Final answer:
Economies of scale can be successfully used in a cost-leadership strategy due to lower average costs, higher bargaining power, and investment in advanced technology.
Step-by-step explanation:
Economies of scale can be successfully used in a cost-leadership strategy for several reasons.
- Lower average costs: When a firm produces on a larger scale, it can spread its fixed costs over a greater quantity of output. This leads to a lower average cost per unit produced, allowing the firm to offer lower prices to customers and achieve cost leadership.
- Higher bargaining power: Large firms that benefit from economies of scale can negotiate better deals with suppliers due to their larger purchasing power. This enables them to secure lower input costs, further reducing their overall production costs.
- Investment in advanced technology: Large firms with economies of scale often have the resources to invest in advanced technologies, such as automated production systems or efficient supply chain management software. These investments can lead to increased productivity and cost savings, supporting a cost-leadership strategy.