Economies of Scale, Vertical Integration, and the Brand I Love Most | Ep 989
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Economies of scale. And so there's two different ways that you can attack this. One is cost advantages. And so basically you achieve a lower Cost basis per unit sold through larger scale production. And so that allows you to undercut prices and deter smaller competitors. So it means Other people who are smaller can't find the volume that you can, and so as a result Can't Price
Lo as low as you can. And so this is a Price Based strategy, as in you can still make a profit at a lower price than all of your competition. And so this is a low cost leader strategy, which typically is paired with economies of scale. Where you don't want to get into and this, I want to make this a clear cautionary tale, is that if you're getting into one of these markets, There's no advantage this is Dan Kennedy quote there's no advantage To being the second cheapest player in a marketplace.
The cool thing with this strategy is that it gets better with time. And so that's what you'll notice is a common thing which each of these points is that As you have a gli a greater network, or as you have a more robust ecosystem of products, or you have larger economies of scale, most businesses, like I said, degrade with scale. They get worse and harder with scale. Whereas if you have one of these strategic advantages woven into the fabric of your business, As you get bigger and the business becomes more complex, you have another force that's driving your competitors away. So you have something that's very strong and working in your favor as you scale, which is one of the key traits of becoming a very large business is having one of these thoughts into your DNA woven day one.
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