Economies of Scale - Understanding the Concept and Its Importance

Economies of scale refer to the cost advantages that a business can achieve by increasing its production output. This article explains the concept of economies of scale, its types, and importance in business operations. It also discusses how AutoEdge can benefit from economies of scale and avoid diseconomies of scale.

Running head: ECONOMIES OF SCALE
Economies of scale
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The economies of scale
The economies of scale is related to the reduced costs per unit which takes place as a
result of increase in the total output of a product. The economies of scale is known to be the
comparative advantage which the large entities have over the smaller ones (Athanassiou,
2015). There are basically two types of economies of scale. They are the internal economy
and the external economy. The economies of scale can be termed as a significant feature of
the business. One of the main function of the economies of scale is to lower the cost per unit
and the average cost. The business also does not go beyond the economies of scale. When
the business grow and the expenses star to increase, it will lead to diseconomies of scale. By
using the economies of scale perfectly, it will lower the unit cost for AutoHedge and will also
help them in developing internal opportunities (Baumers et al. 2016). The firm AutoEdge will
be acquiring economies of scale in many ways. It can acquire specialization as well as
separation off labor in order to achieve greater returns. Diseconomies of scale will lead to
lowing returns to scale and is a kind of approach which gives reason for what happens when
the economies of scale are no longer favorable for the organization. Therefore, AutoEdge
must see that the diseconomies of scale does not take place.
AutoEdge using economies of scale
The economies of scale is achieved when the goods are produced on a large scale with
very few input costs (Athanassiou, 2015). A company will be able to raise its productivity by
lowering its cost which states that the company is operating quite efficiently. When the
techniques are used efficiently with time, the employees will be able to improve its skills
which will be needed for them in order to perform its jobs efficiently in the market. The
company AutoEdge will also be able to propose more products for their customers and of a

ECONOMIES OF SCALE
superior quality which will be saving both the time and money. Although the diseconomies of
scale may take place due to many reasons which may include poor communication within a
business which might have not been recognize the process of communication. The control of
the employees will be lost quickly when the company have grown and also raised the number
of workers (David Myers CEcD, 2015). The huge number of workers of the AutoEdge will
also make it easy for the employees for deceasing the performance since the managers have
huge number of employees to manage. Diseconomies of scale will also be taking place when
there will be presence of large number of workers.

ECONOMIES OF SCALE
Reference list
Athanassiou, M. (2015). Economies of Scale. Wiley Encyclopedia of Management, 1-1.
Baumers, M., Dickens, P., Tuck, C., & Hague, R. (2016). The cost of additive manufacturing:
machine productivity, economies of scale and technology-push. Technological
forecasting and social change, 102, 193-201.
David Myers CEcD, M. A. (2015). economies of scale. Economic Development
Journal, 14(3), 11.
Polkinghorn, A. (2016). Economies of scale. The British Journal of General
Practice, 66(648), 351.