expanding businesses

• what do larger firms benefit from?

  Economies of scale
• what is economies of scale?

  when the average unit cost of each product falls
• purchasing economies of scale

  happens when a large firm buys its supplies in bulk and so it gets them at a cheaper unit price than a small firm
• technical economics of scale


  occur when a large firm can afford to buy and operate more advanced machinery than smaller firms
• lower average unit costs means..


  larger firms can afford to charge their customers less for products than smaller firms can , leading to increased sales and more profit
• diseconomies of scale

  • growth brings risks:
  • bigger the firm = more expensive to manage properly
  • bigger firms have more people so it can be harder to communicate
  • decisions take time to reach the whole workforce
  • workers at the bottom may feel insignificant- productivity can go down
  • production process may become more complex - difficult to coordinate
• one benefit of expanding to a website

  access to a wider audience
• one disadvantage of setting up a website

  technical issues could occur