Difference between revisions of "Sustainable Need for Economies of Scale"
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==Description | '''Breadcrumbs:''' ''[[The Future of Ubiquitous computing in 2025]] --> Economical Driving Forces: Economies of scale'' | ||
==Description== | |||
Economies of scale characterizes a production process in which an increase in the number of units purchased causes a decrease in the average cost of each unit. | |||
The Industrial Revolution created pressure for much larger plants that could capture the benefits of the economies of scale offered by the new technologies it had spawned. Cheap and abundant energy combined with good transporation networks and new production technologies to restructure capital-incentive industries. For the first time, companies combined intermediate processes into single plants and developed large-batch or continuous/process technologies to achieve low-cost volume production. (<i>Source: Transnational Management by Bartlett, Ghoshal, Birkinshaw</i>) | |||
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Economies of scale is a term that is used to describe the reduction in cost-per-unit as more units are produced. Nowadays, more and more companies try to utilize the advantages of other countries in the whole world to enlarge their business scale and as a result reduce the cost of their products and services. This trend accelerates the steps of "Global Village" because economics of scale requires the company to extend its sight into all over the world. The entire world but not only one single country is its factory that it could get resources and materials in one country, produce the products in another country and finally deliver the products to any other country. | Economies of scale is a term that is used to describe the reduction in cost-per-unit as more units are produced. Nowadays, more and more companies try to utilize the advantages of other countries in the whole world to enlarge their business scale and as a result reduce the cost of their products and services. This trend accelerates the steps of "Global Village" because economics of scale requires the company to extend its sight into all over the world. The entire world but not only one single country is its factory that it could get resources and materials in one country, produce the products in another country and finally deliver the products to any other country. | ||
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==Enablers | More information: | ||
[http://en.wikipedia.org/wiki/Economies_of_scale Economies of scale in Wikipedia] | |||
==Enablers== | |||
<ol> | <ol> | ||
<li>WTO</li> | <li>[http://www.wto.org WTO] and falling trade barriers</li> | ||
<li>Decreasing transport costs</li> | <li>Decreasing transport costs</li> | ||
<li>Investment incentives attracting investors to low-cost-labour countries</li> | <li>Investment incentives attracting investors to low-cost-labour countries</li> | ||
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== | ==Inhibitors== | ||
<ol> | <ol> | ||
<li>Cultural differences/conflicts</li> | <li>Cultural differences/conflicts</li> | ||
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</ol> | </ol> | ||
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- Culture differences make against communication. | - Culture differences make against communication. | ||
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- Economies of scope as an opposite term. Co-operations among different companies could also help lower the cost. | - Economies of scope as an opposite term. Co-operations among different companies could also help lower the cost. | ||
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==Paradigms | ==Paradigms== | ||
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In such a business world full of intensive competition, every enterprise plans for achieving sustainable competitive advantage over, or reducing the edge of, its adversaries. In order to gain such advantage, a firm must provide comparable value to the customer but perform activities more efficiently than its rivals what means it must have cost leadership or at least its cost should be lower than most rivals. Utilizing economies of scale is an efficient way to achieve this goal thus finally gain stronger competition ability. | In such a business world full of intensive competition, every enterprise plans for achieving sustainable competitive advantage over, or reducing the edge of, its adversaries. In order to gain such advantage, a firm must provide comparable value to the customer but perform activities more efficiently than its rivals what means it must have cost leadership or at least its cost should be lower than most rivals. Utilizing economies of scale is an efficient way to achieve this goal thus finally gain stronger competition ability. | ||
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==Experts | ==Experts== | ||
[http://www. | [http://www.wto.org WTO] | ||
==Timing | ==Timing== | ||
19th century: Industrial revolution in Europe<br /> | |||
1914: Fordism - Henry Ford's combination of highly efficient factories, highly paid workers, and low prices revolutionized manufacturing | |||
==Web Resources | ==Web Resources== | ||
[http:// | [http://en.wikipedia.org/wiki/Economies_of_scale Definition of Economies of scale]<br> | ||
Latest revision as of 09:09, 6 March 2007
Breadcrumbs: The Future of Ubiquitous computing in 2025 --> Economical Driving Forces: Economies of scale
Description
Economies of scale characterizes a production process in which an increase in the number of units purchased causes a decrease in the average cost of each unit.
The Industrial Revolution created pressure for much larger plants that could capture the benefits of the economies of scale offered by the new technologies it had spawned. Cheap and abundant energy combined with good transporation networks and new production technologies to restructure capital-incentive industries. For the first time, companies combined intermediate processes into single plants and developed large-batch or continuous/process technologies to achieve low-cost volume production. (Source: Transnational Management by Bartlett, Ghoshal, Birkinshaw)
More information: Economies of scale in Wikipedia
Enablers
- WTO and falling trade barriers
- Decreasing transport costs
- Investment incentives attracting investors to low-cost-labour countries
- Advanced communication technologies - easier management of a transnational corporation
- Growing demand for products
- Competition pressuring lower prices
Inhibitors
- Cultural differences/conflicts
- Anti-globalization forces
Paradigms
Experts
Timing
19th century: Industrial revolution in Europe
1914: Fordism - Henry Ford's combination of highly efficient factories, highly paid workers, and low prices revolutionized manufacturing