07. The Production
Possibility Frontier
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The PPF charts your x-inefficiency, or the 'opportunity costs' of what you're doing versus what you could be doing. It's a useful guide to where your marketing is best focussed.
The 'frontier', the curve here, represents the limits to profit: it's the maximum productivity of your company if all resources were doing what they do best at maximum efficiency. A company on line a has high x-inefficiency: it's spending a lot of time doing stuff it's not cut out for. A company on line c is very focussed but prone to being sideswiped; it can't do much else. The best bet for most companies is line b, where x-inefficiency is reasonable but the business can adapt to changing conditions.
Keeping your business on the b-line is a goal of marketing: your marketing programme should align with what your business does best. Next on to 08: the McKinsey matrix.
Back to toolbox
The PPF charts your x-inefficiency, or the 'opportunity costs' of what you're doing versus what you could be doing. It's a useful guide to where your marketing is best focussed.
The 'frontier', the curve here, represents the limits to profit: it's the maximum productivity of your company if all resources were doing what they do best at maximum efficiency. A company on line a has high x-inefficiency: it's spending a lot of time doing stuff it's not cut out for. A company on line c is very focussed but prone to being sideswiped; it can't do much else. The best bet for most companies is line b, where x-inefficiency is reasonable but the business can adapt to changing conditions.
Keeping your business on the b-line is a goal of marketing: your marketing programme should align with what your business does best. Next on to 08: the McKinsey matrix.