Operational Strategies: Scale and Resource Mix

Definitions from Chapter 12 of AQA A2 Textbook

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Choosing The Right Scale Of Production

Economies of Scale: The advantages that an organisation gains due to an increase in size. These cause an increase in productive efficiency ( a decrease in the average cost per unit of production).

Diseconomies of Scale: The disadvantages than an organisation experiences due to an increase in size. These cause a decrease in productive efficiency (an increase in the average cost per unit of production)

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Production

Capital-Intensive Production: Methods of production that use a high level of capital equipment in comparison to other inputs, such as labour. A fully automated factory (e.g. a Fiat car plant) and a nuclear power station are examples of capital-intensive production.

Labour-Intensive Production: Methods of production that use high levels of labour in comparison to capital equipment. Many service industries, such as retailing, restaurants and call centres, use a large number of people in comparison to equipment).

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