The Risk-Return Model

Strategic options tell us “how” a cost driver could be reduced, changed, or eliminated in order to impact a given cost element. Sometimes it may not be possible to use a certain strategic option because of a given situation or relationship between the customer and supplier. Take a closer look at the quadrants in Figure 7-1. Each quadrant represents a type of relationship that may exist in a given situation.

Figure 7-1. Risk-return model for choosing appropriate strategic options.
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Let’s walk through each of these quadrants for a closer look.

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The bottom left quadrant is considered the “low ...

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