Posted 05 September 2005 - 07:27 PM
I'm having a bit of trouble with working these two things out:
1. What are "economies of scale" exactly?
2. If a shop like Ottokars is in the service/tertiary sector than why is it selling goods (books) ?
Any help appreciated.
Posted 05 September 2005 - 10:55 PM
Welcome to the Higher Business Management subforum, and congratulations on your first post on HSN/f.
I'll deal with your first point to begin with.
Let's say company A sells 50,000 products each year, which are exactly the same specification as each other. Company B sells 10,000 products, and they're all completely different to each other - "one-offs".
In order to make their product, Company B has to buy each individual component separately. Whereas Company A can buy in bulk.
It's this "bulk-buying" that leads to economies of scale.
The basic idea behind it is that Company A can benefit from economies of scale because they're buying in bulk. It's cheaper to buy 50 of the same item at once as opposed to just 1 of them. The seller may provide discounts for buying in bulk, and so on.
Now on to your second question.
It's perfectly fine for bookshops to sell books. What they're doing is providing a service to the consumer, i.e. selling them the product.
If you think about it, businesses in the primary sector extract raw materials. Businesses in the secondary sector manufacture a finished product from the raw materials. The service sector provides the service to the consumer, which in this example is selling the book to the consumer.
If you're unsure about this, I refer you to my Course Notes, on Page 3, in the section that's headed up "Sectors of Activity".
If I can be of any more help please feel free to e-mail me.
Posted 06 September 2005 - 08:32 PM
I think I understand the second answer, however I'm still a little unsure on economies of scale - I have heard the term used to describe advantages a company gains from growing smaller aswell as larger - how can this be?
Posted 07 September 2005 - 10:24 PM
I'd check that if I were you... ask your teacher what he/she's on about!
Posted 07 September 2005 - 10:33 PM
Posted 14 December 2005 - 04:08 PM
Posted 13 February 2006 - 12:11 PM
Businesses benefit from the huge economies of scale of the European single market. This is because they are able to freely operate in not just one country (small scale), but can operate freely throughout the whole of the EU (especially for countries that share the euro, but that's besides the point). By having such huge operations, they can have much more flexibility in where they get their resources/ suppliers and have more power in who they sell to. Stuff like transporting goods becomes cheaper, since instead of sending a couple of lorries or planes, you can send much more at a time, allowing for increased efficiency....
I think that explains it sort of.
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