• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Small vs Large Organizations. Economies of scale might not always benefit the customers.

Extracts from this document...

Introduction

Question 1.7.1 Small versus large a) Economies of scale might not always benefit the customers. One way in which "economies of scale" is a disadvantage to customers would be economies of scale leading to less "personalized services". Less personalized services is a result of "economies of scale" because the large firms that usually take advantage of economies usually have a large customer base. This large customer base would prevent the firm from completely knowing the needs of individual customers. On the other hand, a smaller firm would have fewer customers and they would get to know their customers a lot better. Another disadvantage that "economies of scale" have on customers would be it leading to "barriers to entry". Barriers to entry are a disadvantage because it leads to less firms joining a market and therefore lead to less "competition" in a market. Less "competition" in a market would usually mean higher prices for customers. ...read more.

Middle

Small businesses continue to thrive and survive without "economies of scale" for multiple reasons. To begin with, small businesses may sometime be businesses in a small niche market. A small niche market would usually be overlooked by larger firms that are after larger markets. This would prevent the "competition" for the business in general and allow it to have local monopoly power. By having local monopoly power, the business would be able to control the prices completely and would not need "economies of scale" to help it earn more profit. Second of all, small businesses can also receive government aids/subsidies. These just like economies of scale would help drive down the average production cost but without the costs involved with expanding a business to take advantage of economies of scale. Lastly, small businesses can thrive and survive without "economies of scale" because they have better "cost control" and less "financial risk". These are advantages because larger firms that take advantage of "economies of scale" usually have less "cost control" and can encounter diseconomies of scale which could put them in financial risk. ...read more.

Conclusion

A monopoly over a market is against the best interest of the public since it allows firms with a monopoly to fully control the prices in a market. This is bad because this would allow a firm to make as much of a profit as it wants without much opposition. On top of that, a large business may also use "economies of scale" to operate against the interest of the public. It can use "economies of scale" to operate against the interest of the public by using it to create "barriers to entry" and prevent competition. which again leads to higher prices for the public. Lastly, large businesses can also operate against the public by it caring more about the profits and the "efficiency" of production than the quality. This is against the best interest of the public because this could mean products that are of a lower quality. All in all, large businesses pose both an advantage and a disadvantage to the general public. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Business Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Business Studies essays

  1. Advance Professional Development

    How CPD contributes in Skill Development The CPD helps in skills development in various ways, it provides an individual an overview of your professional development to date and reminds you of your achievements and how far you've progressed, it helps in directing your career and helps you keep your eye

  2. Case Study Timmings plc, a small engineering firm.

    (c) Why do you think Timmings plc switched to capital intensive production? Capital intensive production has several advantages and disadvantages, it generally gets more cost effective if larger quantities are produced, but it has huge set up costs.

  1. Free essay

    Media Planning for BMW ActiveHybrid 7. The BMW ActiveHybrid 7 was introduced in 2010. ...

    Actually, the goal made by Mr. Hauber was achieved two month earlier than his schedule. > Competitive Product-Mercedes-Benz S400 Hybrid The S400 Hybrid is a luxury sedan produced by Mercedes-Benz Company. It is a hybrid power car. The two major characteristics of this model are dynamic capability and green capability.

  2. BP Financial analysis

    In the short term, BP is a secure. It is currently selling assets to finance payouts for the oil spill, but continues to invest in new projects in the North Sea, Azerbaijan and the South China Sea. It has consistently had reserve replacement volumes above 100%, showing that it is

  1. Corruption in India. This study focuses only on the corruption experienced by the ...

    Computerization and issue of tickets for rail journeys and competition in the Telecom Sector have ensured that the common citizen does not have to offer bribes for rail tickets and telephone connections. (This not to suggest that there is no corruption in the procurement processes of either the Railway or Telecommunication Department).

  2. Does raising prices always result in more profit?

    In reality, most companies have to decide both how much to charge for their service and the quantities that they can provided. They can choose highest price, average price or lowest price and it mainly depends on the relationship between the price and the demanded.

  1. Questions on Globalisation and International Trade

    In the end, many students may agree that allowing the child to continue to work in the factory is the lesser of the two evils. 3. Drawing upon John Rawls? concept, the veil of ignorance, develop an ethical code that will (a)

  2. How does an international chain hotel and individual hotel operate differently ?

    amusement park are all increase because they know that a lot of people will be traveling on holidays. I think the way they do is quite unethical the price is increase when it is holiday and reduce when it is not.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work