Competitive Economics and Market Concepts

Economies of scale (規模の経済) is the effect where the cost per unit falls the more you produce or sell.

Fixed costs such as factory equipment stay the same regardless of volume, so the more units you make, the smaller each unit's share becomes. Buying raw materials in bulk to get a lower unit price is another benefit of large volume. Since volume translates directly into price competitiveness, companies that can make and sell in large quantities tend to have the edge.

AnalogyA chartered bus costs the same no matter how many people ride, so the fuller it is, the less each passenger pays.

How to rememberIn English it is economies of scale. Economy can mean saving, so read it as the savings that come from a larger scale.

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The experience curve (経験曲線) is the relationship in which the cost per unit falls by a fixed rate as cumulative output grows.

Cumulative output is the total number of units made since production began. As production continues, workers gain skill, wasted steps disappear and processes improve, so costs come down. It is usually expressed as a fixed percentage drop in cost each time cumulative output doubles.

AnalogyA dish you cook for the first time takes a while, but after making it dozens of times you know the routine and can finish it much faster.

How to rememberPlot unit cost on the vertical axis and cumulative output on the horizontal axis, and you get a curve that slopes downward to the right and gradually flattens.

Commoditization (コモディティ化) is when differences in function and quality between products disappear and customers choose mainly on price.

In a market where technology has matured and spread widely, the performance of each company's products grows similar. Once the differences are no longer visible, customers pick the cheaper option, which easily sparks a price war. Companies try to stay distinct by adding value beyond function, such as brand strength or service.

AnalogySugar tastes the same whichever store you buy it from, so people tend to buy it where it is cheapest.

How to rememberCommodity originally meant goods like wheat or crude oil that are treated as identical wherever you buy them. Read the term as industrial products joining that group.

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Cannibalization (カニバリゼーション) is when a company's new product or store takes customers and sales away from its own existing products or stores.

In Japanese it is rendered as "eating one's own kind," meaning total market sales do not grow and revenue merely shifts within the company. It tends to happen when products with similar features or price ranges are aimed at the same customers. When planning a new product, you need to estimate how much revenue will move over from existing products.

AnalogyIt is like opening a second branch of the same chain on the same shopping street, only to find that the first branch's regulars simply moved to the new one.

How to rememberThe word comes from cannibal, one who eats its own kind. The sense of members of the same group devouring each other survives in the name.

Benchmarking (ベンチマーキング) is a method of measuring the level of your own products or operations, comparing it with that of an excellent company to identify the gap, and using the result to improve.

An excellent practice used as a model is called a best practice, and benchmarking is the activity of comparing your company against it. The comparison partner need not be in the same industry, since a company from another sector that excels at a specific operation such as logistics or customer service can also be chosen.

AnalogyIt is like putting videos of yourself and a faster friend side by side, spotting differences in arm swing and stride, and working them into your training.

How to rememberA benchmark was originally a mark cut by surveyors as a reference for height. Here another company's excellent level becomes the reference point for measuring your own.

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Logistics (ロジスティクス) is the idea of planning and managing the entire flow of goods, from procuring raw materials to delivery to the customer, so that it is optimized as a whole.

Making a single task such as transport or warehousing more efficient does not lower overall cost if stock piles up or runs out. Logistics links every stage and manages them together, aiming to deliver the right goods in the right quantity to the right place at the right time.

AnalogyIt is like arranging boxed lunches for a large event by setting the order count, cooking, storage and delivery times to the venue all together so that nothing is left over or short.

How to rememberIt was originally a military term for the supply system that sends troops at the front exactly the materials they need.

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ESG investing (ESG投資) is a way of choosing investments by assessing a company's efforts in the environment, society and corporate governance, in addition to financial information such as sales and profit.

It rests on the view that efforts that rarely show up in financial figures still affect whether a company can keep growing over the long term. Corporate governance refers to the mechanisms that monitor and discipline management so that executives' decisions serve the interests of shareholders and others. By choosing companies whose business is unlikely to be shaken by environmental problems or scandals, investors seek long-term stability.

AnalogyIt is like renting a home by looking not only at how cheap the rent is but also at how well the building is maintained and how responsive the management company is, then deciding whether you could live there comfortably for years.

How to rememberThink of E, S and G as the planet (environment), people (society) and the inside of the company (governance), and you can remember them as moving from the outside in.