GCSE Business StudiesEconomies of Scale. GCSE Business StudiesEconomies of Scale As businesses grow they have higher costs but these costs can be spread.

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Presentation transcript:

GCSE Business StudiesEconomies of Scale

GCSE Business StudiesEconomies of Scale As businesses grow they have higher costs but these costs can be spread over the large number of goods produced. 100 pins may cost 10p each to produce 1 million pins may cost only 1p each to produce

GCSE Business StudiesEconomies of Scale This happens because businesses are able to cut the costs of all the items needed to produce goods. The main Economies of scale are: purchasing marketing technical financial managerial Click one of the above to find out more…

GCSE Business StudiesEconomies of Scale purchasing

GCSE Business StudiesEconomies of Scale £9.60 A box of 24 tins of baked beans might cost a small retailer £ p TOTAL COST NUMBER OF TINS = £ Show hints Show answer HOW MUCH DOES EACH TIN COST?

GCSE Business StudiesEconomies of Scale £48 A pallet of 10 boxes of tins baked beans might cost a medium sized retailer £48 20p 10 BOXES OF 24 TINS = ? TINS TOTAL COST NUMBER OF TINS = £ Show hints Show answers HOW MUCH DOES EACH TIN COST? 240

GCSE Business StudiesEconomies of Scale £360 A lorry load of 10 pallets of boxes of tins baked beans might cost a large retailer £360 15p TOTAL COST NUMBER OF TINS = £ PALLETS OF 10 BOXES OF 24 TINS HOW MUCH DOES EACH TIN COST? Show hints Show answers 2400 HOW MANY TINS?

GCSE Business StudiesEconomies of Scale Review: SMALLMEDIUMLARGE NO OF TINS TOTAL COST£9.60£48£320 COST PER TIN40p 20p15p Fill table

GCSE Business StudiesEconomies of Scale marketing

GCSE Business StudiesEconomies of Scale £ flyers will cost about £30 to print and post 3p TOTAL COST NUMBER OF FLYERS = £ HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER? Show hints Show answer

GCSE Business StudiesEconomies of Scale £ million people A newspaper advertisement may cost about £40000 and may be read by 2 million people 2p = £ TOTAL COST NUMBER OF READERS HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER? Show hints Show answer

GCSE Business StudiesEconomies of Scale £50000 A television advertisement may cost about £50000 to be screened and may be seen by 5 million people 5 million people. 1p TOTAL COST NUMBER OF READERS = £ HOW MUCH DOES IT COST TO REACH EACH POSSIBLE CUSTOMER? Show hints Show answer

GCSE Business StudiesEconomies of Scale B IG firms can afford to advertise on TV to reach a large number of customers. The cost can be spread amongst all the customers. SMALL SMALL firms cannot! Review:

GCSE Business StudiesEconomies of Scale technical

GCSE Business StudiesEconomies of Scale BIG firms can afford to buy expensive machinery and to build large factories to produce many goods. The cost can be spread amongst all the customers. SMALL SMALL firms cannot!

GCSE Business StudiesEconomies of Scale SMALLMEDIUMLARGE COST£50,000£80000£ OUTPUT COST PER GOOD25p20p15p = COST OF MACHINE OUTPUT Show hint Show answer Review:

GCSE Business StudiesEconomies of Scale financial

GCSE Business StudiesEconomies of Scale Large firms able to negotiate cheaper finance deals… SMALL BUSINESS INTEREST LARGE BUSINESS INTEREST

GCSE Business StudiesEconomies of Scale ManagerialManagerial –Use of specialists – accountants, marketing, lawyers, production, human resources etc. This means a high wages and salaries cost which can be spread over the large number of goods produced so the cost added to each of these is small.