Economies of scale

Which company can make cars more cheaply? Why? Toyota Billington’s custom cars

Economies of scale As a company gets bigger, it can make things more cheaply. Definition = As a company increases its scale of production average costs fall.

Average costs If the total cost of making 100 cars is $1,000,000, the average cost is $10,000 per car. If the total cost of making 1,000 cars is $2,000,000, the average cost is ????

Take a minute You manage a supermarket. As a result of growth, you have achieved economies of scale. How will this effect the prices you charge, number of customers, and profits?

Internal Economies of scale Technical Managerial Financial

Internal Economies of scale Purchasing Marketing Risk-bearing

External Economies of Scale Labour force Support services and suppliers Co-operation

Diseconomies of Scale Definition = Increasing average costs as a result of an increase in the scale of operation Co-ordination Motivation Communication

In pairs Explain the Economies and Diseconomies of scale Starbucks may achieve. Jogjakarta is a centre for Batik. What external economies of scale might there be for Batik businesses in Jogjakarta

Reasons for small business surviving Diseconomies of scale Size of the market Flexibility Personal Service

Case study Pg593 a-d