Q1: What are your suggestions to prevent dis economies of scale in larger firms?

Justify
with examples. (150 words)

Diseconomies of scale occurs when long run average costs (LRAC) start to rise with increased
output.

My suggestions to prevent dis economies of scale in larger firms are:

Ensure better & efficient management Practices: To minimize the bureaucracy &
increased decision making time associated with growth by adopting multi-form structure,
where parts of the company operates with independence from one another, giving daily
decisions to local managers. An example here might be Future Group operating its
various business wings with efficient & more empowered management.
Improved ways of communication: Large organizations must use technology and new
ways to maintain an effective flow of information between departments, divisions or
between head office and subsidiaries. So, that the time lags in the flow of information can
be addressed with the speed of response to changing market conditions. For example, a
large retail chain like Lifestyle/Big bazar may be less responsive to changing tastes and
fashions than a much smaller, local retailer.
Enhanced Levels of integration for improved Co-ordination: Large firms with many
departments and divisions, should integrate accordingly to co-ordinate its business
 operations. For example, a large manufacturer employing tens of thousands staffs should
enhance the levels of integration.
Introduction of new and improved technology: Adopt Continuous Learning &
innovative strategies to avoid being a victim of dis economies to scale. For Example, 3M
avoids dis economies to scale by continuously learning and empowering its employees to
innovate.
Avoid dis economies to scale by splitting up the firm into more manageable sections.
For example, a large multinational such as Nestle may be split up into local geographical
areas, with local managers facing incentives to maximize efficiency.
Relocation of operations to enjoy reduced overhead expenses, various other costs and
also to enjoy tax benefits. The best example here can be HMS, when it moved its
headquarters from New York City to Irving, Texas to enjoy these stated benefits.
Contracting out/Outsourcing can reduce Management Burden, Cost Effectiveness and
flexibility. Outsourcing allows organizations to focus on their core business and can
create a competitive advantage by reducing operational costs. The beauty of outsourcing
is you can outsource an entire function or only a part of it. As an example, as a manager
one can outsource the network management oversight of an IT system but keep the end-
user support in-house. This can provide an organization with a good balance of on-site
support for employees. Organizations use outsourcing as a strategic initiative to improve
customer service, quality and reduce costs.
Re-organizing the management structure or transformation from the traditional
ways of doing business. A divisional organizational structure gives a larger business
enterprise the ability to segregate large sections of the company's business into semi-
autonomous groups. These groups are mostly self-managed and focused upon a narrow
aspect of the company's products or services. Divisions work well because they allow a
team to focus upon a single product or service, with a leadership structure that supports
its major strategic objectives. Examples of a product line are the various car brands
under General Motors or Microsoft's software platforms. One example of a service line
is Bank of America's retail, commercial, investing and asset management arms. Unlike
departments, divisions are more autonomous, each with its own top executive--often a
vice president--and typically manage their own hiring, budgeting and advertising.
Q2: How can small firms realize competitive advantage? (100 words)
The ability to niche and differentiate: Small niche markets may have less competition
and therefore be more profitable. Niche markets can have a more price inelastic demand;
therefore smaller firms can charge a bigger mark-up on the marginal cost of production.
This enables the firm to be more profitable, despite lower volume. Niche
marketing allows small business to develop a particular solution for a particular group of
customers. This is much easier to do in a small business which can prosper in a small
niche.
.
Small can be a selling point. In some goods like clothes, there could be an advantage
from small firms selling top end clothes ranges. A big firm like Primark and M&S may be
able to sell clothes cheaper, but, small firms can target the customer who wants an
exclusive deal somebody who wants to stand out from the crowd. Some people prefer a
local small coffee shop, rather than visiting a bland multinational like Starbucks.

Economies of scale are limited in some industries. In the car industry there are a small
number of relatively big firms as economies of scale are large. But, in some industries
like coffee shops, economies of scale is less. There may be dis-economies of scale in
expanding production.

The closer relationship, trust and intimacy with customers: Work with a small
business and youre talking directly to the owner and chief decision maker or someone
who is close to them. One can have more faith that they will do what they promise and if
they dont, you have an easy channel to follow to get things fixed.

The closer, relationship, trust and involvement of the team of employees: Small
businesses have a huge advantage in being able to create a strong connection between the
business owner and the employees and with the purpose of the business. In a small
business, staff are or feel more involved in what is happening but in a big business, they
feel isolated. This makes it much easier to develop themes and high customer service
standards in a small business. The staff feel happier, customers feel happier and you feel
happier.

The ability to move with speed: Smaller firms with short chains of command and
company policies will quickly adapt to what is happening. Speed in supplying customers
and helping them to get the benefits of what they sell is a major advantage which is often
of vital importance for buyers.
Q3: Distinguish between niche marketing and mass marketing? (100 words)
Basis Niche Marketing Mass Marketing
Definitions Niche marketing refers to a Mass marketing refers to a
marketing strategy marketing strategy
that intends to appeal to a that intends to appeal to the
targeted market entire market
Consumers Aims to capture an identical Aims to capture a distinct set
set of buyers who remains for of buyers who are really price
a long time (Homogeneous sensitive (Heterogeneous
buyers). buyers).
Objective To develop a value To increase the market share.
proposition
Advertising & Promotion Does not involve with intense It engages with intense
adverting & promotion adverting & promotion
strategies strategies.
Competition Competition is relatively Competition is relatively
low as the company has a high because of the high
differentiated value. number of similar
competitors.
Profits and Economies of Enjoys fewer profits with Enjoys high returns with
Scale comparatively low economies comparatively high
of scale in the short term. economies of scale.
Examples: Food joints that offers local A product like Reliance Jio
specialties. Such as: Thatte Sim Cards.
Idli exploration at Bidadi, Intense marketing activities
which is on Bangalore of the company has intended
Mysore Highway. to capture almost all the
consumers in the Indian
Light and durable bicycles context regardless of their
designed for cycling income, lifestyle, profession,
enthusiasts (Hercules & age, etc. of the consumer are
Temple cycles) seen as a good example of
mass marketing.
Q4: Why it is believed that small firms have more capability to address the unique
problems of individual customers than big ones? DO you have difference of opinion? If so ,
justify. (200 words)
Yes, I have a difference of opinion. I believe the big multinational firms today have more
capabilities than the smaller firms with regards to addressing the unique problems of individual
customers. Justifications:

Customer Focused: In todays, rapidly growing global economy. Majority of the large firms are
customer-centric and consider information as a key. For example: Marriott International, Dell,
HP, Amazon, etc. For Instance: Amazons CEO Jeff Bezos leaves one seat open at the conference
table and states that the seat is occupied by the the most important person in the room the
customer

Increasing Customer Satisfaction: Large organization aim to find out what customers like
and don't like, and to tailor products and services to better fulfill those needs and eliminate
sources of irritation. For instance, a hotel might offer high-speed wire and wireless Internet
connections in each room to allow customers to use the type of connection they prefer. High
customer satisfaction makes customers more likely to come back in the future.

Creating a Unique Experience: Consumers have many choices of where to buy goods, so
creating a unique, high-quality shopping experience can be just as important for getting
customers to come back as the products themselves. This is an area in which large businesses can
have an advantage over larger competitors.
Its easier to attract new customers
Trained employees & staff: Provide personalized customer service
Demonstrate accountability: For example, Uber, OLA, Flipkart, etc.
Flexibility: Quick to respond & resolve customer queries with help of internet & technology
based environment.
Use of Technology (such as AI, Robotics, Data analytics, etc) to cater to the ever changing
needs & wants of todays customers.

Employees are rewarded with incentives for better services.

Additional Content:

Niche Marketing:
A niche is an identifiable target market that has unique preferences.
In many cases, a niche is a small subset of the total market.
The existence of niches represents opportunities (i.e.in terms of controlled costs, lesser
competition, specific global reach, ease of managing, brand loyalty and more attentive
audience) for small companies to compete with larger firms who may have a strong hold
on the mainstream market. In some cases, large firms will respond by entering a large
number of niches to fight growing competition from smaller rivals.

The following are examples of a niche:

1. Food joints that offers local specialties. Such as: Thatte Idli exploration at Bidadi, which
is on Bangalore Mysore Highway.
2. Light and durable bicycles designed for cycling enthusiasts (Hercules & Temple cycles)

Niche marketing is a targeted marketing plan that focuses on one particular segment of the
market that has high potential to connect with a product or service with benefits of controlled
costs, lesser competition, specific global reach, ease of managing, brand loyalty and more
attentive audience Some of the Niche marketing strategies are:
Word-of-Mouth Campaigns
Endorsement Campaigns
Targeted Collateral Campaigns

It is an especially useful strategy for smaller companies with limited budgets and products
or services that are targeted toward a certain segment of the population. Niche Marketing is
especially effective for reaching consumers who can be targeted based on certain
characteristics, such as demographic, hobby, occupation, or commitment to social or political
causes.

For example, Sensodyne as a toothpaste can be identified as a product utilizes niche marketing
strategy. The product is not catered to the society at large, rather it states, Sensodyne for
sensitive teeth. So this quote depicts that the product does not intend to capture all the
toothpaste consumers rather the consumers who have sensitive teeth. It is important to note that
marketing niches are created and they do not exist. Above example illustrates that the product
strives to create a marketing segment by mentioning the product is only suitable for the people
who have sensitive teeth.

Mass Marketing:
Mass marketing is a marketing strategy that uses mass distribution and mass media. This
essentially means that you are trying to market across all demographics. This is a common
strategy employed by large corporations and international and well-known brands. Such as
HUL, Pepsi-co, Maruti, etc.

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