BENEFITS OF GROWTH - ECONOMIES OF SCOPE Flashcards
DEFINE Economies of scope
occur when bs gains cost advantages by sharing costs between diff products and divisions
economies of scope relate to the
scope of activities of the bs
explain how cost savings are gained from operating in several mkts or providing several products
you already have your labour, capital and infrastructure in palace
You therefore distribute costs across the variety of products you ofer allowing you to reduce your acpu
give example of cadbury promoting bran dthrough advertising and how they gain economies of scope
and compare to a smaller brand
the cost of adv can be spread across several diff products suchas as dairy milk and double decker
whereas smaller producer may hsve to absorb all costs withing one brand - which is more expensive
economies of scope are closely associated with
diversification
why are eos associatred with diversificagtion
as if you diversify you reduce your acpu as costs of bs spread out across several pridcts
how can we evalyate the idea of high risk in ansoffs matrix by mentioning economies of scope
eos allows you to reduce acpu which can lower some of that financial risk (is ifnancial risk right here ?
what are the two benefits of economies of scope
reduce acpu
you can leverage existing brand loyalty
explain how EOS can reduce your acpu
you become more price competitive as lower costs can be passed to customers / keep lower costs and turn into higher profit margins which can be used for r&d it process innovation to further reduce waste and lower ACPU
allows you to pursue porters cost leadership strategy ..
explain how you can use EOS fto leverage existing brand loyalty
+ give example
Can leverage existing brand loyalty when you use EOS such as amazon marketing amazon basics to existing customers - ask if this is NPD Ansoff
which reduces mkting costs overall
ask why its abenefit
