operational strategies: scale and resource mix

economies of scale

the advatnages that an org gains due to an increase in size. these cause an increase in productive efficiency

internal economies are:

• technological change
• specialisation
• purchasing
• marketing
• financial
• R & D
• social and welfare
• managerial and administrative

diseconomies of scale

the disadvatnage that an org experience due to an increase in size. these cause a decrease in productive efficiency

• coordination
• communication
• motivation
• technological
• excessive bureaucracy
• staff problems
• less flexibilty

choosing the optimal mix of resource: capital and labour intensity

the four resources used, known as the factors of production are:

• enterpirse
• labur
• land
• capital

enterprise and land tend to be unique. however, labour and capital are often interchangeable, so a bus must decide whether its transformation process or production methods will be predominatnly based on the used of capital or the use of labour.

factors influencing the choice between capital-intensive and labour-intensvie production

• methods of production
• skills and efficiency of the factors of production
• relative costs of labour and capital
• size and financial position of a bus
• product or service
• customer