The Importance of Size in Organization
Added on 2019-09-23
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Running Head: ECONOMICS 1EconomicsName of the Student:Name of the University:Course Number:
ECONOMICS2Normal shape of an organization long average cost curve The shape of an organization with regards to the long average cost curve is generally u-shaped. On the contrary, it can be said that the long run average cost curve is typically u-shaped because of the diseconomies and economies of scale. It has been also witnessed that when an organization moves towards the future the long average cost curve is made up of a sequence of short-run cost curves. The exact reason behind the u-shaped of the long average cost curve because the output tends to increase so the cost per unit declines after that it reaches a minimum point then it starts to go up that makes u shape (David Myers CEcD, 2015). It has been also observed that the cost curve tends to fall due to the economies of scale. If an organization has expanded then the economies of scale results into the diseconomies of scale and the cost curve starts climbing up. On the other hand, although the shape of the long run average cost curve tends to be u shaped still it is flatter, unlike the short-run cost curve. Furthermore, it can be also concluded that the long-run average cost curves are u-shaped because of the law of variable proportions. It is the law that suggests the quantity some of the factors are fixed and the quantity of other variable factors are changed. The total output tends to develop and then it falls more than corresponding. When an organization also expands it experiences both external and internal economies of scale. Main advantages of the small organizations The key advantages of the small organizations over the large organizations are as follows.It is known that the small organizations tend to be quite innovative and try the things which are new as they are not at all restricted by the past accomplishments and experiences. Firstly, one of the main advantages of the small organization is that they are quite close to their consumers and
ECONOMICS3it is one of the critical factors for being immensely successful in the marketplace. A business which is small can meet with their consumer on a day-to-day basis and develop a friendly and personal relationship than a big company. Secondly, the structure of the small companies also tends to be quite lean. There is also few coating of management along with less number of employees (Dornhaus, Powell and Bengston, 2012). With a limited number of employees helps the small companies to be more flexible, they can also make a decision quickly and then can alsoadapt rapidly when compared with the big companies. On the other hand, the lean structure of the small companies helps to maintain a personal and friendly between the customers as well as in between the employees. Lastly, in the small companies, everyone feels that they are part of a family. The workers in the small companies are treated like the members of a family. When the workers feel that they are a part of the family then a sense of belongingness comes which gives them an immense amount of energy during the rough times. The factors for the demise of large organization between 1974 and 1998 The large companies collapsed in the period between 1974 and 1998 because of the several factors. One of the main reasons for the downfall of the big companies' in the marketplace is due to the rise of the entrepreneurship at an alarming rate and also for the deregulation. There were a large number of companies who were using the same product for almost a decade whereas there were some of the start-ups that introduced innovation in their product line and ate the market of the big corporations (Amit and Zott, 2012). It has been witnessed during the 1990s the introduction of the internet and the appearance of the personal computers by a large number of start-ups have been quite successful which overshadowed some of the largest players in the marketplace such as, IBM. On the other hand, it was projected that the Europe and U.S. could be have emerged as the market leaders but they failed to do so at that
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