Competitive Position and Sources of Advantage - Cost advantage
3 important questions on Competitive Position and Sources of Advantage - Cost advantage
Variable cost advantage is one type of cost advantage. What are three effects to achieve variable cost advantage? Please explain.
- Scale effect: economies of scale
- Scope effect: if you build a new product which is assembled via the same manufacturing process as an existing product it saves you costs
- Learnings effect: the business with the most production experience has the best opportunity to learn from experience
Marketing cost advantage is one type of cost advantage. What are two ways to achieve marketing cost advantage? Please explain.
- Marketing scope effect: if more products are sold to the same customer.
- Advertising cost efficiency: with a brand extension strategy, one advertisement for a product reinforces top-of-the-mind brand awareness --> scope effect.
Operating cost advantage is one type of cost advantage. Explain what this operating cost advantage entails.
Lower operating expenses relative to its competitors contribute to a cost advantage.
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