Economies of Scale and Economies of Scope Free Example

Cost Reduction to Maximize Company Benefits

Economies of scale imply cutting costs of products and production to increase benefits of the company. This idea focuses on possible reduction and optimization of costs, while revenues may remain at the same level. Benefits of the company still grow due to lower costs of production and products. At this point, it is possible to refer to the case of Walmart which does not seem to be suitable for the economy of scale strategy. Walmart is using the scale economy strategy by cutting shipping costs due to the well-developed network and the company offers 1-2% lower shipment costs compared to smaller networks which cannot compete with Walmart in this field.Another example of the scale economy is Amazon which also uses its distribution network to cut costs and optimize the performance of the company.

Economies of scope imply offering a variety of goods from the company to outpace rivals and to reach the high diversity level. Companies increase their benefits due to the growth of sales which occurs in response to the diversification of the production. At this point, it is possible to refer to the case of General Electric which offers a variety of products and services to maximize its benefits.

Webvan made several critical efforts that resulted in its failure. First, the company expanded too fast and raised capital too fast to match that growth with the actual growth of the company and its business. Another mistake the company made was the complex infrastructure model which made the infrastructure ineffective because it was too complicated and, therefore, difficult to use fast and effectively. However, the major failure of the company was the wrong targeting, pricing and segmentation. All these factors resulted in the failure of the scaling strategy of the company because the company attempted to scale too fast and failed to comply its actual business development with the scale it aimed at.

 

Works Cited:

Contributor. Where Webvan Failed and How Home Delivery 2.0 Could Succeed. Tech Crunch.

Laseter, T., Turner, M., and Wilcox, R. (2003). The Big, The Bad and the Beautiful, Strategy and Business.

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[Accessed: July 2, 2020]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: July 2, 2020]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: July 2, 2020]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: July 2, 2020]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: July 2, 2020]