Economies of Scale and Consolidation, and Effects of Industrial Food

1470 Words6 Pages
Introduction In business, the principles of economies of scale and consolidation are standard fare, but it is only since the end of the Second World War that we have even really thought about food as an industry like any other. Indeed, in most of the world, the idea of food as big business subject to concepts like shareholder returns, globalization and commodification is a foreign concept. In America, we are now a few generations into the process of turning our food into just another source of capital, and we are starting to see some strongly negative effects of this outlook. This paper is going to look at some basic business concepts and how the application of those concepts has had an impact on our food supply chain. Economies of Scale and Consolidation The idea of economies of scale is simply that the bigger a production mechanism is, the cheaper it can produce things. Think about Henry Ford's assembly line, and then think about Enzo Ferrari's production methods. The difference in the number of Fords and the number of Ferraris, and the cost of each of those cars, is staggering. Economies of scale allow you to spread your fixed costs across more units of output. In addition, the larger output you have, the better prices you can negotiate on your inputs. When Ford wants windshields, they order in the tens of thousands. Ferrari does not. So economies of scale is a simple, universal principle that can be applied across just about any industry. Fast food restaurants
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