Economies of Scale and Switching Costs According to 7 Powers (Jeff’s Asia Tech Class – Podcast 64)


This week’s podcast is more on the well-known 7 Powers framework by Hamilton Helmer. I go through three of his 7 powers.

You can listen to this podcast here or at iTunesGoogle Podcasts and Himalaya.

But first…consider joining Asia Tech Strategy, my podcast and subscription newsletter on the strategies of China / Asia tech companies.


His fundamental equation of value is:

Value = M0*g*s*m = market scale * power

  • M0 is Market at time zero. g is growth. This is about targeting big and growing market opportunities.
  • S is long-term persistent market share. How much of it you have
  • M is long term persistent margins. (operational margins after cost of capital)
  • You can also do potential value = market scale * power.

His break-down of economies of scale is:

  • Fixed costs
  • Distribution network density
  • Learning Economies (don’t agree)
  • Purchasing Economies
  • Volume / area relationships (cool but I never use this)

His break-down of switching costs is:

  1. Financial switching costs
  2. Procedural switching costs
  3. Relational switching costs

I also cited the 4 terrains from BCG:

Related podcasts and articles are:

From the Concept Library, concepts for this article are:

  • Competitive Advantage: Economies of Scale
  • Competitive Advantage: Surplus Margin Leader
  • Competitive Advantage: Switching Costs
  • Counter-Positioning

From the Company Library, companies for this article are:

  • None
This is part of Learning Goals: Level 4, with a focus on:
  • 15: Didi and Switching Costs

Photo by Hermes Rivera on Unsplash


I write and speak about digital China and Asia’s latest tech trends.

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