ECONOMIES OF SCALE ANGELA R HARRIS
Past few weeks of studies has enlightened us with many concepts and ideas that
businesses practice in order to maximize profits, increase return on investment and
differentiate them to survive and sustain the trends of the consumer market. One of the
key factors discussed is economies of scale which has a huge impact in the current
business environment as it also plays a vital role to create barrier for other small
businesses to enter as a possible contender or competitor in the same industry. Through
this dissertation I would highlight key components around the concept of economies of
scale to help elaborate how it influences the business or a specific industry.
Economies of Scale basically means that buying or selling in bulk is always cheaper.
This is what Wal-Mart, Sam’s Club, and Costco practice to stay in business and to
differentiate them from a local grocery store. Economies of scale is the reason why we
buy package of toilet paper that has 36 rolls, or anything that is buy one get one free.
The more we buy at one time, the less it costs us per item. It’s like grandmother’s
adage of “everything is cheaper by the dozen”.
As an example, Costco can stock up huge shipments of bread loaves from Oroweat,
while a mom and pop business may only be able — or need — to buy a case of bread.
