Negotiating Partnerships: Increase profits and reduce risks

Economies of scale

The motivation behind many mergers is the economies of scale that the parties can achieve by spreading out high development costs, production overheads and distribution for a higher number of units produced. However, these gains must be viewed in relation to the changes that will be a consequence of the larger-scale operation.

If, as course providers, we circulate our course catalogue to 10,000 potential customers, there will be high costs involved in locating their addresses and for postage. If we join forces with a colleague who provides another course, (one that is not in competition with ours) we can halve our costs. If we enter into co-operation with a large-scale course provider, who manages several hundred courses every ...