3.2.1 Growth Flashcards
What are Internal economies of scale
the advantages enjoyed by a business as it increases the scale of its current operations leading to a fall in unit costs
How do lower unit costs make a business more competitive?
- Reduce Prices therefore selling more whilst keeping the same profit margin
- Maintain the same price and earn more profit per unit of the product
What is technical Intenal Economies of scale?
The benefits enjoyed when a business is able to spread more on larger and more EFFICIENT MACHINEY lesding to a fall in averge costs.
What is Purchasing Intenal Economies of scale?
The benefits enjoyed when a business is able to negotiate greater discounts with suppliers for BULK BUYING leading to a fall in average costs.
Increases the buying power of the business (Porter’s five forces).
What is Managerial Intenal Economies of scale?
The benefits enjoyed when a business can employ SPECIALIST PERSONEL leading to a fall in average costs.
The business can employ internal specialists such as an accountant or HR services of external organisation
What is External Economies of scale?
External economies are when a business enjoys lower unit costs as a result of external factors such as a growth in the industry and geographical clustering within an industry.
What are the three areas of External Economies of scale?
Expertise
Cooperation
Support Services
Whar are the three areas of Interal Economies of scale?
Technical
Purchacing
Managerial
What are benefits of Expertise of External Economies of Scale?
The benefits enjoyed when a region or country becomes renowned for a particular industry leading to more highly skilled workers, improved training and greater talent pool leading to a fall in unit costs.
What are benefits of Cooperation of External Economies of Scale?
Greater cooperation between businesses within the same industry and region resulting in greater efficiencies.
What are benefits of Expertise of External Economies of Scale?
The benefits enjoyed when ancillary services that specialise in a particular industry locate near to the industry.
What are some objevies of growth?
Brand Loyalty Barries to entry lowerd Stronger negotioation power Secure rar maerials or outlets Incresed Market Share Saturate the market Increase profitability lower costs Incresed produtivity
What are Diseconomies of scale?
the disadvantages suffered as a result of a business increasing the scale of its operations that lead to a rise in unit costs
What are some problems with Diseconomies of scale?
Communication
Co-ordinatation and control
Alieation
How can Communication effect Diseconomies of scale?
Wider span of control
Longer Chains of Command
Risk of Distortion and Misunderstanding
