Economies of Scale

1368 Words Nov 14th, 2011 6 Pages
The Economies and Diseconomies of Scale and Scope
Introduction
Most of the company’s strategy in remaining to be competitive is trying to differentiate and get over its rivals which has the intentions of realizing the preferred seller and will have the highest returns into the industry. Thus, the choice of the firm had been affected relatively to the minimum efficient scale and the major issues that had been tackled to this issue are the economies and diseconomies of scale and scope (Forgang and Einolf, 2007, p. 151). Economies of Scale and Scope The economies of scale exist by the increase of the output of the goods through additional units while the costs decrease. On the other hand, the
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The example of this approach is the location of the independent controlled donut that can choose to offer the high wages in the charge of higher prices in the affluent area. It can also have the combo promotion for choosing the market cinnamon in the apple cider are available in the bargain market as controlled by the customization. There are also evidences that the diseconomies of scale occurs in the research and development of the pharmaceutical companies wherein outweighing the combination of R and D and the great driver for the efficiency for the strategic importance that cause of difficulties in managing and monitoring for the complex departments. The economies of scale can also occur in outside the firm wherein the larger business can put the pressures to its suppliers for the labour and raw materials so that it raise inputs on the prices. These regulations can be tighter for the bigger firms which can be result of the industry regulations and to the economies of scale (Money Terms, 2008).
The advantages of the diseconomies of scale or the increase in the plant size to the company is the effect to the product cost whereas the increase in the activity can make the possible for the firm in employing specialize labour and sufficient production. In this regard, it can improve the quality of the jobs that are performed by the general and unskilled worker. Thus, the better and more output can
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