Homework Question on Economies of scale
- Explain the following concepts and give examples from your work experience:
- Economies of scale and scope Transaction costs
- Economic value added (EVA) Strategic alliances and real options Balanced scorecard and values
- Generic strategies and imitation Segmentation and strategic groups
- Vertical integration 5 forces and complements
Homework Answer on Economies of scale
Economies of scale are the cost benefits resulting from an increase in output of products, or, the factors making the average production cost of a commodity to fall as the output value increases. The economies of scale are categorized into two types; internal and external economies of scale (Gilpin & Gilpin, 2001).Transaction costs in an organization can be internal or external, and it focuses on the company transactions occurring when goods or services are transferred from the supplier to the consumer following a technologically independent boundary.
Economic value added theory is based on the assumptions containing the requirements for improvement of social actions and the measure of surplus value of an investment (Andersson, 2008). For example; structural conduciveness whereby people are aware of some challenges and can act.Strategic alliances are cooperative approaches whereby companies bring together resources to generate primary competitive benefits and enhance competitiveness.
Real options theory is a decision analysis for business investments capturing the managerial flexibility in adopting decisions in responding to dynamism of the market developments (Gilpin & Gilpin, 2001). For example, a company can establish shareholders values by determining, managing and exercising real options relating to investment portfolio.Balanced scorecard is a planning and management systems that align business activities to achieving the company vision and putting strategies that will improve internal and external relations of the company goals (Andersson, 2008).