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CASE STUDY 23.12 - Coggle Diagram
CASE STUDY 23.12
Minhtet
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Since it is a startup business, he doesn't have enough retain profit to buy non-current asset so he has to hire a van from a third party company which also has high interest rate
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Could not afford to do huge advertising campaign because of the high advertising prices in radio or newspaper therefore it limited the growth rate of Aymen company.
Reductions in a firm's unit(average) costs of production that result from an increase in the scale of operations.
2.b)
Financial economies of scale: large business can borrow money from the bank easier at a lower interest rate than small business.
Managerial Economies of scale: large business can employ specialist managers therefore it improves the product technology which will result in fewer mistakes
Marketing Economies of scale: large businesses can benefits from effective marketing strategies such as billboards
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Technical Economies of scale: large business can produce very high levels of output which means less time consuming leading to lower average cost
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Poor communication: communication barrier between employees and employer. Slow and poor decision making more mistake =more expenses for the business
Demotivation of workers lack of recognition by the supervisors, harder to get promoted = high labor turnover, poor quality, low productivity
Poor Control: duplication of effort, lack of control and coordination between departments, great risk = waste of time , energy and resources.
Maythu
2a. Economies of scale: reductions in a firm's unit (average) costs of production that result from an increase in the scale of operations
2b. Managerial economies: specialist functional managers - operate more efficiently, more skills -> fewer mistakes "accountant who manages the financial affairs", "the other one has a degree in marketing"
Technical economies: fewer mistakes "new stock-management computer system"
- manually record stocks, no own transport, rare advertising, few numbers of employees, all management tasks undertaken by one person
- Diseconomies of scale: expansion -> high numbers of employees -> higher chance of communication problems and poor coordination alienation of workforce (demotivates -> won't give their best while working) -> higher chances of making mistakes, more wastes, etc.
Sonny
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1.Low employee
1.Few number of employees, Low funds to be able to pay for things such as advertisment and no business own transportation . Most management is undertaken by one person in charge.
2.a) It is the reduction of firm's unit cost of production that is resulted in increase of scales of production.
b) Managerial economies can help small firms to achieve or gain functional managers that can help firms to be able to run much more efficiently while also gaining skills.
Financial economies can allow to borrow money to smaller firms with a lower intrest rate
Technical economies
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