The move towards mass marketing occurred in the U.S. in the first decade of the previous century. Henry Ford understood that the potential market for a means of transport affordable by the masses was enormous. Prices could be kept down by producing large volumes of identical cars, to take advantage of economies of scale and reduce product costs per unit. Mass production and mass marketing were born. With regard to marketing, Ford assumed that what the customer wanted was an affordable price. He recognised that this approach could lead to a downward spiral of lower costs allowing for lower prices, with the latter leading to greater volumes, which, in turn, would allow for even lower costs. Renown was guaranteed through the popular appeal of innovation in terms of both the production process (assembly line) and the product. However, Henry Ford ignored the drivers of change. He failed to understand that the rules for success were changing and to adapt his marketing strategies to the changes in consumers’ buying behaviour. Consumers were waiting for up-to-date models. He was so convinced of his choices that he persisted in using outdated production and marketing strategies. While other carmakers placed their bets on increasing wages among the population and on a growing interest in cars, Ford restricted his offering to a product for the masses sold at a low price. With this marketing strategy, he could not compete.
In many countries in Eastern Europe and Central Asia (ECA), the National Quality Infrastructure (NQI) does not support business competitiveness, though this is one of its functions in organization for economic co-operation and development countries. In most of the Commonwealth of Independent States (CIS) countries, it even impedes competitiveness. The most common economic benefits of adopting standards include increased productive and innovative efficiency. Standards lead to economies of scale, allowing suppliers to achieve lower costs per unit by producing large, homogeneous batches of products. Standards spur and disseminate innovation, solve coordination failures, and facilitate the development of profitable networks. Participation in world trade increasingly requires that suppliers comply with standards determined by lead buyers in global value chains. The nature of participation in the global economy has changed dramatically over the past two decades. Rarely do producers turn raw materials into final products and sell them directly to customers. Improving the quality of goods and services and diversifying into sectors where quality matters can be a sustainable source of global competitiveness. Some of the productive tasks associated with high-quality goods have high learning and technological externalities. In those sectors, producers tend to form tight relationships with global buyers who transfer their knowledge and support the producers' quality-upgrading processes. D
In the past, prices for cross-border parcels have been perceived of being too high by some observers. Economists would generally expect that growing volumes, increasing economies of scale, and increased competition lead to lower prices. This paper analyses whether the expected impact can already be observed: It analyses prices for consumer parcels and, where available, average revenues per unit. The paper covers Austria, Belgium, Czech Republic, Germany, Ireland, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom. We ultimately conclude that there are weak indications that competition and economies of scale are putting downward pressure on prices for cross-border parcels, and are thus driving prices to the politically desired direction.
Because the automated clearinghouse (ACH) has been found to have lower social costs than paper checks, the Federal Reserve has been promoting more widespread use of ACH by lowering ACH processing fees. In this paper, we have obtained the first numerical estimates of ACH demand elasticities, a measure of the responsiveness of ACH demand to price changes. Various methods are employed to estimate the demand elasticities to determine how robust the estimates are. During the period 1985–1996, the Federal Reserve lowered the per-item price of interregional ACH, while the per-item price of intraregional ACH stayed constant. We take advantage of this unique pattern of historical price changes implemented by the Federal Reserve to estimate the effect of price changes on demand for ACH. We find that the volume of ACH processed by the Federal Reserve responds to changes in per-item fees, but the increase in volume that results from a price decline is very small and not statistically significantly different from 0, except in the case of debit origination. The results suggest that the Federal Reserve cannot expect to generate substantial additional volume by lowering its prices further. However, commercial banks may be able to increase the volume demanded by lowering their own ACH fees. We also examine how volume growth initiated by a price cut affects unit costs. Given the relatively large-scale economies found for ACH, volume growth leads to lower unit costs. However, to outweigh the re
The ‘1992’ programme for the completion of the internal market within the European Community is a major exercise in trade liberalization. As non-tariff barriers are removed, the cost of exporting from one member state to another will be reduced, and competitive access between European markets will be improved. As outlined by M. Emerson et al. (1988, p. 138), ‘after a time lag, the increased dynamicism of the competitive process will also promote new investment, prompt the restructuring and multinationalism of companies, lead to relocation, disengagement and “creative destruction”’. Hence, competition should intensify in all markets, leading to lower price-cost margins and lower unit costs as X-inefficiency is reduced and economies of scale are achieved and industries are restructured. In particular, it is envisaged (see, for example, Buigues and Ilzkovitz, 1988) that in industries such as advanced materials, chemicals, pharmaceuticals, computers, telecommunications, aerospace, electronics and precision instruments, structures will eventually emerge with fewer, larger and more competitive firms than at present. These are industries where non-tariff barriers were still significant and where potential gains from restructuring could be reaped because of unexhausted scale economies (see also Pratten, 1988). Indeed a significant part — maybe as much 60 to 70 per cent (see Smith and Venables, 1988) — of the gains from the 1992 programme, which the Cecchini Report (1988) estimated to
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increase sales but also to lower per-unit costs because of scale and learning effects. This … that specialization of labor and economies of scale lead to functional efficiency. Manufacturers … differentiation. Over time, costs per unit tend to decline because of scale and learning effects. On
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