Changes in Input Costs and Exchange Rates Framework
Input costs
Changes in input costs and exchange rates can affect industry structure and mobility barriers. Increases in input costs can reduce profitability and increase the risk of new entrants.
- Changes in input costs can affect mobility barriers
- Exchange rates can impact competitive advantage
- Continual innovation is necessary to maintain a competitive advantage
- Assess Input CostsAssess the impact of changes in input costs on mobility barriers and competitive advantagePro tipConsider the complexity of the technology and the availability of skilled personnelWarningUnderestimating input costs can lead to loss of competitive advantage
- Develop Strategy to Maintain Competitive AdvantageDevelop a strategy to maintain a competitive advantage through innovation and experience accumulationPro tipInvest in research and developmentWarningFailure to innovate can lead to loss of competitive advantage
- Monitor Exchange RatesMonitor changes in exchange rates and adjust strategy accordinglyPro tipConsider the impact of exchange rates on competitive advantageWarningFailure to monitor exchange rates can lead to loss of competitive advantage
Movie Production Example
The movie production industry experienced changes in industry structure due to changes in input costs
OutcomeCompanies that innovated and accumulated experience maintained their competitive advantage
Underestimating Input Costs
Failing to consider input costs can lead to loss of competitive advantage
Failing to Innovate
Failure to continually innovate can lead to loss of competitive advantage
The framework is based on the idea that changes in input costs and exchange rates can affect competitive advantage.
Source · BOOK
Competitive Strategy