Sustainable Need for Economies of Scale

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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

  1. WTO and falling trade barriers
  2. Decreasing transport costs
  3. Investment incentives attracting investors to low-cost-labour countries
  4. Advanced communication technologies - easier management of a transnational corporation
  5. Growing demand for products
  6. Competition pressuring lower prices


Inhibitors

  1. Cultural differences/conflicts
  2. Anti-globalization forces


Paradigms

Experts

WTO

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

Web Resources

Definition of Economies of scale