in large scale operations, workers can do more specific tasks, and can become proficient in their tasks, enabling efficiency
1 of 13
Internal - technical
some production processes have high fixed costs, by using the resources at full capacity, average costs will be lower
2 of 13
Internal - bulk buying
buying in a large quantity lowers the average costs
3 of 13
Internal - spreading overheads
if a firm merged, it could rationalise its operational centres - eg one head office rather than two
4 of 13
Internal - risk bearing
investments can be expensive and risky - so only a large firm will be willing to undertake the necessary investment
5 of 13
Internal - marketing
there is no point in a small firm paying for a national advertising campaign because the return will not cover the high sunk costs
6 of 13
Internal - financial
a bigger firm can get a better rate of interest than smaller firms. banks may be more willing to lend to bigger firms as they are seen as a safer investment - more likely to pay back loans
7 of 13
External
when firms benefit from the whole industry getting bigger - eg better infrastructure, good supply networks
8 of 13
External - cluster
if firms locate in a similar area, it is more efficient for suppliers to meet a larger base of purchasers
9 of 13
External - skilled labour
if similar firms locate in a particular region it will encourage skilled labour to seek work in the area eg Silicone Valley
10 of 13
External - transport links
if industries become concentrated in one area, there will develop better transport links for shipping goods - new entrants to the market can take advantage of this
11 of 13
External - supportive legislation
if an industry grows and becomes important to a region, it may gain greater political bargaining power and local politicians will seek to gain favourable terms for their local industry
12 of 13
External diseconomies of scale
an industry growing in size causes negative externalities - rising ling run average costs, eg rapid growth causing traffic congestion
13 of 13
Other cards in this set
Card 2
Front
Internal - technical
Back
some production processes have high fixed costs, by using the resources at full capacity, average costs will be lower
Comments
No comments have yet been made