1 / 12

Economies of scale

Economies of scale. Toyota. Billington’s custom cars. Which company can make cars more cheaply? Why?. Economies of scale. As a company gets bigger, it can make things more cheaply. Definition = As a company increases its scale of production average costs fall. Average costs.

mostyn
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. Toyota Billington’s custom cars Which company can make cars more cheaply? Why?

  3. Economies of scale • As a company gets bigger, it can make things more cheaply. • Definition = As a company increases its scale of production average costs fall.

  4. Average costs • If the total cost of making 100 cars is $1,000,000, the average cost is $10,000 per car. • If the total cost of making 1,000 cars is $2,000,000, the average cost is ????

  5. Take a minute • You manage a supermarket. As a result of growth, you have achieved economies of scale. • How will this effect the prices you charge, number of customers, and profits?

  6. Internal Economies of scale • Technical • Managerial • Financial

  7. Internal Economies of scale • Purchasing • Marketing • Risk-bearing

  8. External Economies of Scale • Labour force • Support services and suppliers • Co-operation

  9. Diseconomies of Scale • Definition = Increasing average costs as a result of an increase in the scale of operation • Co-ordination • Motivation • Communication

  10. In pairs • Explain the Economies and Diseconomies of scale Starbucks may achieve. • Jogjakarta is a centre for Batik. What external economies of scale might there be for Batik businesses in Jogjakarta

  11. Reasons for small business surviving • Diseconomies of scale • Size of the market • Flexibility • Personal Service

  12. Case study • Pg593 a-d

More Related