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The strategic planning process – part 1 (Technical article)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBL Exams › The strategic planning process – part 1 (Technical article)

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by Ken Garrett.
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  • December 3, 2021 at 4:58 pm #642422
    Spiro
    Participant
    • Topics: 11
    • Replies: 42
    • ☆☆

    In The strategic planning process – part 1 technical article, in Porter’s five forces -> 5. The extent of competitive rivalry, I can not understand the following:

    the cost structures if high – fixed costs prices are often cut to generate volume

    Please elaborate it further. The structure of this sentence confuses me.

    December 3, 2021 at 10:03 pm #642433
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10595
    • ☆☆☆☆☆

    It means that if an industry has high fixed costs it will usually require a high volume of sales to generate enough contribution to first break-even then to make profits. Prices might be cut to win additional sales volume or to fiercely maintain current volume.

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