Production in relation to economies and diseconomies of scale Presentation By: Aditi Pathak

1. INTRODUCTION
• Parle Products has been India's largest
manufacturer of biscuits and confectionery for
almost 80 years. Makers of the world's largest selling
biscuit, Parle-G

2. INTRODUCTION
• With a 38% share of the
total biscuit market and
a 15% share of the total
confectionary market
in India, Parle has
grown to become a
multi-million dollar
company. While to the
consumers it's a
beacon of faith and
trust, competitors look
upon Parle as an
example of marketing
brilliance.

3. INTRODUCTION
• Today, the great
strength of Parle
Products is the
extremely widespread
distribution network.
Even at the remotest
places, you can buy
Parle biscuits and
sweets from the local
grocer. Currently, Parle
Products has over
33, 00,000 distribution
outlets.

4. HISTORY:
Parle Products company was founded in 1929 in British India. It
was owned by the Chauhan family of Vile Parle.
Parle began manufacturing biscuits in 1939. In 1947, when India
became independent, the company launched an ad
campaign, showcasing its Gluco biscuits as an Indian alternative
to the British biscuits.

5. HISTORY:
The original Parle company was split into three separate
companies, owned by the different factions of the original
Chauhan family:
• Parle Products, led by Vijay, Sharad and Raj Chauhan (owner
of the brands Parle-G, Melody, Mango Bite, Poppins, Kismi
toffee bar, Monaco and KrackJack)
• Parle Agro, led by Prakash Chauhan and his daughters
Schauna, Alisha and Nadia (owner of the brands such as
Frooti and Appy)
• Parle Bisleri, led by Ramesh Chauhan

6. PRODUCTS
• Biscuits: ParleG, Monaco, Hide n
Seek, Hide n Seek
Bourbon, Parle
Marie, Nimkin, Golden
Arcs, Top, Hide n Seek
Fab, KrackJack, Kreams, Mil
ano, Milk Shakti, 2020, Happy
Happy, Coconut, Jimin, Gold Star, Acti-Fit
crackers.

7. PRODUCTS
• Sweets: Orange
Bite, Kismi, Melody, Mango
Bite, Kaccha Mango
Bite, Mazelo, Poppins, Lond
onderry, Chox, 2 in 1
eclairs, Fruit Drops.
• Snacks: Parle’s
Wafer, Fulltoss, Namkeen, C
heeslings, Munchies.
• They also have a gifting
range called “Occasions.

8. QUALITY FIRST APPROACH
Hygiene is the precursor to every
process at Parle. From husking
the wheat and melting the sugar
to delivering the final products
to supermarkets and store
shelves nationwide, care is taken
at every step to ensure the best
product of long-lasting freshness.
Every batch of
biscuits, confectioneries &
snacks are thoroughly checked
by expert staff, using the most
modern equipment. This ensures
consistent and perfect quality
across the nation and abroad.

9. AWARDS
Right since the company's inception, Parle has always strived to
give their consumers the best value and keep them satisfied
through the quality of their products. They have always worked
hard to deliver best results and produce the best quality of
products. Parle Products have been ranked 7th amongst the top
ten most trusted brands by Economic Times.

10. THE AWARD WON BY PARLE PRODUCTS

11. WHAT IS PRODUCTION?
Production is a process of combining various material inputs and
immaterial inputs (plans, know-how) in order to make something
for consumption (the output). It is the act of creating output, a
good or service which has value and contributes to the utility of
individuals.

12. PRODUCTION IN PARLE FACTORY

13. WHAT ARE ECONOMIES OF SCALE?
• Economies of scale are the cost advantages that a
business can exploit by expanding their scale of
production in the long run.
• The effect is to reduce the long run average (unit)
costs of production over a range of output. These
lower costs are an improvement in productive
efficiency and can feed through to consumers in
the form of lower market prices.

14. WHAT ARE ECONOMIES OF SCALE?
• They can also give a business a competitive
advantage in the market as they lead to lower
prices and higher profits, also consumers and
producers could both benefit from it.

15. ECONOMIES OF SCALE IN THE CASE OF
PARLE PRODUCTS
• There are two types of costs incurred by a
business, they are classified as Fixed Costs and
Variable costs. Fixed costs are those costs which
remain the same no matter what the level of
production is, whereas Variable costs are those
costs which change with the level of output. As
Parle Products is a company which produces its
products in bulk, the fixed cost they incur, if per unit
fixed cost is taken into consideration, is greatly
minimized.

16. ECONOMIES OF SCALE IN THE CASE OF
PARLE PRODUCTS
• The advantages of purchasing economies can be
claimed by Parle Products as they are capable of
buying the raw materials required for the large
scale production in bulk thereby saving
considerably on the cost of raw material and
transportation costs.

17. CONCLUSION
The aforementioned factors helps in minimizing the
overall cost, thus, the market price of Parle products is
comparatively lower than those of its competitors. For
example, Parle-G biscuits have a market price which
is as meagre as Rs.2.

18. WHAT IS DISECONOMIES OF SCALE?
• Economic theory predicts that a firm may become
less efficient if it becomes too large. The additional
costs of becoming too large are called
diseconomies of scale. Diseconomies of scale result
in rising long run average costs which are
experienced when a firm expands beyond its
optimum scale.

19. DISECONOMIES OF SCALE IN THE CASE
OF PARLE PRODUCTS
• Parle Products has diverse product range, that is, it
doesn’t produce just one product but many.
• Now, as there are diverse products in its range, the
economies of scale can be achieved only on a
product-wise basis and not on an overall basis. For
example, the raw materials required for a sweet
produced wouldn’t be the same as the ones
required for producing biscuits.

20. DISECONOMIES OF SCALE IN THE CASE
OF PARLE PRODUCTS
• Principal-agent problem: This problem is caused
because the size and complexity of Parle Products
means that their owners often have to delegate
decision making to appointed managers, which can
lead to inefficiencies. For example, the owners will have
to employ managers for each distribution and sales
network and delegate some of the jobs to managers but
the managers may not necessarily make decisions in the
best interest of the owners. For example, a distribution or
sales manager may employ the most attractive sales
assistant rather than the most productive one.

21. CONCLUSION
• Parle Products have economies as well as
diseconomies of scale due to its present scale of
operation. But it hasn’t yet reached that level of
expansion that would lead to more
diseconomies, i.e. the benefits of economies of
scale that Parle Products reaps currently is more
than the few diseconomies it might be
encountering.