Final answer:
Cost reduction during the product life cycle is crucial for profitability, with opportunities at each stage such as development, production, support, and service. In decreasing cost industries, technological advancements and workforce education can lead to lower overall production costs and facilitate price reductions.
Step-by-step explanation:
Costs should be reduced at every stage of the product life cycle where feasible to maximize efficiency and profitability. However, certain stages may offer more significant opportunities for cost reduction:
- Product Development: Investing in research and design can lead to products that are easier and cheaper to manufacture and service, as well as having a longer lifespan.
- Product Production: Optimizing production processes for efficiency can decrease labor costs and material waste.
- Product Support: Effective marketing and distribution can lower the cost per acquisition and increase market penetration.
- Product Service and Warranty Claims: Designing products for durability and ease of repair can reduce warranty claims and service costs.
It is also essential for a firm to consider the following:
- What products to produce based on consumer demand and profitability.
- Choosing a production process that balances cost with quality.
- Adjusting output to meet market demand without overproduction.
- Setting prices that are competitive yet profitable.
- Employing the right amount of labor to maintain productivity without incurring unnecessary expenses.
In a decreasing cost industry, technology improvements and employee education can lead to falling average total costs, allowing the industry to lower prices while maintaining profitability.