1 / 15

Economies of Scale

Economies of Scale. Mind Map of Economies of Scale. Economies of Scale. Otherwise known as Procurement can take the form of: Technical Specialisation Purchasing. Economies of Scale. The advantages of large scale production that result in lower unit (average) costs (cost per unit)

woody
Download Presentation

Economies of Scale

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Economies of Scale

  2. Mind Map of Economies of Scale

  3. Economies of Scale Otherwise known as Procurement can take the form of: • Technical • Specialisation • Purchasing

  4. Economies of Scale • The advantages of large scale production that result in lower unit (average) costs (cost per unit) • Economies of Scale – spreads total costs over a greater range of output

  5. Economies of Scale • Internal: Technical • Specialisation – large organisations can employ specialised labour • Indivisibility of plant – machines can’t be broken down to do smaller jobs! • Principle of multiples – firms using more than one machine of different capacities more efficient • Increased dimensions – bigger containers can reduce average cost

  6. Economies of Scale • Principle of Multiples: • Some production processes need more than one machine • Different capacities • May need more than one machine to be fully efficient

  7. Economies of Scale • Financial • Large firms able to negotiate cheaper finance deals • Large firms able to be more flexible about finance – share options, rights issues, etc. • Large firms able to utilise skills of merchant banks to arrange finance

  8. Economies of Scale • Commercial • Large firms can negotiate favourable prices as a result of buying in bulk • Large firms may have advantages in keeping prices higher because of their market power

  9. Kingsbrook Economies of Scale • Technical – video conferencing, sub contract to local colleges, combine classes from SWAN Network, regional IT technician, shared Heads/leadership group • Specialisation – each college in SWAN focus on a specific course – i.e. business at Kingsbrook, students move around to seek specialist topics/themes. Appoint OFSTED leaders for Mngt, Regional coaches and specialist to help with subjects. • Purchasing – IT, IT equipment, stationary, buildings, software, uniforms, (role of LEA but failed)!

  10. Diseconomies of Scale • The disadvantages of large scale production that can lead to increasing average costs • Problems of management • Maintaining effective communication • Co-ordinating activities – often across the globe! • De-motivation and alienation of staff • Divorce of ownership and control

  11. Diseconomies of Scale • Communication • Messages to the right people at the right time. • Emails/mobiles have helped this!

  12. Diseconomies of Scale • Coordination • Coordinating activities to ensure that everyone is working towards the same goals. • Easy for different functional areas to ‘detach’ themselves from the overall firm. • Bigger the organisation = difficult to manage.

  13. Diseconomies of Scale • Motivation • Bigger organisation = difficult for everyone to feel involved. • Small businesses – team environment • Can become isolated and demotivated.

  14. Difference between the two? • Typically, economies of scale are quantifiable i.e. you can calculate the amount saved. • Diseconomies of scale – more discrete in that they are submerged beneath the organisation, therefore qualitative!

More Related