Question

Read the article 'The Big, The Bad and the Beautiful' and discuss the followin the examples in the article, explain how firms create competitive advantage utilizing economies of scale and economies of scope. Provide other real life examples to support your answer.

Answer 1

A firm can create competitive advantage by using economies of scale can be understood by first understanding what economies of scale is, it is the cost advantage a company poses by increasing its production.

So it can be said that a big firm can surely increase its production and get its cost down which works in fabrication for integrated circuits for example intel which is why the Intel Corporation  regularly invest upward of a billion dollars in new higher-capacity facilities.

A firm can also create competitive advantage by economies of scope which is when producing a large variety products is more cost efficient to company than less variety.

Which is what general electric do.GE has long allowed its customers to finance the multimillion-dollar purchase of its jet engines via a leasing arrangement from GE Finance. More recently, GE has pursued a service strategy of selling “power by the hour” so that an airline doesn’t buy a specific engine.

Another real life example can be procter and gamble it is a large brand management company. The company owns more than 20 billion dollar brands, and another 20 or more half billion dollar brands, mostly in the area of consumer products. P and G's extensive distribution network allows it to reach over 4 billion customers, with plans to reach up to 5 billion consumers in the next few years as they continue their international expansion. The company spends more money on consumer and market research than any other corporation.