Transaction Management in Database Management System
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Economies of scale | Managerial Economics
1. Why are some industries, such as the automobile and
aircraft industries, and the petrochemical industry,
dominated by a few large companies but others, like the
local retail outlets, operated by a large number of small
firms?
H A V E A T H I N K A B O U T T H E A N S W E R T O T H I S A N D J O T
D O W N S O M E N O T E S
8. 1
They arise “with in” or “inside” a firm
3
They are particular to a firm and
enjoyed by only one firm
5
effectively controlled by the
management of a firm
2
They arise due to improvements in
internal factors
4
arise due to increase in the scale of
production
BUSINESS SECRETS OF THE
FIRM
Internal Economies of Scale
11. DEVELOPED
INFRASTRUCTURE
easy to source raw material and
other supplies+
Reduced transportation cost
GOVERMENT FACTORS |
WELFARE
At times physical factors also
contributes
SKILLED WORKFORCE
Profound availability leads to
quality production at lower cost
AGGLOMERATION
Localisation of the industry
External Economies
of Scale!
12. Multiple retailers and
small grocers
Multiple retailers such as Wal-Mart, Tesco, Sogo and
Carrefour exploit economies of scale as much as they can.
They maximise the benefits of bulk buying as they purchase
huge quantities of materials from suppliers. They become the
major customers even for the largest of manufacturers such a
Heinz. They also get the advantages of the economic
employment of specialist staff, power with the banks, and, as
major employers of staff, influence within the local
authorities. Prices are low to the customer, profits reasonable
to the shareholders. Some stakeholders may suffer, e.g. the
small supplier, particularly of agricultural products may be
forced to offer lower and lower prices to maintain their
supply contracts.