More profit, wider variety of skills, more publicity, less competiton, cheaper opportunities, better infrastructure, better efficiency.
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What are internal economies of scale?
Cost benefits that an individual firm can enjoy when it expands.
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What are external economies of scale?
Cost benefits that all firms in an industry can enjoy when the industry expands.
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What is bulk buying?
A firm can gain a discounted price from a supplier as they are buying in larger quantities.
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What is marketing?
Larger firms can employ more expensive but more effective outlets to promote their products, e.g. global television advertising.
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What is technical?
A firm can invest in new product development or technology to make their production process more efficient.
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What is financial?
They can access cheaper sources of finance as they are less of a risk of debt.
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What is managerial?
Larger firms can afford to employ the best people in their fields. These experts can help increase revenue and reduce costs.
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What is risk-bearing?
Large firms can spread their risk--they can afford to make a loss in one market because they are big enough to operate in other, more profitable, markets.
Skilled labour, infrastructure, access to suppliers, similar businesses in the area.
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What is skilled labour?
There may be a build up of labour with skills & work experience required for that industry. Resulting in lower training costs.
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What is infrastructure?
If an industry dominates a region, the roads/railways/ports/buildings etc will be tailored to that industry.
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What is access to suppliers?
Specialist marketing, cleaning, banking, waste disposal, distrubtion, maintenance & component supplier are likely to be attracted to an area if there is a dominating industry.
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What is similar businesses in the area?
Firms close to competitors are likely to cooperate and work together, e.g. sharing the costs of research.
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What are diseconomies of scale?
They occur when a business becomes innefficient as it grows. These are the disadvantages experienced by a business as it grows leading to a rise in unit cost.
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How is communication a diseconomy of scale?
As more employees are employed, it is harder to keep everyone up to date, messages may get confused or take too long to get to the right person, relationships with suppliers may be difficult to maintain.
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How is bureacracy a diseconomy of scale?
Rigid rules & regulations within a business tend to occur in large organisations. It is said to limit creativity & lead to negativity. Tasks are undertaken that do not add value to the firms operations.
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How is lack of control a diseconomy of scale?
Increased numbers of resources are difficult to coordinate efficiently.
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How is difference between management in the organisation a diseconomy of scale?
Employees may feel like they are not treated as individuals in the workplace. They may be overworked & stressed but believe that they're not getting anyway near the rewards senior management are getting.
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What are the diseconomies of scale?
Communication, bureaucracy, lack of control & difference between management in the organisation.
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Other cards in this set
Card 2
Front
What are internal economies of scale?
Back
Cost benefits that an individual firm can enjoy when it expands.
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