Question

Using a real-world company (other than Sysco), explain the causes of economies of scale for your company.

Answer 1

Economies of scale are cost advantages gained by companies when the production is so efficient. The scale of business is a factor in economies of scale. Through this the cost of the firm reduces and company starts to grow and make profit compared to other firms.The economies of scale are both internal and external.

Walmart is an American retail store who has been enhancing their growth rapidly. They have established themselves in most parts of the country. Even though Amazon has put up a challenge for walmart, they have sustained it by utilising the unequal income distribution of income in the country. They provide products at a lower cost than their competitors as they have been practising in minimizing their costs.

Economies of scale helps a company in:

• Reduce long term costst

it helps the company to diminish their cost ,so that the company can contribute it to the customers by lowering the product price.

• Increase the profitability

It generates a higher rate of return over the capital investment. Thus generating profit.

• Expansion of Business

It help the firms to withstand the competition and less vulnerable to threats by competition. The business unit gets opportunity expand its size.

Thanks.