Describe the external economies of scale, Financial Management

In the 2000s the German discount chain Aldi began an expansion on the east coast of Australia. One strategy of Aldi is to encourage small retailers such as butchers, bakers, delicatessens, chemist shops, newsagencies, dry cleaning and petrol retailers to locate close to Aldi stores. This is because Aldi has a narrow product range with only about 600 product lines compared to Coles’ average of 30,000 lines. Most of Aldi’s lines are private label produced only for Aldi, which is one of the key reasons why Aldi can compete with the huge buying power of Coles and Woolworths. Aldi encourages the small retailers to set up close to its stores to help offset the disadvantages arising from its narrow range of lines. 

Questions

Using the concept of external economies of scale, summarize Aldi’s objective in encouraging small retailers to set up close to Aldi stores.

Describe the external economies of scale for Aldi and the small retailers that can arise from an increase in customer traffic and sales.

Describe the internal economies of scale for Aldi if the availability of a wide range of small retailers adds to the customer traffic for its stores.

Posted Date: 2/28/2013 4:36:24 AM | Location : United States







Related Discussions:- Describe the external economies of scale, Assignment Help, Ask Question on Describe the external economies of scale, Get Answer, Expert's Help, Describe the external economies of scale Discussions

Write discussion on Describe the external economies of scale
Your posts are moderated
Related Questions
A niche market targets a well-defined and specific market segment. Firms that operate in niche markets will therefore cater for the precise and distinct needs of their customers. D


Explain how the cash budget and the capital budget relate to pro forma financial statements. The cash budget demonstrates the projected flow of cash in and out of the firm fo

A firm requires a clear policy regarding as to whether the credit should be authorized to a customer and if yes to what extent. Credit principles are set for making such decisions.

Capital Asset Pricing Model (CAPM)   Capital Asset Pricing Model (CAPM) is a model which utilizes the measure of systematic risk, 'B' to price assets. The expected rate of r

BURLEY PLC Financial desirability In a real-terms analysis the real rate of return necessary by shareholders has to be used. This is found as follows 1 nominal rate/1 i

RELATIONSHIP OF FINANCIAL MANAGEMENT WITH OTHER BUSINESS FUNCTIONS

Problem: i) Assume a firm buys a new tooling machine for Rs 2000,000, installation costs net of taxes are Rs 300,000. An existing asset has a book value of Rs 400,000 and the

S pecifications Following are the various specifications that we need to apply while creating contracts. If the goods to be procured are covered under Bureau of Indian

Cash Books (Cash Payments and Receipts Journals) Cash books are the names given to the Cash Receipts Journal and the Cash Payments Journal. They are used to record the flow of