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1.6 Growth & Evolution (scale of operation (economy of scale (reason…
1.6 Growth & Evolution
scale of operation
economy of scale
reason of cost benefit
purchasing economy
technical economy
financial economy
marketing economy
managerial economy
appropriate scale of operation
consider
scope of economies of scale
size of market the firm operate
capital available
owner's objective
number of competition
diseconomy of scale
cause of managerial problem
poor coordination and slow decision making
alienation of work force
communication problem
merits of small and large organisation
significant of small & micro business
job oppportunity
wider consumer choice
competition for larger business
supply specialist goods & service
small vs large organisations
advantages
small
Can be managed and controlled by owner
Often able to adapt quickly to meet changing customer need
Easier communication with workers and customers
Offer personal service to customer
large
Can afford to employ specialist pro managers
Benefit from cost reduction associated with large scale production
Able to set prices that other firm has to follow
Have access to several sources of finance
disadvantages
small
may have limited access to source of finance
owner have to carry large burden of responsibility if unable to employ specialist manager
greater risk of negative effect impact of external change
unlikely to benefit from economies of scale
large
may be difficult to manage
may have potential cost increase associated with large scale production
may suffer from slow decision making and poor communication
may often suffer from a divorce between ownership and control that conflicting objectives