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Economies of scale (Economies of Scale :chart_with_upwards_trend:…
Economies of scale
Economies of Scale
:chart_with_upwards_trend:
Internal
Marketing economies
-
cost effective marketing strategies
Technical economies
-
purchase of technology depending on companies needs
Financial economies
-
large firms get better rates due to reliability
Risk-Bearing economies
- lar
ge firms acquire a wide range of products to reduce risk
Managerial economies
-
large firms can hire specialist managers who are more efficient
Purchasing economies
-
bulk buying allows a company to receive a discount on the order
External
Skilled Labour
-
certain workers in a concentrated area may have experience required for an industry. Therefore training costs will be lowered and some schools and colleges will provide vocational courses
Infrastructure
-
Public infrastructure tailored to industry in certain area
Ancillary and Commercial Services
-
Services like waste disposal move closer to an industry
Co-operation
-
Companies work with each other to develop products
Diseconomies of Scale
:chart_with_downwards_trend:
Internal
Bureaucracy
-
Too many resources are being used in administration
Labour relations
-
Worker/ manager relationships are more difficult to uphold in larger firms, therefore efficiency falls
Control and co-ordination
-
Larger companies are expensive to supervise due to size
External
Market price
-
an increase in one or all factors of production
Demand for higher wages
-
usually coincides with rise in living standards or worker demand
Pollution
-
causes health hazard for workers
Pressure on infrastructure
-
increased industry activity puts strain on roads and other such structures, therefore business imports of raw materials is delayed