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economies of scale - Coggle Diagram
economies of scale
internal economies of scale
buying economies: large firms receiving discounts when purchasing bulks of raw material(sometimes also higher in quality)
selling economies: transporting goods that is half full of a truck cost almost the same of transporting a full truck of goods (large in sell also decrease the cost of advertisement)
managerial economies: large firms are capable to employ staff in key position
labour economics: specialisation of workers
financial economies: large firms are easier on raising finance by selling share and preference from bank (to attract them)
technical economies: bigger firms are more viable on using technologically advanced machine
research and development economies: large firms having research and development apartment
marketing economies: advertisement
risk bearing economies: e.g. conglomerate (economies of scope)
external economies of scale
skilled labour force(overall within the industry)
good reputation: big firms working in the same region e.g. Silicon Valley
specialist: specialist supplier(ancillary industry); specialist market; specialist service(courses for certain industry )
improve infrastructure: better electricity supply, internet, etc.
internal diseconomies of scale
Difficulties of controlling the firm: large firms are harder to mange due to it size(increase in cost)
communication problems: different time zones, hard to forward ideas to the management team, etc
poor industrial relations: lack of motivation, sense of belonging, more conflicts(diverse in opinion)
external economies of scale
congestion(on workers and provision of raw material)
increase in competition