Question

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its

Answer 1

Answer:

DiscountHaven Inc. is a large chain of hypermarkets. It has cost benefits due to its extensive operation. The company's marketing and sales, logistics, administrative, and other such related costs get divided between a large number of product units stocked in its stores. This makes it difficult for smaller retail stores and supermarkets to compete against DiscountHaven's low prices. Thus, DiscountHaven has a competitive advantage due to its  economies of scale.

Explanation:

Economies of scale are the economic benefits that are realized by operating on a larger scale. In general, the average cost per unit of output decreases with an increasing scale because fixed costs are spread over more units of output. Operational efficiency is often greater with increasing scale, which in turn leads to lower variable costs. When the average costs increase with an increasing scale, this is called the disadvantage of scale.

When an industry is characterized by economies of scale, it can lead to a monopoly or oligopoly. Only large companies can then produce economically so that the barriers to entry for new market players are high.

Answer 2

Answer:

Discount Haven has competitive advantage due to its Discount pricing strategy.

Explanation:

Discount pricing and price reductions are a natural part of retailing especially for large retail stores that operate as a chain. Discounting can include coupons, rebates, seasonal prices, and other promotional markdowns. Typically, price strategies based on discounts are designed to bring in more traffic that might offer the potential of purchasing higher-priced items.

Discount Pricing is merchandise priced below cost is referred to as a loss leader.

Although retailers make no profit on these discounted items, they hope the loss leader brings more consumers into the store who will purchase other products at higher margins.