It can be in firms' interests to source components they need from Assignment

It can be in firms' interests to source components they need from competitors. Explain how this can be the case and examine an - Assignment Example 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 pric e 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). ... 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 pric e. 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.