Interelationships and interdependencies (Learning Aim B)

Question 1

What is Economies of Scale?

Answer 1

Cost savings made by doing things in larger numbers/volumes or by buying things in bulk. For example, sharing resources such as call centres and aircraft.

Question 2

What are interrelationships?

Answer 2

Organisations working together to benefit both businesses. For example, National Rain Out promotion. Offers 2 for 1 on tickets to London attractions with a train ticket. Benefitting the train companies and attractions. Can also work outside the industry. For example, Tesco Clubcard and Nectar offer promotions to swap points for deals on attractions, accommodation and travel.

Question 3

What are interdependencies?

Answer 3

Organisations that rely on each other for business. For example, Airlines and Airports. They need each other to be able to operate so they keep relationships to negotiate mutually beneficial terms of business. For example, A cruise line and a port or an airline and an airport.

Question 4

Advantages?

Answer 4

Economies of scale.
Joint costs of advertising/marketing.
Increased customer satisfaction and revenue.
Shared expertise in staff.
Benefits from good publicity of partners.
Shared customer bases make communication easier.

Question 5

Disadvantages?

Answer 5

Confusion in identity of company.
Less personalised service.
Bad press for one will affect the other.
Shared commission on sales as commission has to be shared equally among all parties. There is a potential for less profits too.