Discussion on the Boundaries of the Firm - Case Study Example

Horizontal boundaries keep on changing with the passage of time because they bring with them a lot of incentives for not only the companies under consideration but also the industry as a whole. (Brusoni, 2001) The related terms of economies of scale and economies of scope come into the loop since these bring with them measures of growth and productivity over a certain period of time as well as offer to the organizations under study the much needed uplift in terms of its economic upheaval and stability - a fact signified time and again by the numerous processes and tasks that are employed to carry out the very same.

Economic prosperity is one aspect that holds a lot of significance for this phenomenon since it is the lynchpin behind the undertaking of the economies of scale and economies of scope. What we need to understand here is the fact that these related terms are incorporated into the whole mix so that productivity and growth measures could be envisaged on a consistent basis and there is a forecasting regime in charge of the pattern that is actually bringing about the whole change, for the better without a shadow of a doubt.

Economies of scale discusses the aspect of production phase which marks with the increase in scale of the firm and on the flip side causes a downfall in the average cost per unit in the longer duration. (Elbaz, 1994) Thus the scale of operation is basically the key when it comes to find out whether the economies of scale could be feasible for it or not. The economies of scale include some types under it: the purchasing, managerial, financial and marketing aspects. What these types of factors as they are generally known as, does is to reduce the average costs in the long term when the talk goes out loud of production.

The aspects related with natural monopoly are generally characterized under the regimes of economies of scale but this holds true for reasonably medium range firms. As one knows, natural monopoly has no competition whatsoever and thus it is deemed as a success by all counts under such a scenario. When one speaks of the need of having economies of scale, there is a quintessential need to understand that there are a couple of ways through which the same could be achieved. One is through having the high fixed cost and constant marginal cost while the other is through low or no fixed cost as well as declining marginal cost all this while.

One must take note of the fact that economies of scale are all about efficiencies which are linked with the supply side alterations. This is in line with the increase or decrease of the scale of production as concerns to a single product type or unit. The horizontal boundaries are also manifested by the proper incorporation of economies of scope within the related contexts. These are in essence pretty much similar to the economies of scale but little changes and modifications. Economies of scope are comprised with the efficiencies that are associated with the demand side changes which essentially highlight the increase or decrease in the scope of marketing as well as distribution concerning different kinds of products or units.

What we must comprehend from