Economies Of Scale Flashcards
What does economies of scale mean
As a business grows their average cost per unit falls
What does diseconomies of scale mean
As a business grows too fast or too big their unit cost rises as output rises
What does purchasing economies of scales mesn
As a business gets bigger they are able to buy in bulk and will be given bulk-buy discounts which reduces the unit cost of each product
What does financial economies of scale mean
Banks may give better interest rates and more money to larger companies as there is a better chance they will get their money back
What does managerial economies of scale mean
Where bigger companies are able to employ specialists - increasingly productivity
What does technical economies of scale mean
Bigger businesses are able to invest in new and better technology - more efficient rescource use
Ehat does marketing economies of scale mean
Large firms are able to buy their advertising in bulk at discounted prices if they have significant negotiating power in the market
What does risk bearing economies of scale mean
A company is able to spread risk on a range of different products that a company Is able to fall back on
What does concentration economies of scale mean
When firms in the same industry cluster together
This causes skilled workers to shift to these clusters
You may also be closer to suppliers(less distribution costs)
You also gain an incentive to innovate as your near to competition
What are the disadvantages of a business growing too big or too quick
Employees may feel more isolated and less appreciated
Managers have a larger span of control and find ut difficult to build a team atmosphere
This results nine falling productivity and increase in average labour costs per unit
How can a business help diseconmies of scale?
Delegation of decision making(empowering employees)
Making jobs more interesting (job enrichment)
Splitting Employees into teams (teamworking)
