• 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. 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.

  2. starting a small business

    What salon do you go to? Please state 5. Is the salon local? Yes No 6. Do you live in the following areas? Walthamstow Leyton Leytonstone Other 7. What do you get done the most from the salon? Please state 8. How much does it cost?

  1. BP Financial analysis

    BP had more current liabilities than current assets in 2008, and has not appeared to have behaved prudently throughout the period of study. However, the low oil price at the end of 2008 affects this ratio heavily, and by 2009 they were level with the industry average.

  2. New business plan

    There were 3.885 million arrivals and 3.883 million departures. Overseas visitors accounted for around three-fifths of these movements and New Zealand residents accounted for the other two-fifths. Permanent and long-term (PLT) arrivals include people who arrive in New Zealand intending to stay for a period of 12 months or more

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

    for undertaking the study. 1.0 AN OVERVIEW Common citizens of the country pay a bribe of Rs. 21,068 crores while availing one or more of the eleven public services in a year. As high as 62 percent of citizens think that the corruption is not a hearsay, but they in fact had the firsthand

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

    According to the ABC newspaper articles called ?Difficult Days? and ?10,000 Free Round-Trip Tickets to Japan?. We can see how much tourism business is affecting the hotel industry. Oppositely, when there are any public holidays, all the travel fees including hotel price and all the ticket for airplane, train or

  1. Does raising prices always result in more profit?

    To be simple, here we analyse the IT service business only based on their changes of demand responds to changes of price. Other things equal, we know by the law of demand that a higher price usually results in decreasing their demand.

  2. Questions on Globalisation and International Trade

    individuals to work for the good of society rather than allowing individuals to build personal wealth does not provide a great incentive for people to invent new products, develop better advertising campaigns, find ways to be more efficient, etc. As a result, command economies typically generate less innovation and are less efficient than market economies.

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