Cost Structure

From Open Risk Manual

Definition

The Cost Structure describes all costs incurred to implement and operate a Business Model.

Costs are required for creating value using Key Resources and Key Activities, delivering value via a Distribution Channel and maintaining Customer Relationship.

A business model will involve a mix of diverse cost elements: Customer Acquisition Cost (abbreviated to CAC) refers to the resources that a business must allocate (financial or otherwise) in order to acquire an additional customer (this includes research and marketing costs); Fixed Productions Costs that are known a-priory (at least for a certain period) such as fixed salaries, rents, operational costs with agreed price levels etc; Variable Production Costs that are not known a-priory and can be linked to market variables, production volumes, variable remuneration components etc.

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