economies of scale af

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  • Created by: geogt002
  • Created on: 05-06-16 16:12
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  • economies of scale
    • managerial- bigger organisations can employ specialist managers for each department which should make the business more efficient and reduce costs. e.g. a finance director ( sunjit) is likely to make better decisions regarding the businesses budgeting and helping to reduce costs.
    • implications for af of managerial economies of scale..specialist managers can make better decisions meaning af will be more cost efficient. however they may have their positions because they  re family not necessarily experts/specialist. this could affect af competitive positions.
    • purchasing economies of scale- these occur when a business gains a discount for buying an order in bulk. this will reduce the cost per unit of what they have ordered.
    • technical economies of scale- these occur when a business has access to the latest technology that allows the to produce more goods at the same time therefore reducing the cost per untit.
    • may benefit from economies of scale when ordering materials to manufacture their furniture, such as buying the wood for a range of furniture such as egerton in 1 large order.
    • af may have access to specialist machinery in their factory.
    • risk bearing economies- these occur when a business sells a range of prodcuts. therefore they spead te risk f business faliure over several manafacture a ramge of products. this means that if the demand for wardrobes fall then af will still generate revenue from beds or chairs. however they only sell to the uk. if they started exporting to other countries it would reduce the chance of failure.
    • marketing economies of scale- these occur when a large firm has access to mass media when advertising their products. this reaches more customers, reducing the cost of advertising per customer. af ar unlike;y to benefit as they are in a business to business market anso so their customers are retailers so they will do the advertising.
    • financial economies of scale- these occur when a large firm borrows money. as the firm is large and the amounts they borrow are vast banks offer them a lower rate of interest than that of a small firm or loan. this reduces the cost of interest per pound borrowed. af are likely to benefit from this as if they invest in a biomass burner the government might be able ti offer a low interest low, therefore reducing the cost of borrowing per pound borrowed.


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