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ACCA Strategic Professional · Strategic Business Leader · Enabling success: disruptive technologies

Kelmar Services runs an online marketplace that connects independent tutors with students. Kelmar owns no teaching staff and creates no lessons itself. Its value grows as more tutors and students join, because each group attracts the other. Which concept best explains the source of its competitive advantage?

The advantage comes from network effects in a digital platform model. Each additional tutor makes the marketplace more attractive to students and vice versa, so value rises with participation even though Kelmar owns no teaching resources. Vertical integration or cost leadership does not explain this self-reinforcing growth.

  1. AEconomies of scope from a broad product range
  2. BVertical integration of the tutoring supply chain
  3. CNetwork effects typical of a digital platform business modelCorrect
  4. DCost leadership through lower raw material prices

Explanation

A platform matches two sides of a market, and value increases as each side grows, which is a network effect. Kelmar does not own the supply, so vertical integration is wrong. Economies of scope and raw material costs do not describe the mutual attraction between user groups.

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