Inquiry case example - Veolia water is the world’s largest water

company
Veolia Water is the water division of the French
company Veolia Environment and is the world's
largest supplier of water services. Its total revenue is
$13Bn and it employs 95,000 people. Veolia Water
manages the whole water supply process: sourcing
from reservoirs and rivers, water treatment and the
final distribution of water to the population. Veolia
Water is a very big company with 95 million
customers.

It is the single provider of domestic water in the markets it supplies and it would be described as a
natural monopoly because of the high set-up costs and economies of scale associated with the
domestic water industry.
Questions
a. Define the term total revenue. [2]
The total amount of money earned by a company from selling its goods and services
b. If Veolia Water's total revenue is $13Billion and it has 95 million customers, calculate its average
revenue. [2] AR = 13×10^9 / 95×10^6 = $136.84

c. Outline the high set-up costs Veolia Water encounters when it is setting up production. [2]
Setting up water production requires a large quantity of water extracting and filtering infrastructures, which is a huge
barrier for Veolia Water to enter the market
d. Explain how Veolia Water might benefit from technical and financial economies of scale. [4]
Veolia water benefits in a long run and can enjoy economies of sale mainly because of the high
barrier for other industries to enter the market. In order to set up production for water, the industry
has to burden a significant amount of fixed costs during its initial short run. In other words, most
of the industries aren’t able to burden the average costs in the beginning.
On the other hand, average costs for Veolia Water declines by time because of its technologies
constantly developing, for example, improvements that enable managing larger volumes of water
and enhancing the quality of the water, without having to compete with other industries in the
market.