This week’s podcast is about economies of scale in purchasing power. I go through Walmart and Costco as traditional examples. And point to JD, Apple, and Pinduoduo as digital examples.
You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.
Here are types of economies of scale.
- CA11: Fixed Operating and Capital Costs
- CA12: Purchasing Economies and Bargaining Power with Suppliers
- Larger companies can demand cheaper prices and/or better terms from suppliers than their smaller competitors. This is about bargaining power for important and/or sizeable inputs
- CA13: Geographic and Distribution Density
- CA14: Geometry Effect
- CA15: Learning Scale
Cases of purchasing economies
- Newsfeed of offers plus C2M results in purchasing economies. Pinduoduo.
- Privileged technology access by Apple
- Purchasing economies. This was JD’s biggest lever.
- Platform business models power over suppliers.
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Related articles:
- Why I Really Like Amazon’s Strategy, Despite the Crap Consumer Experience (US-Asia Tech Strategy – Daily Article)
- 3 Big Questions for GoTo (Gojek + Tokopedia) Going Forward (2 of 2)(Winning Tech Strategy – Daily Article)
- Why Netflix and Amazon Prime Don’t Have Long-Term Power. (2 of 2) (US-Asia Tech Strategy – Daily Article)
From the Concept Library, concepts for this article are:
- Competitive Advantage: Purchasing Economies and Bargaining Power with Suppliers
From the Company Library, companies for this article are:
- JD
- Pinduoduo
- Walmart
- Costco
Photo by Den Harrson on Unsplash
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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.
I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.
My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.
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