MODULE TITLE:  BUSINESS MANAGEMENT TECHNIQUES

TOPIC TITLE:  BUSINESS ORGANISATION AND STRATEGIES

LESSON 2:  THE SCALE OF PRODUCTION

INTRODUCTION - The scale of production is influenced by a number of factors including the demand for a product and the technology available to an industry.  This lesson explores the influences on the size of firms and considers why there are so many small firms when it would appear that large-scale production is more advantageous.

YOUR AIMS - At the end of this lesson you should be able to:

• outline the factors influencing the scale of production
• assess the likely economies of scale from which a firm can benefit if it expands
• appreciate that large-scale production can bring disadvantages
• understand how firms can combine by vertical and horizontal integration
• appraise the advantages of small-scale firms and understand their position in the economy.

QUESTIONS -

1. How might market factors affect the scale of production?

2. What is meant by the term 'economies of scale'.

3. What is the most suitable size of business for a quality chocolate retailer? Give reasons.

4. What are external economies of scale?

5. Why may a small business owner want to avoid growth?