Business – 9.1 Location and scale – Scale of operations | e-Consult
9.1 Location and scale – Scale of operations (1 questions)
Login to see all questions.
Click on a question to view the answer
Market demand determines the volume of sales a business can realistically achieve; high demand can justify a larger scale to meet customer needs efficiently. Competition pressures firms to achieve lower unit costs and faster response times, often encouraging scale expansion.
- Advantage: Larger scale can achieve lower average costs through economies of scale, allowing the firm to price competitively and gain market share.
- Disadvantage: In a highly competitive market, a large scale can lead to excess capacity if demand falls, resulting in higher fixed costs per unit and reduced profitability.