Economies of Scale

Cost advantages associated with large operations. **"Economies of scale" is a simple concept that can be demonstrated through an example. Assume you are a small business owner and are considering printing a marketing brochure. The printer quotes a price of $5,000 for 500 brochures, and $10,000 for 2,500 copies. While 500 brochures will cost you $10 per brochure, 2,500 will only cost you $4 per brochure. In this case, the printer is passing on part of the cost advantage of printing a larger numb…
STUDY
PLAY
Economies of Scale
Cost advantages associated with large operations.

**"Economies of scale" is a simple concept that can be demonstrated through an example. Assume you are a small business owner and are considering printing a marketing brochure. The printer quotes a price of $5,000 for 500 brochures, and $10,000 for 2,500 copies. While 500 brochures will cost you $10 per brochure, 2,500 will only cost you $4 per brochure. In this case, the printer is passing on part of the cost advantage of printing a larger number of brochures to you. This cost advantage arises because the printer has the same initial set-up cost regardless of whether the number of brochures printed is 500 or 2,500. Once these costs are covered, there is only a marginal extra cost for printing each additional brochure.
Economic Forces
Factors that affect general health & wellbeing of a nation. Ex. Unemployment; interest rates; and economic growth.
Heuristic
Rules of thumb that simplifies decision making.
**refers to experience-based techniques for problem solving, learning, and discovery that find a solution which is not guaranteed to be optimal, but good enough for a given set of goals.
Prior-Hypothesis bias
Cognitive bias resulting from the tendency to base decisions on strong prior beliefs even if evidence shows that those beliefs are wrong.
Representative Bias
Cognitive Bias result from the tendency to generalize inappropriately from a small sample of single vivid episode or event.
Illusion of Control
Bias with tendency to overestimate one's own ability to control activities and events.
Group Think
Pattern of faulty and biased decision making that occurs in groupie whose members strive for agreements among themselves at the expense of accurately assessing information relevant to decision.
Skunkworks
group of intrepreneurs who are separated from the normal operation of an organization to encourage them to devote all their attention to developing new products.
Planning
Identifying and selecting appropriate goals and courses of action; one of the four principal task of management.
strategy
Cluster of decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals.
Mission Statement
Declaration of organization purpose that identifys the organazations products and customers and distinguishes the organization from it's competitors
Scenario Planning
Multiple forecasts of future conditions followed by analysis of how to respond effectively to each of those conditions.
Strategic Leadership
The ability of the CEO & top managers to convey a competing vision of what they want the organization to achieve to their subordinates.
SWOT Analysis
Planning exercise in which managers identify organizational strengths, weaknesses, oppurtunities, and threats.
Customer relation management
Technique used IT to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time
Total quality management
technique that focuses on improving the quality of an organizations products and services
Inventory
Stock of raw materials, inputs, and component parts that an organization has on hand at a particular time.
Six sigma
technique used to improve quality by systematically improving how value chain activites are performed and then using statistical methods to improvement
Flexible Manufacturing
Technique that attempts to reduce the cost associated with the product assembly process or the way services are delivered to customers.
Process Re-engineering
Fundamental rethinking and radical redesign of businesses process to achieve dramatic improvement in critical measures of performance such as cost, quality, service, and speed.
Organizational Design
Process by which managers make specific organizing choices that result in a particular kind of organizational structure,
Organizational Structure
Formal system of task and reporting relationships that coordinates and motivates member so they work together to achieve goals.
Job design
Process which managers decide how to divide task into specific jobs.
Job simplification
Process of reducing the number of tasks that each worker performs.
Job Enrichment
Increasing the degree of responsibility a worker has over his or her job.
Authority
power to hold people accountable for their actions and to make decisions concerning the use of organizational resources.
Heirarchy of Authority
Chain of command, specifying the relative authority of each manager.
Span of Control
The number of subordinates who report directly to a manager.
Organizational Ethics
Moral's, values, rules, and beliefs that establish the appropriate way for an organization and its members to deal with each other and with other people outside the organization.
Sociocultural Forces
Pressures emanating from the social structure of a county or society or from the national culture
Power Distance
degree to which societies accept the idea that inequalities in the power and well being of their citizens that are due to differences in individuals physical and intellectual capabilities and heritage
Satisficing
Searching for and choosing an acceptable or satisfactory response to problems and opportunites rather than trying to make the best decision.
YOU MIGHT ALSO LIKE...