Direct costs are usually associated with direct labor and controllable material costs. The analysis of direct costs for Navigation Tech Solutions as a start-up company should be realized in contrast to the costs of the company’s competitor in the industry (Garrett, 2008, p. 24). Thus, the main competitor for the start-up in the industry of navigation systems for drones is VectorCal.
In this context, it is important to focus on the prediction of main costs for VectorCal, on the comparison of competitors’ direct and indirect costs; and on the comparison of competitors in terms of price of the acquisition.
Prediction of Main Costs for VectorCal
The main costs include direct labor and material costs. Referring to the production of drone navigation systems by VectorCal, it is possible to predict direct labor costs associated with recruiting and retaining such skilled employees as scientists, engineers, technicians, IT specialists who are involved in the process of producing the drone navigation systems (Murphy, 2009, p. 58).
The labor costs are also related to any operators who monitor and supervise the navigation system development and implementation at all stages. Direct material costs include the resources associated with purchasing the necessary hardware, software, programs, and other equipment and technologies that are required for the production of efficient drone navigation systems.
Comparison of Direct and Indirect Costs
While comparing the costs associated with the production of navigation systems by Navigation Tech Solutions and VectorCal, it is possible to state that the start-up company needs to spend more indirect costs for the promotion and contact with potential clients at the first stage of the firm’s development (Murphy, 2009, p. 111). This company also needs to have more allocated costs because of the necessity to provide payments to consultants to develop an efficient business plan and propose IT solutions.
However, VectorCal has higher direct costs because of supporting the large Research and Development department, but the company has lower costs spent on attracting customers.
From this point, Navigation Tech Solutions has the potential to control direct and indirect costs and decrease the expenses associated with the production process only if the effective business plan is proposed and efficient forecasting methods are used. The other way is the focus on integrating the economically advantageous innovative and experimental IT solutions.
Comparison Related to the Price of Acquisition and Costs
Direct, semi-variable, and allocated costs can be discussed as influencing the price of acquisition associated with both companies. It is possible to assume that the price of acquisition for VectorCal is expected to be less than for Navigation Tech Solutions because of the time during which the companies operate within the industry (Shim & Siegel, 2009, p. 112).
In spite of the fact that it is rather difficult to use the competitive acquisition methods to influence the price in this industry because of its small size, it is possible to refer to positive changes in the acquisition pattern for the start-up company with the great potential rather than for VectorCal because of the necessity to spend more costs for making the operations based on the innovative technologies.
Conclusion
The comparison of direct and indirect costs for Navigation Tech Solutions and VectorCal indicates that both companies can successfully operate within the industry during a long period of time. The main condition is the focus on investing in the research and development sector to optimize the operations and use innovative technologies to reduce the overall costs.
References
Garrett, G. (2008). Cost estimating and contract pricing: Tools, techniques and best practices. New York, NY: CCH Incorporated.
Murphy, J. E. (2009). Guide to contract pricing: Cost and price analysis for contractors, subcontractors, and government agencies. Vienna, VA: Management Concepts.
Shim, J., & Siegel, J. (2009). Modern cost management and analysis. New York, NY: Barron’s Educational Series.