BUS 1100 Lecture 9: Business notes 9
27 Oct 2017
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Cost advantages businesses obtain as they increase their size. Two circumstances when economies of scale might not actually benefit customers. If a company pursues specialization economies of scale, they would need to hire several skilled personnel. This means that more of their income is required to pay for their salaries. If a company pursues technical economies of scale, they will invest in machinery. However, they have to deal with the costs of maintaining the machinery and repairing the machinery. This could lead to them increasing the prices of products. Why economies of scale might be inappropriate, undesirable or inaccessible for certain businesses: organizations that are too large could lead to poorer working relationships. This is because as it expands, more specialized personnel are hired. Reasons why so many small firms continue to survive and thrive: small businesses survive because owners of small businesses have better control of the company and thus the finances.
