economies of scale

Examples of economies of scale in the following topics:

• Production Orientation

  • Industrial firms focused on production orientation models that exploited economies of scale to reach maximum efficiency at the lowest cost.
  • Economies of scale posits that by driving efficiency, companies (particularly production-oriented organizations) will realize significant cost advantages as they expand operations.
  • For example, companies that focus on increasing economies of scale will see reductions in unit cost as the size of facilities and the usage levels of other inputs increase.
  • Some common sources of economies of scale include:
  • Technological - taking advantage of returns to scale in the production function

• Growth

  • During the growth stage, the public becomes more aware of the product; as sales and revenues start to increase, profits begin to accrue.
  • Because of this, the manufacturing company can look at ways to introduce new features, alterations, or other types of innovation to the product according to feedback from consumers and from the market in general.
  • Costs reduced due to economies of scale: as production and distribution are ramped up, economies of scale kick in and reduce the per unit costs.
  • Public awareness increases: through increased promotion, visibility and word of mouth, public awareness grows.
  • Identify the conditions that exist when a product is in stage 2, growth of the Product Life Cycle

• Trade and Globalization

  • Countries engage in international trade to focus on producing goods most efficiently and to achieve economies of scale in production.
  • Second, countries trade to achieve economies of scale in production.
  • If each country produces only a limited range of goods, it can produce each of these goods at a larger scale and hence more efficiently than if it tried to produce everything.
  • In real terms, the economy doubled in size between 1978 and 1986.
  • By 2008, the economy was 16.7 times the size it was in 1978, and 12.1 times its previous per capita levels.

• Changes in Promotion

  • For global advertisers, there are four potentially competing business objectives that must be balanced when developing worldwide advertising: building a brand while speaking with one voice, developing economies of scale in the creative process, maximizing local effectiveness of advertisements, and increasing the company's speed of implementation.
  • In India, the Hindu religion forbids the consumption of beef.
  • Business norms - The norms of conducting business also vary from one country to the next.
  • The ability to identify the elements or moments of an advertisement that contribute to the success of a product launch or expansion is how economies of scale are maximized in marketing communications.
  • Market research measures such as flow of attention, flow of emotion, and branding moments provide insight into what is working in an advertisement in one or many countries.

• Reminding and Retaining Customers

  • The promotional activities of an organization continue long after customer acquisition.
  • Retention strategies that incorporate personalization features may include one or more of the following:
  • This transition allows companies to develop economies of scope rather than economies of scale.
  • To retain their customer base and satisfy customer requirements above those of competitors, brands must engage in the following process:
  • It also counteracts the theory that new customers must be gained at the expense of losing older customers.

• Marketing Orientation

  • Kohli in the "Journal of Marketing", marketing orientation is the, "The organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments and organization wide responsiveness to it. "
  • From the beginning of the Industrial Revolution until the 1950s, companies focused on maximizing economies of scale and minimizing production costs.
  • Since high quality products were scarce during this period, brands could make products on a massive scale that were functional and durable, but ignore marketing elements such as add-on features and design.
  • This was largely due to the growing numbers of affluent and middle class people that the rise of capitalism had created.
  • Similar to a production-oriented company, one of the primary goals of marketing-oriented or customer-oriented businesses is long-term profitability.

• Business Analysis

  • While the major source of revenue would be product sales, another possible significant source of revenue is the licensing of the technology generated as a byproduct of the given product.
  • Clearly this is not applicable to all products, but for certain classes of products, this can be a very significant source of income .
  • Operating costs that account for possible economies of scale and learning curves
  • This allows the observer to gauge the strength of different aspects of the company's operations.
  • Demonstrate knowledge of the components included in the business analysis stage of product development

• The Global Economy

  • Now that the world has entered the twenty-first century, we are seeing the emergence of an interdependent global economy.
  • As a result of this rapid shift towards an integrated, global economy, brands must adjust all aspects of the marketing mix to fit local tastes and needs, while maintaining a consistent product and brand image.
  • Oxford University Press defines global marketing as "marketing on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives. " The global economy certainly provides advantages to companies wanting to increase revenues and expand their brand.
  • The global economy provides many advantages for companies that are able to introduce their products on a global scale, while customizing their marketing strategies for different languages, cultures, and socio-economic demographics.
  • Some of the challenges to marketing in a global economy are:

• Are Global Corporations Beneficial?

  • MNC operations often attain economies of scale, through mass producing in external markets at substantially cheaper costs, or economies of scope, through horizontal expansion into new geographic markets.
  • As gross domestic product (GDP) growth migrates from mature economies, such as the US and EU member states, to developing economies, such as China and India, it becomes highly relevant to capture growth in higher growth markets. is a particularly strong visual representation of the advantages a global corporation stands to capture, where the darker green areas reppresent where the highest GDP growth potential resides.
  • Combining these four challenges for global corporations with the inherent opportunities presented by a global economy, companies are encouraged to chase the opportunities while carefully controlling the risks to capture the optimal amount of value.
  • Along with arguments supporting the benefits of a more globally-connected economy, there are criticisms that question the profits that are captured.
  • Opponents argue that the expansion of global trade creates unfair exchanges between larger and smaller economies, arguing that developed economies capture significantly more value because of financial leverage.

• The Service Economy

  • This is primarily due to the increasing importance and share of the service sector in the economies of most developed and developing countries.
  • At one end of the scale are huge international corporations operating in such industries as airlines, banking, insurance, telecommunications, and hotels.
  • At the other end of the scale are a vast array of locally owned and operated small businesses, such as restaurants, laundries, optometrists, beauty parlors, and numerous business-to-business services.
  • As their economies continue to develop, the importance of the service sector continues to grow.
  • Define the role of a service economy in developed and developing countries