Economies of Scale

1- Risk of entry by New competitors. New competitors argon companies that are not currently operating and competing in a certain fabrication, but they are expected to enter the industry as they have the capability to compete with other companies if they choose. They cogency face some difficulties or barriers that are formed by established companies that are already operating in the industry to discourage them from accounting entry the industry. Although it is easy to enter in to this industry, it is heavy(a) to establish a distinct cross out name. There is luxuriouslyer(prenominal) cost entry in market and high enquiry and development cost. Mc. Donalds make it difficult to enter in to the market as it is a grown established familiarity with a strong brand identity. * Economies of Scale. They are the cost advantages that associated with mountainous sized caller-up. The sources of economies of scale include discount on pop purchases, cost reduction, spreading of fixed costs over large outputs and economies of scale in advertising. As Mc. Donalds is an established company it has high economies of scale. So, new entrants have to face the endangerment of entering on a small scale and suffering of high cost disadvantage or entering on a large scale and hold a huge risk of high capital costs. ALSO, new entrants would be forced to humiliate their prices.

* Cost Advantages. The risk and threat of new entrants green goddess be reduced, if the existing companies have an tyrannical cost advantages. Mc. Donalds has acquired absolute cost advantages by achieving superior production operations of having a good a control of inputs that are needed for production. In addition, it has an access to cheaper inputs. * Brand loyalty. It is basically about the buyers preference for the products of established companies. The company can build its brand loyalty through the continuous advertising of the companys different products and brands, patent protection of product innovation that can be achieved through the research and development... If you want to get a full essay, order it on our website: Ordercustompaper.com

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