Question

To what extent are the seven cost drivers shown in Figure 7.7 relevant in analyzing the costs per student at your business school or educational institution? What recommendations would you make to your dean for improving the cost efficiency of your school?

ECONOMIES OF SCALE • Technical input-output relationships • Indivisibilities • Specialization ECONOMIES OF LEARNING • Increased individual skills • Improved organizational routines PRODUCTION TECHNIQUES • Process innovation • Re-engineering of business processes PRODUCT DESIGN Standardization of designs and components • Design for manufacture INPUT COSTS • Location advantages • Ownership of low-cost inputs • Non-union labor • Bargaining power CAPACITY UTILIZATION • Ratio of fixed to variable costs • Fast and flexible capacity adjustment RESIDUAL EFFICIENCY Organizational slack/X-inefficiency • Motivation and organizational culture Managerial effectiveness

Answer 1

cost drivers	impact on business school	recommendations
economies of scale	more the number of students less the cost per student	Increase enrollments
economies of learning	more enrollments in highly specialized courses requiring higher investments will make costing viable	publicise the highly skilled courses
production techniques	taking courses online will increase enrollments and bring down the cost	invest in online courses
product design	uniform and consistent study materials for all branches for first year students will bring down the cost	design uniform and consistent study material
input costs	standardization of teaching methods and infrastructure will reducce costs	same as impact
capacity utilization	Student enrollment as per the capacity will optimize costs	same as impact
residual efficiency	Optimizing faculy timings will lead to reduction of slack	same as impact