University:
College
Course:
College Business
Academic year:

2023
Views:

17

Pages:

2
Author:

anon

Economies of Scale When large companies produce larger outputs at lower unit costs, this is known as an economy of scale. Internal economies of scale-that result from the growth of a business External economies of scale- that result from the growth of the industry of which the business is part of. Changes are common to take advantage of economies of scale, tend to be from small scale to large. Economies of scale in retailing- increase all inputs, outputs increase aswell by a larger margin. Economies of scale in manufacturing- cost per unit lowered=efficient Leads to multinationals dominating smaller firms. Marketing economies: Cost of advertising and distribution rises at a lower rate than output and sales. In proportion to sales, large firms advertise cheaper than small firms Financial economies: Easier to raise finance, favored by banks and other lending institution and are allowed to negotiate loans with preferential interest. Share issuing available. Managorial economies: Specialist functional managers=better decisions=lower unit costs Technical economies: Flow production, efficient Purchasing economy: Bulk buy Based on idea that any use of resources that does not create value for the consumer is waste. A lean company will make best use of resources by cutting out waste. Waste: Overproduction: producing goods before customers demand them. This leads to high storage costs and possible damage to items waiting to be sold Waiting: whenever goods are not moving or being processed, the waste of waiting occurs Transporting: Transporting goods is a waste that adds no value to a product. Too much can also cause damage. Motion: Employees involved in unnecessary bending, stretching and other body movements wastes time. Health safety risk. Over-processing: Using complex equipment to carry out simple tasks can be wasteful Defects: Products that are poorly made have to be rejected and time is wasted on inspecting for faults. Acting lean: 1)Keep work areas tidy and organized so time isn’t wasted on finding/moving them around 2)Goods produced and delivered just in time to be sold so stock costs are lowered. 3)Kaizen-Continuous improvement, everyone in the company is given responsibility for identifying and suggesting ways of improving production.