The Use of Interests to Source Components Needed From Competitors - Assignment Example

? The Use of Interests to Source Components Needed From Competitors Introduction In a competitive market place, different firms have formed strategies on how to gain competitive advantage over the immediate competitors. In the competition, firms may acquire resources from the competitors to gain competitive advantage over them. In the marketing strategy, a firm decides on the sustainable competitive strategy as a means of striving to defeat the competitors. These strategies involve the use of its interests to acquire the components from the competitors. The ability to plough back the profits into the business operations gives the firm a competitive advantage over the competitors. Buying of the competitors products may mean the increase in the economies of scale to the firm, which buys the components. This may also come up with the risks associated with the changes in the market structure to torment the operations of the firm (Cennam, & Santalo 2013, pp. 1346-1349) The Benefits When the firm buys the component of the competitor, the firm enjoys vast economies of scale. When the size of the firm increases, the competition wrecks, since the production of the major competitor ids impeded. The competitor the economic scale increases with great efficiency of the firm to solve the huddles of the markets. The costs of operations decrease in the sense that the firm will not at the verge of strong competition to demand a lot in their production mechanism. Being able to control the market gives the firm another heightened advantage as the price is set by the major producer of the products. This is further motivated also by the low costs of production that the firm enjoys due to the wide base of economies of scale (Long & Wijeyaratne, 2013. pp. 21). Buying of components from the competitor gives the firm a broad base in the market making it a perfect competitor in which the changes in the market prices of the products do not interfere with the operation system of the firm. With the increase in the firms output, the firm is able to offer its products to the customers at a lower cost. This increase in the in the firm’s output leads to cost advantage which is one of the strategies the firm may win over the competitor. More customers would be attracted to the firm’s products. This would attract more customers to buy the firm’s product (Pukeliene & Maksvytiene, 2008. pp. 40). The firm will be able to offer more benefits on its products than the competing products from other firms within the economy. This ability to deliver better services to the customers, improves the firm’s ability to satisfy the growing demands in the contemporary markets (Cummins & Xie, 2013. pp. 151-153). The firm is able to make economic profit margins by having the opportunity to choose from the best alternative due to the diverse products from the firm. The bought components of the competitor can be released to the markets at the firm’s most convenient time. This give the firm the widest base on the opportunity cost (Long & Wijeyaratne, 2013. pp. 80). The markets may demand the products, the firm is at a better position to select on the demanded product, and offer at the firm’s own set price. The advantage of the firm to select on the best and readily available product to sell to the market, gives the firm more profits since they sell at their own set prices. When the demand of a given product goes up, the price increases significantly (Dichter & Sala, 2012). This gives the firm an opportunity to sell it at their own set price. This increases the interests of the firm, which it can use to further control the markets based on the wide economies of scale. For example, if the firm decides to release a product, which is highly demanded for to the markets, and the difference in the profits accrued is the opportunity cost. At such a time, the value of the demanded product is higher than the actual value of the other similar products and that of the product itself when the demand is low (Spiller, 2011. pp.600-603). The Risks of the Firm Buying of the components by the firm from the competitors put the buying firm at great economic risks. The bought components may lose their value in the market as the economic trends may change over time. This poses the firm into the risks of losing the expected value of the products in the markets as the prices may fall significantly. The losses made may wreck the economic control of the market by the firm. The cost incurred in buying the products may therefore fail to be recovered and therefore the firm is at the verge of falling. As the firm reduces its prices to the customers while withholding the products in its warehouse, the economic base of the firm shrinks (Heiman, 2010. pp. 362). The utilization of the interests and profits to buy the components of the competitor reduces the finances in the firm. The availability of liquid flow of capital is reduced. This implies that the firm is at a great risk of not operating properly in case of any emergency in the markets. The products bought may lose their value over time before the time for their sale and this puts the firm at the risks of losing their capital. Changes in consumer tastes may also impede the selling of the products. This derails the economic operations of the firm and may consequently fail to operate if the problems of alterations in the market persist (Kaserer & Kraft, 2003. pp. 490-495). The achieved economies of scale due to the larger production base and the competitive advantage, the productive efficiency of the firm may be impaired. This is due to the intensive use of the fixed resources that the economies of scale insert into the operating system of the firm (Gawer, 2009). By increasing the outputs if the firm is active with the high fixed costs of its products in the management of Average Fixed Costs, the output increases. When such a firm produces a lot, from the excess buying from the competitor, then the Fixed Cost on each produced unit decreases. The Average Fixed Cost ion the firm also decreases as the fixed cost reduces too. This causes loss in the firm (Schaefer & Maurer, 2013. pp. 140-144). Conclusion To utilize of the interests and to plough back of the profits of the firm helps the firm in the market significantly. This affects the firm both positively and detrimentally. As a result, the firm acquires a wider economic base due to the increased economies of scale. The firm also dominates in the market and set the prices of products in the market. The firm is able to gain huge opportunity costs as it can deliver the products about the market demands (Dichter & Sala, 2012. pp. 12-13). On the other hand, the firm may be at the risk of making losses if the consumers change their interests in the market. If any emergency in the firm comes forth, the firm will not manage to arrest such situations if finances are required. The operations of the firm are likely to be paralyzed if the acquired products are destroyed by disasters, which they were not insured against before the time of their sale (Cennamo & Santalo, 2013). Bibliography CENNAMO, C, & SANTALO, J (2013), 'Platform competition: Strategic trade-offs in platform markets', Strategic Management Journal.vol. 34. no. 11. Pp. 1331-1350. CUMMINS, J, & XIE, X (2013). 'Efficiency, productivity, and scale economies in the U.S. property-liability insurance industry', Journal of Productivity Analysis. vol. 39. no 2. Pp. 141-164 DICHTER, A, KHVATOVA, E, & SALA, C (2012). 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