PARAPHRASE chapter 13 - Essay Example

ties better than competitors perform, a firm is potentially able to create more value than its competitors do. Frequently, strategic positions in a firm can be classified into two broad categories, namely a cost advantage or a differentiation advantage. Should a firm beat others in activities that breed superior differentiation or in activities that create reduced expenses, its strategic standing should correspond to these activities. A firm can conveniently outsource its value-added activities to other firms that can do such activities at a relatively lower cost.

However, a firm should refrain from outsourcing activities which though can be performed cheaply by other firms would lead it to subject itself to considerable transactions costs and hold. Chandler holds the view that capital-intensive industries enjoy economies of scale. Industries that can produce in large quantities can achieve considerable reductions in costs. A crucial ingredient of a few firms that will control the market and be successful is if they continue producing throughout. The marketing department is charged with identifying markets, securing distribution and determining the price at which the firm can sell its increased output.

There exists few natural sources of economies of scale in labor-intensive industries hence big firms have no intrinsic cost advantage over small firms. Where there are many firms and absent product differentiation, the market will be dominated by few opportunities for profits. A key function of the marketing department is to distinguish the firm’s products in the mind of the consumer. The department turns out to be a central origin of value in the firm. Successful differentiation on the other hand is capable of turning the market monopolistically competitive or oligopolistic where image differentiation is immensely successful.

Marketing steers this progression of market structure. An experience good refers to a product whose quality is only assessable after