”Kings of the Road”
Toyota is a member of 10m club and increasing its span like Volkswagen and GM that will help the company to enjoy the continuous growth of the world’s biggest car market i.e. China. Whereas, costly brands such as BMW and Jaguar Land Rover are capable of selling high-cost cars in small volume and earn handsome amount of profit. Size matters a lot when it comes to sufficient product range, flexible product lines, and high bargaining power with the supplier to meet tougher environmental regulation. However, the largest group of carmakers can bear the heavy cost to meet the emissions standards in the biggest economies.
Carmakers can exploit economies of scales when they merge through partnerships in which cost has shared by both parties. Moreover, profitable models have made through an agreement that allows to enter a new market and fill gaps regarding product range and technology in the medium-sized car firms.
Without merger carmakers can take advantage of economies of scales by building a broad alliance. One prominent example is of Renault and Nissan, they both have celebrated their fifteenth partnership. The key that keeps both parties alive is their technology, management and cash, despite sharing some platforms both are successfully running their businesses separately.
Citigroup’s is in a profitable financial service business and rated one of the largest in the world. Yes, large scale has helped it as the company has covered the complete range of financial services. It would not be possible for a company to grow if it stays in the small scale business. The company has a broad expansion in Global Consumer, Global Corporate, and Global Investment Management & Banking.
Whereas success strategy of the company emphasis more on a merger that has required on a massive scale and scope of the business regarding distribution. The strategy used by the Citigroup is through merger and expanding its products and service range. However, the other companies that focus on diversifying their product/service range were not successful, but the businesses that emphasize only on retail and credit cards are found dominant in the larger markets.
Yes, an apparent benefit has given in the Sandy Weill message that merely focus on the concept of diversified financial services firm, and it is only possible through distribution channels to reach every consumer wealth segment. The suggestion for the company is that a better choice is to focus narrowly and not by expansion of products and services as it will help the company to become highly successful in the biggest economies.
The Economist, (2014). Kings of the road. Retrieved 10 February 2016, from http://www.economist.com/news/business/21593468-size-not-everything-mass-market-carmakers-it-helps-kings-road
Baccara, M., Backus, D., & Cabral, L. (2002). Scale and Scope at Citigroup. NYUSTERN, Firms and Markets, 1-4.