Why go firms grow - Access to new economies

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  • Created by: brandss
  • Created on: 18-05-16 11:10
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  • Types of economies  achieved through growth
    • Technical economies
      • Specialisation
        • bigger the firm the greater the oppourtunies for specilisation
          • labour
          • machinery
            • access to more efficient capital (expensive)
      • indivisbilties
        • access to more efficient capital (expensive)
    • Managerial economies
      • larger firms can employ specialist managers
        • higher productivity and lower Cost per unit
    • Marketing economies
      • larger firms have bigger influence on their suppliers (threaten to shop elsewhere)
      • use own transport for goods. costs fall
      • bigger firms get better deals on advertising
      • larger brand recognition increases sales
    • Financial econmies
      • greater access to finance
        • lower risk than small firms
        • better credit ratings
      • obtain better repayment methods and rates
        • lower cost per unit
    • Economies of scope
      • merging and expansion lead to greater product range
        • LRAC then fall
          • costs can be spread across all products. (marketing, admin, etc)
            • AC per product falls


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