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Economies Of Scope And Scale
- 1. ECONOMIES OF SCALE V/S ECONOMIES OF SCOPE PRESENTED BY, GAURAV H. NANJANI PGDBM. BATCH 09-11 RIZVI MANAGEMENT INSTITUTE. BANDRA (w) MUMBAI
- 8. 2 WAYS TO ACHIEVE ECONOMIES OF SCALE. HIGH FIXED COST & CONSTANT MARGINAL COST. LOW OR NO FIXED COST & DECLINING MARGINAL COST.
- 9. Increased Dimensions: e.g. PRINCIPLE OF BULK TRANSEKTION 5m 2m 2m Transport container = Volume of 20m 3 Total Cost: Construction, driver, fuel, maintenance, insurance, road tax = Rs.600 per journey AC = Rs.30/m 3 4m 10m 4m Transport Container 2 = Volume 160m 3 Total Cost = Rs.1800 per journey AC = Rs.11.25/m 3
- 10. LONG run economies of scale LAC ECO. OF SCALE DIS-ECO. OF SCALE OUT PUT INR O’ O Y X
- 18. Economies of scope only applies to certain industries, it can not be applied to all the sectors. Economist also says that economies of scope is exploitation of resources .
- 19. Entrepreneur`s says the economies of scope helps in maximum utilization of resources. Economies of scope helps in profit maximization.
- 21. Long term future of business Expansion Modernization Diversification Related Unrelated
- 24. THANK YOU
Editor's Notes
- The explanation that accompanies this slide is fairly straight forward – The first container has a carrying capacity of 20 cubic metres. The cost of carrying the product involves the actual construction of the container/lorry etc, the cost of the maintenance, driver etc. This is assumed to be £600 per journey and as such gives an average cost of £30 per cubic metre. Doubling the dimensions of the container increases the carrying capacity by 8 times. However, the cost of the construction, maintenance etc is not likely to rise by 8 times. The example shows cost having risen 2 times. As a result the cost per unit is now £11.25 per cubic metre! Again the point about the relative competitive advantage is worth highlighting.