Question

Generally, Internet firms versus traditional firms have a distinct disadvantage in what area?

1. Logistics
2. Inventory and personnel
3. Taxes
4. Physical facility cost

Answer 1

Internet firms traditionally have a disadvantage in physical facility costs as they do not require expensive retail locations, unlike traditional businesses, and can utilize economies of scale to reduce average costs. So, the correct answer is option 4.

Step-by-step explanation:

Internet firms, when compared to traditional firms, generally have a distinct disadvantage in physical facility costs. Traditional firms often operate in retail locations commanding high rent, while companies like Amazon have leveraged economies of scale by using large warehouses in low-rent areas. These warehouses are highly automated, leading to low average costs per sale and enabling Amazon to offer a wide range of products with efficient fulfillment processes.

In contrast, traditional businesses may find themselves with higher facility-related costs due to the necessity of maintaining retail spaces in high-cost areas, which can impact their competitive edge in terms of pricing and profitability.

So, the correct answer is option 4.