Question

Compare and contrast the motivations for global expansion.

a.       Economies of scale- . 


b.      Economies of scope-

c.       Low-cost production factors-

Answer 1

Economies of Scale- I strongly agree that this factor motivates the company to go global. This happens just to increase the production. I will let you understand with a small example- Suppose you want to make food for yourself. Then you will have to pay $10. Suppose you are two then each one will have to pay lower than 10 let suppose $8 each if there ar 3 then each one have to pay lower amount . This is economies of scale. As the company increase the production cost per product get reduced. Resulting better margin, competitive advantages etc.

Economies of scope- Economies of scale is when a company save cost by manufacturing two or more distinct goods, when the cost of doing so is less than that of producing each separately.

This also helps in global expansion.

Production Factors- Production factors means the things which are used to manufacture products like land. Resources, money etc. Different country have different factor. So the company utilizes it. For an example if a company installs a oil refinery in Saudi Arabia then the refinery cost will be very cheaper than installing the plant in Asian Country.