Term
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Definition
| High-power threat of rivalry means that competition on prices, features and services, is intense. This means that rivals reduce prices frequently, and take on added costs for product features, advertising, promotion, and services. |
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Term
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Definition
| Profit is vulnerable to high-power threat of rivalry because it reduces price and adds to costs of product features and services. |
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Term
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Definition
| Economies of scale means that the cost per unit produced decreases as the size of production increases. This cuts cost without hurting product features and services. |
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Term
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Definition
| Therefore, economies of scale protects profit against threat of rivalry by reducing cost without decreasing the essential product features and services. If rivalry forces average price to come down, the lower costs of production from economies of scale can be passed to buyers as lower prices, while preserving profit. |
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