Hm, so maybe this is a little trickier than it seems as well.
So again, it's possible to achieve more profitability through
economies of scale or efficiencies.
But it is certainly not automatic.
And if your experience is like mine, you might have the feeling that, well,
oftentimes as businesses become larger they may in fact become less efficient.
Right?
It might be more difficult for
them to operate operationally in an efficient manner.
So while it's theoretically possible to achieve this, it's difficult.
And we better be clear on how that's gonna be achieved.
So, so far we haven't come up with a very satisfactory answer
to the question yet, have we?
Maybe you came up with another answer altogether,
that doesn't involve scale efficiencies and what not.
Maybe it involves market share.
Maybe your idea is that we want to grow our market share, and that
that might be sort of an avenue towards greater profitability down the road.
And again, it's entirely possible.
But it's important to remember that, again,
based on the theory, think about your supply and demand curves.
Often times things like market share units sold,
that's something that often times is in direct contrast with per unit margin.
So in other words let's take the example of Coca-Cola let's say.
If you're Coca-Cola, the easiest way to achieve greater market share might be
to just lower the price of your cans of soda, so if we cut the price in half, and
we're Coke, are we going to sell more cans of soda?
Of course we are.
But what's going to happen to our margins?
The margins on each of those cans of soda are gonna go down.
They might disappear completely depending on how we priced it, right?
So, even things like market share and profits are often times,
they can eventually, in the long run, be complimentary and
maybe there are strategic reasons to get less profits now to grow one's market
share because we think that will equate to more profit potential in the future, but
again all of these reasons to grow,
I'm going to suggest, are sort of insufficiently strategic.
I think often times when a business attempts to grow,
it has this vague sense that growth is going to lead to a better situation.
It's going to make it more profitable.
But having this vague sense that growth will lead to profits isn't enough.
So what am I doing here?
I'm kinda playing devil's advocate, and I'm just trying to push you
to think about some of these common answers to the question of why grow,
because I want you to understand that while achieving greater profitability
through growth is certainly possible, it's not automatic.
Getting bigger does not automatically result
in greater profitability as if by magic or some law of nature, right?
So that's the first lesson here.
It's more difficult to achieve profitability through growth
than it appears, right?
And therefore, I think, there's a second lesson here.
And the second lesson is if none of these answers are sufficiently