Question

How does economies of scale lead to competitive advantage?

How does economies of scale lead to competitive advantage?

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Answer #1

It can be mentioned that there are actually two types of competitive advantage where the first one is cost advantage and the second one is differentiation advantage. Economies of scale indeed get to represent the cost advantage on the whole. This is because a firm with economies of scale get to decrease the overall average cost by increasing the output with which the cost is minimised with increase in productivity which in indeed the cost advantage version of the competitive advantage on the whole.

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