Large Firms

Evaluation

There are many advantages a large firm can get, and these are called economies of scale. They can, firstly, borrow more money at a lower rate of interest as they are large and less likely to go bankrupt. They can also buy in bulk at a cheaper price, and they can spend  their money on advertising. They can use specialization, which fastens the rate of production. Lastly, they can use risk  bearing, because if a demand for a specific product decreases, they still have other products to sell. However, there are disadvantages, also known as diseconomies of scale. For instance  if a firm gets too big, there may be breakdowns of communication. THis may delay decision making and hence engender disagreements. Also, there may be decrease in staff morale as it may be difficult to retain close personal contact with staff because of the organization's large size. Furthermore, because of specialization, workers may find their jobs boring and repetitive.