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How does a company recognize that they've achieved economies of scale or diseconomies of scale?
They can recognise this by seeing that, when quantity is changed, the unit cost of production is falling or increasing at a changing rate. When there is an economy of scale, the unit cost of production is decreasing with units produced; with diseconomies, it is increasing. This can also be represented mathematically by finding the derivatives of cost functions.
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Diseconomies of scale are illustrated by?
Diseconomies of scale occur when a company's production costs per unit increase as it grows larger, often due to factors like mismanagement, communication breakdowns, or increased complexity. For example, as a factory expands, it may face challenges in coordination and inefficiencies that lead to higher operational costs. This phenomenon highlights that beyond a certain point, scaling up can lead to diminishing returns rather than enhanced efficiency. Ultimately, diseconomies of scale can negate the benefits of economies of scale, impacting profitability.
How do you avoid the Motorola diseconomies of scale?
To avoid Motorola diseconomies of scale, companies should focus on maintaining efficient communication and decision-making processes as they grow, ensuring that organizational complexity doesn't hinder productivity. Additionally, investing in scalable technology and systems can help streamline operations, while fostering a strong company culture can keep employees engaged and aligned with the company's goals. Regularly reviewing processes for inefficiencies and adapting to market changes also helps maintain agility and effectiveness as the business expands.
How can economies of scale be achieved through vertical integration?
Economies of scale can be achieved through vertical integration by consolidating different stages of production within a single company, which reduces costs per unit as output increases. By controlling the supply chain—from raw materials to manufacturing and distribution—companies can streamline operations, reduce transaction costs, and improve efficiency. This integration also allows for better coordination and quality control, ultimately leading to increased competitiveness and profitability. Moreover, it can reduce reliance on external suppliers, minimizing risks associated with supply chain disruptions.
What is a large company's ability to take advantage of economies of scale?
The company can offer goods more cheaply than smaller retailers
What are the differences between internal and external economies of scale?
AnswerEconomies of scal occurs when there is an increase in output as cost decreases. This means, as a company will have a better chance to decrease its costs. There are two ways of achieving this, internal and external economies of scale. Internal economies of scale occurs due to the change in size of an individual firm and are not dependant on the industry as a whole. This can be achieved in two ways. 1) Firm level 2) Plant level.External economies of scale occurs due to a growth in the industry as a whole. The individual firms need not grow, however the entire industry around them does.
Diseconomies of scale are illustrated by?
Diseconomies of scale occur when a company's production costs per unit increase as it grows larger, often due to factors like mismanagement, communication breakdowns, or increased complexity. For example, as a factory expands, it may face challenges in coordination and inefficiencies that lead to higher operational costs. This phenomenon highlights that beyond a certain point, scaling up can lead to diminishing returns rather than enhanced efficiency. Ultimately, diseconomies of scale can negate the benefits of economies of scale, impacting profitability.
What are diseconomies of scale?
When the business becomes too big that there wouldn't be enough managers to manage it efficiently => the marginal cost increases, pushing the average costs up.
What are the reasons for GM diseconomies pf scale?
Diseconomies of scale occur when a company grows so large that the costs per unit start to increase. For General Motors (GM), reasons for these diseconomies can include increased complexity in management and communication, which can lead to inefficiencies. Additionally, as the company expands, it may face higher labor costs due to union demands and regulatory compliance. Finally, overextended supply chains and logistical challenges can contribute to rising operational costs.
What is meant by a global company?
a company that operates in almost of the world's economies ie. McDonalds
What can a corporation do to lower its cost of capital?
A finance manage of a company usually will choose methods that will raise capital that will cost the company the least and the methods can vary depending on the company. Selling stocks and more product sales are ways to reduce the cost of capital.
Definition of a global company?
Global companies plan activities on a global basis. By operating in more than one country benefits from savings or economies on activities such as R&D, marketing, operations and finance are achieved which may not be available to domestic companies
How do you avoid the Motorola diseconomies of scale?
To avoid Motorola diseconomies of scale, companies should focus on maintaining efficient communication and decision-making processes as they grow, ensuring that organizational complexity doesn't hinder productivity. Additionally, investing in scalable technology and systems can help streamline operations, while fostering a strong company culture can keep employees engaged and aligned with the company's goals. Regularly reviewing processes for inefficiencies and adapting to market changes also helps maintain agility and effectiveness as the business expands.
What does a holding company allow?
A holding company allows a corporation to achieve economies of scale as well as geographic or market diversification
What does optimal scale of operation means?
The optimal scale of operation refers to the size and capacity at which a business or organization achieves the lowest average costs and maximum efficiency in production or service delivery. It is the point where the benefits of economies of scale are fully realized, and any further increases in scale may lead to diseconomies of scale, where costs begin to rise. This concept is crucial for strategic planning and resource allocation, ensuring that a company operates effectively and competitively in its market.
How can economies of scale be achieved through vertical integration?
Economies of scale can be achieved through vertical integration by consolidating different stages of production within a single company, which reduces costs per unit as output increases. By controlling the supply chain—from raw materials to manufacturing and distribution—companies can streamline operations, reduce transaction costs, and improve efficiency. This integration also allows for better coordination and quality control, ultimately leading to increased competitiveness and profitability. Moreover, it can reduce reliance on external suppliers, minimizing risks associated with supply chain disruptions.
What is a large company's ability to take advantage of economies of scale?
The company can offer goods more cheaply than smaller retailers
What are the differences between internal and external economies of scale?
AnswerEconomies of scal occurs when there is an increase in output as cost decreases. This means, as a company will have a better chance to decrease its costs. There are two ways of achieving this, internal and external economies of scale. Internal economies of scale occurs due to the change in size of an individual firm and are not dependant on the industry as a whole. This can be achieved in two ways. 1) Firm level 2) Plant level.External economies of scale occurs due to a growth in the industry as a whole. The individual firms need not grow, however the entire industry around them does.
