Cost of Emerging Technology
Essay by cmcclain5 • November 10, 2013 • Essay • 339 Words (2 Pages) • 1,454 Views
Cost Structure of Emerging Technologies
The main purpose of this article is to discuss how the changes in sales volume can affect the operating income of a company. Many companies upon start up can incur a high fixed cost while establishing a foundation to be competitive. The article mentions how in the 1880s railroad companies incurred high fixed costs while laying railroad tracks to service the demand for freight transportation. The investment of the railroad tracks gave the companies the ability competes in pricing for shipping.
In the article the author is addressing what makes companies over invest in new technology upon startup. Many of them invest the majority of the company's debt into the fixed assets which does not change as does the operating income because of a change in revenue. The analysis of the competition involved is a variable that often cannot be determined upon initial entry of a market.
Importance of this information gathered from this article is that high fixed cost in company's start up can be risky. If the industry is in a large competition market then more than likely there will be pricing wars and it could lead to a company shutting down. However, some industries allow a competitive market and still generate revenue regardless of how the market grows. In my opinion wireless providers are surviving in the market even though new competition emerged daily.
In conclusion this article bring light to hove having high fixed cost during start up is risky but can prove to be useful. The industries mentioned are good examples of cost structures in emerging technology. If researched you will find each of them suffered a tremendous loss because the fixed cost associated with startup was high and the revenue generated was not enough to keep them effectively operational.
The key concepts to be understood is the effect of high fixed costs can have an impact on the operating revenue being positive or negative. The operating leverage in the company can affect how their performance will be overall in the market.
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