Advantages of Scale

  1. Cost reductions along the experience curve. The very nature of things is that if you get a whole lot of volume through your operation, you get better at processing that volume. And that’s an enormous advantage.
  2. Advantages of scale from TV advertising: When TV advertising first arrived- when talking colour pictures first came into our living room, it was unbelievably powerful thing. If you are P&G you could afford to use this new method of advertising. Some small guy couldn’t. So when TV came in, the branded companies that were already big got a huge tailwind.
  3. Your advantage of scale can be an informational advantage. If I go to some remote place, I will buy Coke vs. some unknown brand even though Coke may be more expensive. So Coke has the informational advantage.
  4. The advantage of psychology.  If everybody is drinking Coke, I will also do so. And Coke is available almost everywhere in the world. (To build Coke’s capabilities is another matter.)