This PPT slide, part of the 155-slide Strategic Analysis Primer PowerPoint presentation, addresses the concept of complexity costs, emphasizing how they escalate with the increase in the number of activities and connections within an organization. It outlines that complexity can lead to higher unit costs across various scopes, including manufacturing and administration. The mention of manufacturing highlights that as the number of parts, models, and product lines increases, so too do the costs associated with managing those complexities. Similarly, in administration, the complexity of coordinating across different businesses and countries can lead to inefficiencies and increased expenses.

The slide provides a practical example to illustrate this point: the cost of establishing connections in a communication network. It uses a formula to demonstrate how the number of connections grows exponentially as the number of people increases. For instance, with 50 people, there are 1,225 connections, while with 100 people, the number jumps to 4,950. This exponential growth in connections leads to a corresponding rise in costs per person, which is detailed in the accompanying table.

The key takeaway is that as organizations expand their scope—whether through product lines or geographical reach—they must be aware of the hidden costs associated with complexity. This understanding is crucial for decision-makers who need to balance growth with operational efficiency. Recognizing the implications of complexity can inform strategic choices that mitigate unnecessary expenses and streamline operations.

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Strategic Analysis Manufacturing