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Article
Publication date: 1 April 2003

Mike Hess and Joan Enric Ricart

Previous research argues that customer switching costs play an important role in the firm’s ability to retain customers and achieve competitive advantage. Research also…

Abstract

Previous research argues that customer switching costs play an important role in the firm’s ability to retain customers and achieve competitive advantage. Research also indicates that in the increasingly networked environment, switching costs are changing in important ways. Despite switching costs’ recognized role in contributing to competitive advantage and its increasingly strategic characteristics in the expanding networked environment, we find a lack of coherence and completeness in the conceptual tools and models developed to understand its role and help effectively to manage the phenomenon. In this paper we attempt to address these needs by expanding and refining the conceptualization of customer switching costs and developing a more useful and comprehensive framework for managers.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 1 no. 1
Type: Research Article
ISSN: 1536-5433

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Abstract

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Documents from the History of Economic Thought
Type: Book
ISBN: 978-0-7623-1423-2

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Book part
Publication date: 24 March 2005

Herbert L. Baer, Virginia G. France and James T. Moser

This paper develops a model that explains how the creation of a futures clearinghouse allows traders to reduce default and economize on margin. We contrast the collateral…

Abstract

This paper develops a model that explains how the creation of a futures clearinghouse allows traders to reduce default and economize on margin. We contrast the collateral necessary between bilateral partners with that required when multilateral netting occurs. Optimal margin levels balance the deadweight costs of default against the opportunity costs of holding additional margin. Once created, it may be optimal for the clearinghouse to monitor the financial condition of its members. If undertaken, monitoring will reduce the amount of margin required but need not affect the probability of default. Once created, it becomes optimal for the clearinghouse membership to expel defaulting members. This reduces the probability of default. Our empirical tests suggest that the opportunity cost of margin plays an important role in clearinghouse behavior particularly their determination of margin amounts. The relationship between volatility and margins suggests that participants face an upward-sloping opportunity cost of margin. This appears to dominate the effects that monitoring and expulsion might have on margin setting.

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Research in Finance
Type: Book
ISBN: 978-0-76231-161-3

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Article
Publication date: 11 February 2021

Rodrigo E. Peimbert-García, Jesús Isaac Vázquez-Serrano and Jorge Limón-Robles

Literature shows that the economics of early failures in maintenance and electric utilities have not been deeply analyzed. This study aims to focus on quantifying the…

Abstract

Purpose

Literature shows that the economics of early failures in maintenance and electric utilities have not been deeply analyzed. This study aims to focus on quantifying the economic impact that early failures in current transformers have on total maintenance costs. The empirical study is conducted in a regional transmission division of an electric utility located in Mexico.

Design/methodology/approach

The utility's database was accessed to collect 219 maintenance records. Clustering techniques were used to identify early failures from a bimodal distribution of failures. Confirmatory goodness-of-fit procedures followed the analysis, and finally, direct and opportunity costs were estimated by adapting the cost-of-quality (PAF) Model.

Findings

Around 11% of all maintenance activities are triggered by early failures, and they account for up to US$2.2m during the eight-year period under study, which represents 16% of total maintenance costs. Additionally, opportunity costs represent close to two-thirds of the total costs due to early failures. This was obtained after finding and validating a clear-cut border of 3.5 months between early failures and the rest.

Originality/value

Failures in energy grids and power transmission can have a large economic impact on the power industry and the society in general. Thus, the maintenance function in equipment such as current transformers is a crucial entry of the budget of any electric utility. This study is one of the very few that highlights the magnitude and importance of direct and opportunity costs derived from early failures.

Details

Journal of Quality in Maintenance Engineering, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1355-2511

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Article
Publication date: 17 March 2020

João Cláudio Soares, Anabela Pereira Tereso and Sérgio Dinis Sousa

This paper proposes a decision support model that can be used to help decide the destination of defective products, for mass production industries. The objective of this…

Abstract

Purpose

This paper proposes a decision support model that can be used to help decide the destination of defective products, for mass production industries. The objective of this model is to reduce the cost of the defect, and consequently reduce the total quality costs.

Design/methodology/approach

The decision model was developed based on the theory of quality costs and decision-making models, considering the practical aspects of reality through data collection, observation and experience in Industrial Pole of Manaus (Brazil) industries. A decision model adjusted to reality assists in the construction of the decision process, indicating the facts, data collection and the planning of the actions to choose the best alternative.

Findings

The specific contributions of this research are: (1) define a sequential structure of actions, effects and costs associated with defective items; (2) allow a comprehensive approach to failure costs, including various elements of lost opportunity costs; (3) minimize failure costs, and consequently reduce total quality costs, without necessarily investing in prevention and assessment; (4) describe the use and application of the built theory; (5) identify the quality cost elements most representative in existence of defective items; and (6) identify improvement points in the management of possible future defective items.

Originality/value

Much of the work of implementation of quality cost models do not emphasize the analysis of the destination of defective items. Also, there are no studies that use decision models with identification, accounting and evaluation of effects and criteria of quality, productivity and cost to define the destination of manufacture defective items.

Details

International Journal of Quality & Reliability Management, vol. 38 no. 1
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 3 May 2019

Judd Michael and Nathaniel Elser

This paper aims to propose a quadruple bottom line approach for higher education leaders who must decide whether to accept sustainability initiatives that do have not have…

Abstract

Purpose

This paper aims to propose a quadruple bottom line approach for higher education leaders who must decide whether to accept sustainability initiatives that do have not have a business case. The authors describe a personal waste management program at a major university to illustrate how a quadruple bottom line framework may impact decisions to adopt a sustainability practice in higher education. The authors also demonstrate how opportunity costs can be applied to better understand the true costs of such waste management programs.

Design/methodology/approach

This exploratory research uses a case study approach with a unique accounting method to determine the costs of a personal waste management system. System costs are calculated for the entire university and for sample units within the university.

Findings

University leaders chose to continue the new waste management program in light of evidence showing higher than anticipated costs. The authors illustrate how this decision was driven by consideration of a fourth bottom line, that of the educational value of the sustainability initiative. It is discussed whether proposed sustainability initiatives such as these should be evaluated using a traditional triple bottom line framework, or, in the case of higher education, if equal consideration should also be given to factors related to the educational mission of the institution.

Originality/value

The authors develop a quadruple bottom line framework to explain the frequent implementation of economically costly sustainability programs in higher education contexts. This paper also reviews the rise of “personal waste management” programs at higher education institutions, demonstrates how the value of employee time can and should be considered as a cost of a comprehensive campus sustainability program (i.e. recycling and composting) and illustrates a novel means for using opportunity costs to determine those costs.

Details

International Journal of Sustainability in Higher Education, vol. 20 no. 2
Type: Research Article
ISSN: 1467-6370

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Article
Publication date: 1 May 1980

David Ray, John Gattorna and Mike Allen

Preface The functions of business divide into several areas and the general focus of this book is on one of the most important although least understood of…

Abstract

Preface The functions of business divide into several areas and the general focus of this book is on one of the most important although least understood of these—DISTRIBUTION. The particular focus is on reviewing current practice in distribution costing and on attempting to push the frontiers back a little by suggesting some new approaches to overcome previously defined shortcomings.

Details

International Journal of Physical Distribution & Materials Management, vol. 10 no. 5/6
Type: Research Article
ISSN: 0269-8218

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Article
Publication date: 29 November 2018

Patricia Duarte, Jwen Fai Low and Andrea Schiffauerova

By developing a better understanding of costs associated with improving organizational quality and costs incurred by neglecting it, banks could devise more optimal…

Abstract

Purpose

By developing a better understanding of costs associated with improving organizational quality and costs incurred by neglecting it, banks could devise more optimal operational policies. The paper aims to discuss this issue.

Design/methodology/approach

This paper proposes a generic banking cost of quality (COQ) model developed from Colombian banking data. The model has been developed using the product performance approach, which is consistent with strategizing from a long-term and organization-wide perspective. The proposed COQ function is composed of prevention and appraisal categories, costs caused by events of operational risks and opportunity costs caused by events of credit risks measured though non-performing loans.

Findings

The model was validated using data obtained from three major Colombian banks. The significant theoretical contribution of this research stems from the development of a banking COQ model which represents a pioneer effort at quantifying quality costs in financial institutions.

Originality/value

This is a unique attempt at using a product performance approach in service industry and also a rare effort toward incorporating opportunity costs in COQ. Managerially, the proposed COQ model can be established as a holistic business strategy and can serve as a tool helping managers to evaluate the impact of quality management initiatives and to decide on trade-offs between quality level and quality costs.

Details

International Journal of Quality & Reliability Management, vol. 35 no. 10
Type: Research Article
ISSN: 0265-671X

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Article
Publication date: 1 April 2002

D.G. Gouws and H.P. Wolmarans

Student failure in tertiary education costs taxpayers and donors large sums each year. The cost of quality can be substantial, but it can also be a source of significant…

Abstract

Student failure in tertiary education costs taxpayers and donors large sums each year. The cost of quality can be substantial, but it can also be a source of significant savings. This study attempts to provide a framework in terms of which these costs can be quantified through the application of the principles of quality costing in tertiary education. An emphasis on quality increases profitability by increasing student throughput and by decreasing the cost of the provision of services. Significant savings are possible if the educational system could achieve greater success by focusing on adding value to those students that are more likely to succeed. If quality costing is made visible in the South African tertiary education system, it could have a profound impact on the products (students) that are delivered to society.

Details

Meditari Accountancy Research, vol. 10 no. 1
Type: Research Article
ISSN: 1022-2529

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Article
Publication date: 1 April 1986

Frank P. Buffa

Consolidation, the grouping of several small shipments into one at a designated location, can reduce total logistics cost. Total logistics cost includes consolidation…

Abstract

Consolidation, the grouping of several small shipments into one at a designated location, can reduce total logistics cost. Total logistics cost includes consolidation, transportation and inventory costs. Identifying where cost‐saving opportunities exist is often confused by the interrelated nature of these various costs.

Details

International Journal of Physical Distribution & Materials Management, vol. 16 no. 4
Type: Research Article
ISSN: 0269-8218

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