Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche? economies of scale customer switching costs capital requirements network effects

Question

Business

Philip Carson

3 October, 21:15

Given the industry structure in the automobile business, entering the auto manufacturing industry doesn't seem advisable. Yet Tesla Motors is joining the fray. Rather than attempting to compete head-on in internal combustion engines, Tesla Motors is entering the all-electric car segment, a much less crowded niche in the overall car industry. Which of the following is Tesla most hoping to benefit from in this market niche? economies of scale customer switching costs capital requirements network effects

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Cale Schultz · Answer 1

economies of scale

Explanation:

Economies of scale defines the advantage to company in terms of cost, that is with each increasing unit of output the cost for additional unit tends to decline.

All electric car segment do not currently operate or have competition as there is low market for such segments, but as the market is small for electric cars.

But as the company thinks to benefit in small scale because of economies of scale, the company might choose this electric car segment, encouraging customers, and with decreasing cost, company will be benefit.