Economies of Scale is often linked with survival and sustainability. Yet, in most of the industry categories, there are organizations of all sizes. How is the dichotomy explained? Does it also mean that a start up should have some minimum level of resources? How to calculate such minimum level.
Any pointer/ literature support is highly appreciated.
Regards
The economy of Scale and Diseconomy of Scale are important for businesses are among the lean businesses (cost reduction, efficiency improvement, etc.).
Generally, service and agile business (e.g. software), highly innovative business (mobiles), high margin (premium cars), proportionally significant marketing cost (compared to the operation) companies are not or slightly affected by the economy of scale.
The advantages of economy of scale can be excessed by the local environment. For example, labor in a rural area can be cheaper but the available workforce is lower. Smaller plants can reduce logistic costs. In the case of biofuels, increasing capacity grows the feedstock collection radius, so there is an optimum plant size what depends on the density of the available feedstock in the specific area.
Read the story of KFC restaurants all you need is the idea capital is just a means
- Badges
- Science topic