• 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

    following is the result of skill audit for each team member 1) Chaudry Asif Hussain Asif Hussain is a good team player because he has the ability to work with team, interact with others well and cooperate with other team members.

  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. Free essay

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

    The wealth distance between the rich and the poor is getting bigger in China. 6. Inflation in China is stalling the development of the automobile industry. * Social factors: 1. In China, the conservative culture recently became one of the most influential factors that disturb the development of R&D and designing in the Chinese automobile industry.

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

    The service providers will then get used to doing their duties honestly without extracting any consideration. This is what TII hopes to promote in the coming months using the findings of this study. This study is based on a rigorous and comprehensive methodology developed by CMS through various experiments and

  2. Questions on Globalisation and International Trade

    competition that typically promote efficiency and productivity in a free market system. The system even limited the actions of private companies, requiring them to get government approval for routine business activities. Production quotas and high import tariffs also stunted the development of a healthy private sector, as did restrictive labor laws that made it difficult to fire employees.

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

    are working is to earn money to alive or to improve their life quality. As the economy growths, a lot of people start to do their own business because it has a positive impact for businesses to be profitable. This will increase the number of business trip which also increase the number of hotel industry.

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