  • While the cost negatively impacts businesses, it also offers an opportunity through competitive advantage.
  • This is to say, organizations can capture lower health insurance costs per employee due to scale economies, allowing organizations an important bargaining chip in the hiring process.
  • Identify the critical importance of providing strong benefits packages, particularly in light of current external factors (e.g., health care costs)

• Differences Between Strategic Planning at Small Versus Large Firms

  • Large firms such as McDonald's often achieve better scale economies and thus can pursue low-cost strategies.
  • A smaller organization needs to be agile, adaptable, and flexible enough to develop new strengths and capture niche opportunities within a competitive industry with bigger players.
  • Small firm strategies often incorporate flexibility to capture new opportunities as they arise, as opposed to maintaining an already well-established competitive advantage.
  • In most cases, low-cost strategies require substantial economies of scale.

• Global Strategy

  • By expanding to a broader consumer base, these firms can take advantage of scale economies (cost advantages that an enterprise obtains due to expansion) and learning-curve effects because they are able to mass-produce a standard product that can be exported (providing that demand is greater than the costs involved).
  • Globalization is not limited to cost leadership, however.
  • The globalization strategy of Starbucks—while it includes selling in many countries—is hugely depending on global sourcing, and strategic managers must carefully monitor this process for costs and benefits.
  • Managers must conduct a cost/benefit analysis to identify which country actually offers the best profit potential.
  • The map identifies GDP (nominal) in different countries;countries with higher GDPs offer high consumer spending opportunities for multinational enterprises.

• Sustainability Innovation

  • In other words, it is "business with a cause," where the world's problems are turned into business opportunities for deploying sustainability innovations.
  • Through greening their supply chain, minimizing water use, cutting electric costs, reducing fuel costs through better distribution, and a number of other innovative process improvements, Interface Global produces high quality carpets at a lower cost and smaller environmental footprint.

• The Impact of External and Internal Factors on Strategy

  • Strategic management is the managerial responsibility to achieve competitive advantage through optimizing internal resources while capturing external opportunities and avoiding external threats.
  • Marketing and sales: building a brand, selling products, and identifying retail strategies and opportunities
  • For the sake of this discussion, we will focus on the following general strategic concerns as they pertain to opportunities and threats:
  • It is important to know which economic factors are opportunities and which are threats.
  • The regulatory environment: Environmental regulations, import/export tariffs, corporate taxes, and other regulatory concerns can poise high costs on an organization.

• Reducing Workplace Stress

  • Design jobs that provide meaning and stimulation for workers as well as opportunities for them to use their skills.
  • Give workers opportunities to participate in decisions and actions that affect their jobs.

• Considering the Environment

  • Alternatively, a company that demonstrates a low-cost strength (producing products cheaper than the competition) benefits from employing a structural or bureaucratic strategy to streamline operations.
  • SWOT analysis: In this particular model, a company's strengths and weaknesses are assessed in the context of the opportunities and threats in the business environment.
  • A SWOT analysis enables a company to identify the ideal structure to maximize its internal strengths while capturing external opportunities and avoiding threats.