Thursday, 26 September 2013

Internal Economies of Scale

Internal Economies of Scale

  • Purchasing – big firms that buy large amount of resources can get cheaper rates (bulk buying)
  • Marketing – these include advertising costs. Larger companies can use 1 advert to advertise over 1000 stores whereas another company can only advertise 1 store
  • Technical – larger plants are more efficient than smaller ones. There can be more specialisation and more investment in machinery
  • Financial – large firms can take loans from the banks at a lower interest rate as there is less risk for the money not coming back
  • Managerial – as firms expand they can afford specialist managers, increasing efficiency
  • Riskbearing – larger firms are more likely to have a wider product range and fall into a wide variety of markets. They can also afford to invest in research