Industry Analysis Answer 2022

Running head: Industry Analysis
Industry Analysis
Name of the Student
Name of the University
Student ID

Industry Analysis1
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Answer 3..........................................................................................................................................5
Answer 4..........................................................................................................................................7
List of Reference..............................................................................................................................9

Industry Analysis2
Answer 1
(1.1) Economies of scale is the production condition of a firm under which the firm has the
opportunity to increase its production because with every unit increase in production the average
cost of the firm will decline (Baumers et al. 2016). Theoretically economies of scale occurs
when a firm operates at the downwards sloping portion of long run average cost (LAC) curve.
Economies of scope is the process or strategy by which a firm operating in an industry
creates efficiency in business by producing diversified products (Sakhartov 2017). With
diversified products a firm can cater to different types of customers in different market and thus
can expand its business vertically in the market.
The industry considered in this cases is automobile industry. In automobile industry the
firms are of large size and invest huge amount of capital in the production facility. Thus,
producing less number of vehicles would surge the average cost of the firm thus producing more
number of vehicles would cut the average cost of the firm (Wu et al. 2019). Thus economies of
scale is effective in cost structure of the industry. On the other hand, a firm in the industry
producing only one product suppose it is car. The firm thus would only cater to the car market
and thus the market would be smaller, but as the firm in automobile industry are large, they can
produce other products such as bikes like Honda. Producing more than one and diversified
product allow firms to cater larger market and more customer and thereby they can more profit
(Benur and Bramwell 2015). This business expansion strategy can only be achieved under
economies of scope.
In automobile industry there are few firms that compete in a market and the number of
buyers are numerous. The products of the industry are hugely expensive and cost of production is