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Economies and Diseconomies of scale - Coggle Diagram
Economies and Diseconomies of scale
Scale
The size of something,
especially when it is large
Economies of Scale
As a business increases its size,
average costs start to fall
Diseconomies of scale
Rising average costs when businesses become too big
Regulatory costs
Office politics
Rising costs of complexity
Rising average costs when a firm
becomes too big
Labour relations
Too many workers create lack of
understanding
Increased need for
supervision/management
Increased need for
supervision/management
Bureaucracy
Too many resources/processes used in administration
Internal Economies of Scale
Cost benefits that an individual firm can enjoy when it expands(grows)
Cost benefits that an individual firm can enjoy
when it expands
Technical Economies
Larger businesses are more efficient
More specialisation
More investment in equipment
Equipment is used more often
Average costs fall
Managerial Economies
Large firms can afford specialist managers
Small firms have one manager doing many jobs
Large firms will be more efficient
External Economies of Scale
Cost benefits that all firms inthe industry can enjoy whenthe industry expands
Skilled labour
Industry concentrated in one area
Training costs are lower
Schools will offer vocational courses
Infrastructure
Roads, buildings and infrastructure will be shaped by the needs of that industry
These will be developed and will benefit other businesses in the area
Ancillary and commercial services
Truck cleaning services
Wheat inspectors
Agribanking services
Component suppliers
Everyone in the area will benefit from these services
Cooperation
Firms in the same industry are likely to cooperate with each other
They can share costs and benefits of research and development