Business Report 1

Exploitation of Economies of Scope, Contribution of Technological and its Strategic

Implications for Firms

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 Business Report 2

Economies of scale are closely related to the economies of scope. The economies of scope refer

to all the factors that enable cheap production of a wide range of products t once rather than the

production of each product on its very own (Antoinette, 2007). Most of the businesses that

practice this kind of economy of scale are businesses that share a centralized function like

marketing and finance. They can also originate from other interrelationships in the process of

business like when one product is cross sold alongside another product or the use of one

company’s product as an input for another company’s product. Diversification has been greatly

underpinning the corporate behaviour of many companies. Most of the international

conglomerates that was built in the years between 1970’s-1980’s had the economy of scale as the

driving force. Some of them include the Hanson of the UK, ITT in United States and BTR. The

reason behind most of these companies’ amalgamations was in their scope to leverage on their

skills financially but across many diverse ranges of the industries. In the year 1990s, many

conglomerates that were put together greatly relied on the factor of cross selling hence reaping

economies of scale through using the same system and people to market different and many

products. In the year 1998, Citicorp and traveler group combined and the logic in their business

was to sell the products of one company by using the sales teams of other companies (Clark,

2008).

Some of the companies will practice the economy of scale for the purposes of concentrating in

the manufacturing of large volumes. This is done mostly at an advances stage of production in

most of the companies. It happens in the stage of the internalization whereby the organization

tries to set up some very complex kind of organizational designs, the main rational being to reap

off the economy of scale by production in high volumes by applying some the other strategic

resources in a wide range of markets and products. An example is the strategy used by the coca-
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cola company in dealing with the employees (Dimand, 2008). The coca cola company employees

specially the top management employees needed to undertake a training involving five Ps

namely the planning, persevere, patience, personal relations and perfection. The plan must be

written down, defining the company’s marketing and competitive strategies, opportunities as

well as tactical components, the employees are also trained on the issue of persevering and not

easily giving up, they are also trained to have patience, to relate well at a personal level with the

customers and finally how to achieve perfection. At the point of establishing the company in

China, there was only one soft drink Company in existence especially with reference to national

distribution. The rest of them were only operating locally (Mintzberg, 2009).

One of the greatest challenges the company had to deal with was the fact that it was only allowed

to sell to the foreigners and at some very specific places like hotels and stores where the

company has established some friendships. It was by the year 1980, that the company built the

other outlets in Beijing, Guangdong, Guangzhou as well as Xiame. It was also given ownership

by the government but in exchange the company was demanded to offer a better deal in terms of

distribution and also sales. In the year 1984, the plant for coca cola bottling was established in

China place called Zhuhai in Guangdong province. One year later, the company was allowed to

sell all of its products to the people of China unlike earlier. Some of the products that the

company is selling in the whole of the company include fanta and sprite. it has also be en forced

to develop some local brands which it sells to the people. The company has slowly been

establishing itself as a beverage producing company in the whole of china with its products

gaining much popularity with the citizens. The management of the company has to adopt one of

the greatest slogan namely “Think local and act local”. This has ensured that the company is

occupying a great part of the market share because of the fact that it is not the only one that is
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currently operating in the country as a foreign business (Markwell, 2006). It has achieved that by

adapting to some very important business strategies one of them being the aspect of thinking

locally and acting locally. Asia is one of the continent with very many and diverse cultures and

so for a business too thrive there, it has to think locally and act locally to ensure the culture of the

local people is captures.

The company called Greater Manchester Fire and rescue fire tried to apply the economy of scope

because it was expected to consider some cut of 5% in areas like the staffing, equipments and

premises. Each of them will have some expenses and costs reduction to ensure there is a great cut

off in the total expenditure by about 5%.The issue of equipment, the company is intending to sell

off some of the old equipments so that it can be able to purchase new ones. This is because some

of the new ones that will be purchased will be of a very sophisticated technology and they will

also have the advantage of fuel savage (Hannagan, 2005). The new technological equipments

will be in such a way that they will not consume so much fuel to run or to function. This will

help in cutting down the costs of production. The main problem will be that some of the

employees will lose their job due to the fact that the new technology will require very well

trained employees to operate it. The issue of premise will help in the cost reduction by the fact

that the company will get premises for their offices where the rent is much cheaper. Also the

company will ensure the premises will be located in the highly risky areas as well as in the areas

where the raw materials of their services like water and carbon dioxide will be readily available.

Disney is a company that was formed in the year 1923. It is a very well established company in

the whole world as far as the issue of animation is concerned. It started with simple animations

but today it accommodated international production of live films. It has actually grown so much

to a point of becoming the largest film studio in the whole of Hollywood. It is one of the business
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organizations that have sincerely embraced the economy of scope. The company is one a mission

to be the best leading producer globally of the information as well as entertainment. It goes

beyond that and tries to produce the bets and most creative profitable and innovative

entertainment that is fit for all the ages viewing. It specializes in all form of productions ranging

from the commercial to the domestic level. The following are some of the products that it

produces production of traditional films, cable TV and other programmers of entertainment both

for domestic and consumer purposes. The company has had its moments where things were not

going well but basically due the level of economy. It is earlier translating its work in English

and Spanish but lately due to the consumers feedback much has been improved because there is

production in Chinese and Indian languages. There are three very important parts of brand

management as far as the Walt Disney company is concerned which are the image, feature and

the core values which it has used to achieve the economies of scale (Sullivan & Steven, 2003).

These are very useful for the company in building the brand name to all of its customers. It is

through the core values of the company that the customers have been able to clearly understand

the purpose and the faith of the brand of the Walt Disney. The feature which is very strong for

the company has helped the customers to be able to identify the company’s brands. This is

because; people have been in a position to clearly understand the brand produced by the Walt

Disney due to the fact that all of their products have had a repeated feature which the customers

easily identify. The issue of image has been used by the company for the purposes of winning it

customer’s identification. The Walt Disney has been committed in trying to build the image of

the brand for all of its products. This explains why most of the people in the whole world think

very positively about the products that are offered by the Walt Disney Company as compared to

other companies. It is very evident that even most of the parents will gladly buy films for their
 Business Report 6

children as well as the entire family viewing form the Walt Disney Company because they trust

them. This explains why the three element appears in the centre most of the circle in the

concentric (Veblen, 2000).

The other four very important elements are the brand identity, strategy, management and value.

They are the main processes that are used by the company to ensure the customers get to know

the brand very well. Brand identity entails the naming of the particular brand, also the aspect of

using the brand name as well as the logo. The company comes up with very unique names for

their products which are known in the whole world. A good example is the cartoon series called

Tom and Jerry. This is a film that is very unique and incase the company would want to come up

with a new action then the name itself would sell the brand or the product. Also the use of the

name Disney is very appropriate to the customer because it is very unique and easy for them to

remember. Beside the name all of its products contains some logos and symbols like one very

unique a Mickey Mouse with rounded and big ears. Brand strategy entails the transmission of the

massages about the brand of the company to all of the customers. This explains why the

company must be aware of its niche first before embarking on other issues. Through that then the

company is able to know the kind of message to pass across for the customers, especially

through the advertisement and also the company is able to create impressive images to the minds

of the customers (Hill & Jones, 2007). Walt Disney has been able to fully embark and maintain

the practice and that explains why their products are able to be sold in the whole world without

any struggle. In actual sense they have been able to self advertise them in the whole world very

easily and in very balanced way.

The brand value of the company has been maintained through continuous innovation and

creativity in the technologies and as a result there has been massive production hence acquisition
 Business Report 7

of economies of scope. The brand value of any given company refers to the feeling the customers

and the entire world feel concerning the brand. One of the uniqueness the brands of the Walt

Disney have to the world is the effort it has continuously put in ensuring that the people of the

world are always happy. It is evident form the people that all of the products that are associated

by the Walt Disney Company are ever fashionable of high quality, contains the latest technology

and also contains a very unique design which suit any age. This has been derived at after the

positive feedback that is received from the customers all over the world. Most of the people

argue that they can comfortably purchase a film that is a product of the Walt Disney to be viewed

by the whole family because they are confident that it will be suitable for all viewing. It has been

confirmed that their cartoons can also be enjoyed by not only the children but also by the entire

world very comfortably. This means that when designing them, the company is very considerate

of the fact that all the ages of people will enjoy (Mintzberg, 2009).

The contractors of Nike Company must adopt the Arbitration framework of the Australia as a

strategy for achieving economies of scope. In the whole world, it has been documented that

arbitration framework of Australia at the face value offers the best egalitarian structure of the

wages. Arbitration refers to the making of the collective agreements between the employees and

the trade unions which are binding legally as well as mediated through a judge or magistrate

appointed by the state. It contracts with the all the other collective power of bargaining whereby

the issue of power struggle is an order of the day. It is very evident that also the wages are the

best as far as industrial relations is concerned al over the world. It has been proved that in

Australia the relative wage structure is not extremely different as compared to the collective

bargaining during the periods of unemployment and full employment (Finlay, 2000). There are a

number of regulations that have been put across concerning the wages regulation with relation to
 Business Report 8

the industrial relations. The minimum wage should be set in terms of hourly bases like in the

United Kingdom their regulation is called the national minimum wage act of 1998. The

collective bargaining agreements especially between the trade unions and the employees are able

to regulate the wages of all workers as per the needs of the specific business. This means that the

company must consider the framework to improve the workers labour. One of the ways of

human resource management can be done in the company is through motivation. Through

motivation, there can be a great deal of improvement in performance. Motivation has been

defined as the combination of one’s desires as well as energy, which are all directed in achieving

a certain goal. In other words, it is what causes a certain action to be taken. In order to influence

people’s motivation then it means to get them to do what you actually want them to do what is

basically mass production. It should be noted that not all people are motivated by the same things

to perform
 Business Report 9

Reference

Antoinette, C. 2007. Marginal economics. The New Palgrave: A Dictionary of Economics, v. 3,

p. 323.

Clark, B. 2008. Principles of political economy: A comparative approach. Westport, CT:

Praeger.

Dimand, R. 2008. The origins of the Keynesian revolution. Stanford: Stanford University Press,

p. 117.

Finlay, P. 2000. Strategic management: an introduction to business and corporate strategy. New

York: Pearson Education.

Hannagan, M. 2005. Management concepts and practice. England: Prentice hall.

Hill, C. & Jones, G. 2007. Strategic Management: An Integrated Approach, 8th Ed. California:

Cengage Learning.

Markwell, D. 2006. John Maynard Keynes and International Relations: Economic Paths to War

and Peace. New York: Oxford University Press.

Mintzberg, H. 2009. The Structuring of Organizations. Englewood Cliffs, NJ, USA: Prentice-

Hall.

Sullivan, A. & Steven M. 2003. Economics: Principles in action. Upper Saddle River: Pearson

Prentice Hall.

Veblen, T. 2000. The Preconceptions of Economic Science - III. The Quarterly Journal of

Economics, 14(2), 240-269.