Marketing economies of scale can come about when two firms merge and they gain economies of scale (i.e. they can save money by merging).
This may happen because the new, larger firm has great purchasing power and can therefore negotiate cheaper prices on television advertising, online, radio and newspaper adverts (monopsony power). The merged firm is likely to have a larger marketing division than a smaller single firm with more (quantity) employees and also more talent (quality) which means they can pool their resources to produce better marketing campaigns.
If two firms merge (say Company A who has a good reputation and Company B which doesn't have as good a reputation) then the new firm may benefit from the good reputation which can lead to greater sales (alternatively it may adopt the bad reputation depending on the state of the merge!).
Hope this helps.
Rhys
www.learneconomicsonline.com
This may happen because the new, larger firm has great purchasing power and can therefore negotiate cheaper prices on television advertising, online, radio and newspaper adverts (monopsony power). The merged firm is likely to have a larger marketing division than a smaller single firm with more (quantity) employees and also more talent (quality) which means they can pool their resources to produce better marketing campaigns.
If two firms merge (say Company A who has a good reputation and Company B which doesn't have as good a reputation) then the new firm may benefit from the good reputation which can lead to greater sales (alternatively it may adopt the bad reputation depending on the state of the merge!).
Hope this helps.
Rhys
www.learneconomicsonline.com
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