Economies Of Scale And Scope

949 Words Dec 9th, 2016 4 Pages
Economies of Scope:
Economies of scale and scope help producers lower their cost by producing the next unit of output at lower costs this trend continues until production reaches a level of diseconomies of scale where production is no longer running as efficient as it should. This tends to increase the barriers to entry for new competitors as when they enter the market they will experience a higher cost of production. Why? Solely because they have smaller economies of scale and cannot afford to sell the product at the same price as other much larger firms. Generally, economies of scale and scope positively affect General Electric. Since General Electric is one of the biggest conglomerates in the world it has the opportunity to offer products and services through the same organization. These products might be highly unalike but due to the wide range of businesses covered by GE the prospect is there. For example, GE, in order to continue a healthy relationship with valued customers, has allowed the multimillion dollar purchase of its jet engines to be financed over long periods of time. The catch is that these finance opportunities are usually done via a leasing arrangement from GE Finance. In recent year GE has pursued a service strategy when it comes to selling aircraft engines. They sell what they call “power by the hour” this enables the private firm to indirectly rent the engine turbines, in return the firm would award GE with maintenance contracts on the engines. This…
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