For John, BLUF: Well, there is Five Guys. Nothing to see here; just move along.
That is too bad for us here in the Commonwealth. Here is a meditation on scaling up businesses, looking at WinCo, which is challenging WalMart, and In-N-Out Burger, which is not challenging McDonalds. The Bloomberg author is Ms Megan McArdle.
Hat tip to the Instapundit.
Regards — Cliff
My take on the Bloomberg article by Ms Megan McArdle is that it essentially restates the Diminishing Law of Returns from Economics. Underlying the law of diminishing returns is the concept that supply drives prices down, with sales creating the supply. Some companies are capable of selling large quantities before they realize smaller returns on each sale, for others only a few sales are possible before each new sale generates less income. A corporation can only continue to grow as long as it has not touched the curve representing its unique law of diminishing returns.
ReplyDeleteAlso as I recall each law of diminishing returns is established with respect to a fixed customer base to which a corporation's services or products will find appeal. One way in which companies extend upwards their law of diminishing returns is they diversify their services/offers in an effort to reach a wider customer base.