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