In many industries, the capital required to build an asset of minimum efficient scale is growing. For instance, the cost of building and equipping a leading-edge semiconductor fab has climbed to $7 billion, as the technology required to make more advanced chips is getting more complex. The cost of building an oil rig has increased steadily, to more than $600 million, due to raw materials and labor cost increases, growing technical challenges, steeper regulatory requirements, and speculative building. Driven by economies of scale, container ship size has been increasing for decades, with the largest ships now costing roughly $200 million. Building a large-scale biopharmaceutical facility requires up to $500 million. The latest nuclear reactor designs, promising higher safety, longer operating life, and lower operating costs, cost up to $25 billion after factoring in the huge budget overruns.
Joint Ventures Reduce the Risk of Major Capital Investments
Alternative models for big-ticket items.
April 06, 2016
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New!
HBR Learning
Sharpening Your Business Acumen Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Sharpening Your Business Acumen. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Take your career to the next level by learning business and finance basics, and developing an enterprise mindset.