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ABILITY TO BACKWARD INTEGRATE - refers to the ability for a customer to become a competitor by producing that which used to be a purchased input. [Source: M. Porter] ACCESS TO DISTRIBUTION CHANNELS - refers to the ability of a firm to persuade industry channels to accept and to promote its products and services. The more that existing competitors have the channels tied up, the tougher entry into the industry will be. Sometimes this barrier is so high that to surmount it an entering firm must create an entirely new distribution channel (as Timex did the watch industry decades ago). [Source: M. Porter] ACCESS TO SUPPLIERS - could represent a barrier to entry if a new entrant was not able to secure required products and services from the industry's suppliers. Access to suppliers is often more difficult when there are few suppliers and they produce a unique product or service which cannot be easily duplicated. ACTIVITY - see Value Activity. ACTIVITY COST - is the cost of an activity and can be calculated as the sum of the following three components: (1) human resource costs (2) purchased operating input costs, and (3) fixed asset costs. ASSET REPLACEMENT COST - is an estimate of the current price of an asset if purchased today. Assets should be assigned to the activities that employ, control, or most influence their use. [Source: M. Porter] (If assigning asset costs to value activities and the activity employs only a percentage of an asset, multiply that percentage times the current asset price.) AVERAGE UNIT COSTS - is equal to total costs divided by the number of products produce. Compare with Marginal Costs. |
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