Toyota Motor Company's Economies of Scale

The Toyota Motor Company has successfully utilized the concept of economies of scale to increase its efficiency and reduce costs. This was achieved by dividing labor into specialized activities, allowing for more efficient production and minimizing changes when improving or changing product models. Additionally, the company invested in large-scale equipment, expanding operations and reducing unit costs.

Economies of Scale
Toyota Motor Company
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The Toyota Company has been selected to discuss the concept of economies of scale and the
successful utilization of this concept in within the company. Economies of scale refer to the
occurrences when the long-run average costs goes down when the overall output goes up.
The increase in the production to a substantial level generally results in the economies of scale.
There are various areas that are focused while approaching the economies of scale. One of them
is division of labor towards specialized activities. The other is the use of capital equipment
(Thomas & Maurice, 2004).
Toyota Company has amply used both the aforementioned elements to orient towards the
economies of scale. The company has individuals and departments that are specialized in
production of specific units and conducting specific tasks day in and day out.
This has increased their efficiency substantially (Christopher, 2000). All the components are
produced separately at each of the allocated division and then the parts are assembled at final
stage.
This has allowed the company to tweak only concerned areas when improving or changing the
product model and not the whole manufacturing unit. Along with that, it has kept the economies
of scale to an appreciable level.
Moreover, the company has focused on utilizing the capital equipment that is, it has invested in
large scale equipment that has expanded the size of operation and reduce the unit costs of
production (Holweg, 2007).

References
Thomas, C. & Maurice, S. (2004). Managerial economics (pp. 343-344). Maidenhead: McGraw-
Hill Education.
Christopher, M. (2000). The agile supply chain: competing in volatile markets. Industrial
marketing management, 29(1), 37-44.
Holweg, M. (2007). The genealogy of lean production. Journal of operations management,
25(2), 420-437.