John (2009) define economies of scale as the cost benefits derived by a company as a result of expansion. The cost benefits are mainly achieved in that as a company expands it begins to produce its goods and services in large quantities thereby resulting in…
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scale, on the other hand, is realized when a firm expands its scope of operation outside a firm, such as improving its transport network thereby resulting in decreased cost for a firm working within the industry (Harrison and St. John, 2009).
There are several ways through which a firm can benefit from the economies of scale. Firstly, a company can benefits from the economies of scale through reduced input costs. This is achieved because when a firm purchases its inputs in large quantities, this enables it to take advantage of discounts offered as a result of bulk purchases (Harrison and St. John, 2009).
Secondly, a firm will benefit from large economies of scale since it results in reduced average production and selling cost. For instance, certain costs such as advertising, research and development, skilled labor and expertise are generally expensive for small firms. However, economies of scale enhance the efficiency of these inputs thereby resulting in reduced cost of selling and production (Harrison and St. John, 2009).
Thirdly, a firm is likely to benefit from the economies of scale in that as the production capacity of a firm increases, it will be able to acquire specialized machineries and labor resulting in improved efficiency. This is because employees would be better qualified on their jobs, thereby spending less time on their work, with greater accuracy resulting in reduced wastages (Harrison and St. John, 2009).
As much as a company can benefit from being part of a large corporation, there are also disadvantages associated with being part of a large corporation. Firstly, large corporations are subjected to many legal and tax work, which might be disadvantageous to subsidiaries (Pride, Hughes, and Kapoor, 2012). For instance, large corporation as subjected to double taxation whereby all profits are taxed once. Secondly, there is a lot of limitation as regards management and strategic decision-makings, which are mainly made by a large company (Pride,
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Economists usually consider the implicit costs and explicit costs of operating, often called as opportunity cost, while accounting cost do not count the explicit costs of the owner. Ralph Bryns, 2011 argues that a business becomes profitable in the overall perspective when a firm’s revenue exceeds the explicit and implicit costs.
The profits of a firm in essence are the total revenue net of total costs. Both these variables, total revenues and total costs depend upon the level of output produced. Additionally, the price charged per unit of the product influences the total revenue.
Firstly, the manager should consider the costs of additional capital as compared to cost of employing new workers. Moreover, he should also consider whether adding new workers will help increase the output or it will result in falling output. In the short run, the capital is fixed and as more workers are added to the fixed capital, initially with each additional worker the marginal revenue product of the labor will increase as the restaurant will experience increasing returns to scale.
The magnitude of economic cost is dependent on the value of the foregone benefits of the best alternative and the cost of the alternative selected. The main difference between accounting cost and economic cost is that the later factors in the concept of opportunity cost (Boyes & Melvin, 2011).
Second, the supply chain management covers the whole process of product development and delivery to the end user - starting with the introduction of the raw materials to the point when consumers buy the finished product. In addition, the statistics shows that the companies that have implemented the supply chain management have a greater cost effective advantage over the competitors because they are able to accomplish short-term and long-term goals, gain greater market share and increase the customers' satisfaction.
Basically, failure of a company to satisfy the market demand as scheduled means that the company will lose a lot of business opportunity caused by production inefficiency or internal miscommunication. For this study, the student will
nging drastically due to increase in production costs among other factors such as rise in competition of talent, risk of intellectual property and diminishing incentives from the governments.
There are costs which are related production costs which have led to increase in
The overview of the idea, the profit and profitability, milestones and then the possible effects of demand and supply forces form the discussion.
The business will operate in the fashion sector with a variety of products. The products include