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Economies of Scale - Coggle Diagram
Economies of Scale
reasons for reducing per-unit costs
specialization of labor and more integrated technology boost production volumes
bulk orders from suppliers
larger advertising buys
lower cost of capital
spreading internal function costs across more units produced and sold
attainment
increasing production
lowering costs
the size of the business
the larger the business, the more the cost savings
spreading the cost of production over a larger amount of goods
types of economies of scale
internal
are based on management decisions
a company cuts costs internally
lowering their costs and raising their production levels
buy resources in bulk
have a patent or special technology
access more capital
external
factors that affect an entire industry
no one company controls costs on its own
a highly-skilled labor pool
subsidies and/or tax reductions
partnerships and joint ventures
cost advantages
efficient production
costs are spread over a larger number of goods