[citation needed]However, a different meaning is assigned to the term by the business writer Michael Porter: "cost drivers are the structural determinants of the cost of an activity, reflecting any linkages or interrelationships that affect it".
For example, the driver 'economy of scale' leads to different costs per unit for different scales of operation (a small cargo vessel is more expensive per unit than a large bulk carrier), and the driver 'capacity utilisation' leads to greater costs per unit if the capacity is under-utilised and lower costs per unit is the utilisation is high.
With the change in business structures, technology and thereby cost structures it was found that the volume of output was not the only cost driver.
John Shank and Vijay Govindarajan divide cost drivers into two categories:[2] Structural cost drivers that are derived from the business strategic choices about its underlying economic structure such as scale and scope of operations, complexity of products, use of technology, etc., and executional cost drivers that are derived from the execution of the business activities such as capacity utilization, plant layout, work-force involvement, etc.
To carry out a value chain analysis, ABC is a necessary tool.