Part A2 · Costs, Margin and Break-even

Economies of Scale and Scope

Economies of scale lower average cost as volume grows. Economies of scope lower cost when one set of assets carries several services.

Economies of Scale and Scope · Illustrated by Hendra Saputra with AI assistanceSelect the illustration to explore it at a larger size.

The idea

A mobile network is mostly fixed cost, so the largest operator usually has the lowest cost per customer and can survive a price war longest. Shared networks and distribution make it cheap to add wallets, home internet or content. This pushes markets towards three or four players, and it means a smaller operator should win on a focused segment, channel or product rather than on price.

Use it thoughtfully

  • Know your cost per customer against larger rivals.
  • Use shared assets to add services cheaply.
  • If smaller, compete on a focused segment, not on price.

An example

ILLUSTRATIVE EXAMPLE: A smaller operator avoids a national price war and focuses on students and remittance families with tailored packs and service.

A question to try

Where could your existing network or channels carry a new service at little extra cost?

A useful framework is a starting point, not a guarantee. Effects vary with the audience, product and situation. Use truthful evidence, respect customer choice, and test the result.

Connect the ideas

Illustration

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