Economies of Scale Essay Example | Topics and Well Written Essays - 2500 words

Economies of Scale - Essay Example This concept is popularly known as 'Economies of Scale'. Many firms in different sectors of the economy are experiencing the economies of scale by virtue of expanding their economic activities to a greater level. The economies of scale may be internal or external. Internal economies of scale are experienced within the same firm while external economies of scale are experienced in the same industry. In this paper the internal economies of scale are discussed in detail in the Section-I. Subsequently disadvantages of the economies of scale for a firm as well as for the consumers of the firms experiencing economies of scale are described in the section-II and III. Finally the implications of the regulatory authorities on the concept of 'minimum efficient scale' has been described in section-IV. If the average cost per unit of input falls per unit increase in the output, then the firm is said to be enjoying the internal economies of scale. This in other words it can be expressed as a percentage change in all inputs leads to a greater percentage change in outputs. Here average total cost (ATC) first decreases because fixed cost such as buildings, equipments and management expenses remains constant and have been utilized to their optimum. The total cost is spread over a greater range of outputs. This increasing returns to scale is achieved till an optimum level after which any increase in the quantity of input, the average total cost(ATC) increases showing the diseconomies of scale. Firms which generally require large capital investments show economies of scale. This internal economies of scale is of five types, such as technical, commercial, managerial, financial and risk bearing economies. The pattern of the economies of scale is shown in the figure- 1. Figure-1: Various types of economies of scale (Source: http://www.bized.co.uk/educators/16-19/economics/firms/presentation/scale_map.htm ) There are various factors as shown in the figure-1 contributes to different economies of scale. Each factor has got significance for reduction in average cost of production thus making the output cheaper. Technical: Technical economies are when improved techniques benefits a firm to increase its production to a large extent. "Businesses with large scale production can use more advanced machinery (or use existing machinery more efficiently). This may include using mass production techniques, which are more efficient form of production" ( tutor2u.net). This technical economies of scale is achieved due to several factors, such as: Indivisibility of Plant:- Due to imperfect divisibility of factors the economies of scale occur and the long-run average cost falls because of this indivisibility of factors (Kaldor & Robinson, cited by Ahuza, 2004). In this case most of the factors are 'lumpy' i.e. they are available in large indivisible units which can therefore yield lower cost of production when they are used to produce a large output. Here example can be given of telecommunication industry where the initial investment in infrastructure is too high. So by increasing a larger clientele base only the fixed cost can be spread over and increasing return to scale may be seen. Likewise another example is radio-dispatching technology used by the police officers. The cost of installing the technology is about the same no

H&M Communication Campaign Case Study Example | Topics and Well Written Essays - 2000 words

H&M Communication Campaign - Case Study Example The realisation of that potential, however, is contingent upon the formulation and implementation of a market plan as which would create consumer awareness of the brand, on the one hand, and incite the purchasing decision on the other. This necessitates the capitalisation upon both Madonna and H&M's already existent market appeal and pre-existing consumer loyalty and trust. To ensure the popularisation of the brand, it is imperative that M by Madonna engage in a marketing communication campaign designed to disseminate information about the line and to familiarise the consumer fashion market with it. The primary goal of the campaign is to increase market awareness of the line, with campaign success measured in terms of message penetration as evidenced through sales figures. The campaign will be comprised of a mix of advertising and public relations, supported with direct mail. Paid advertisements will target the defined global consumer segment and public relations, the launching of the lines in various markets. Advertising will consist of magazine, billboards (outdoor advertising) and TV. Public relations will consist of the distribution of promotion packages at the launch events, with the former being highly publicised events featuring celebrity guests. M By Madonna offers the trendy young consumer an entire fashion range at an affordable price. Realising the importance of dress as a statement about who one is and where one is heading, the line extends consumers the opportunity to look fashionable and expensive' without having to pay dearly for it. 3 Background Founded in 1947, H&M has grown from a small Swedish fashion outlet to one of the world's largest fashion retailers, with over 1,300 stores and operations in 24 countries. Always associated with the youth market, H&M provides both male and female fashion consumers with trendy, often jet-setting, fashions and high quality products at affordable prices (Nolan, 2006). As such, it provides the youth market with the haut couture look at retail prices. The Madonna-H&M venture is a potentially promising addition to the youth fashion market. The resultant line, M By Madonna, provides the youth consumer with an entire range of youth clothing and accessories, suitable for wear at the office, at university/school, for leisure, formal and casual occasions. It is, in other words, a highly varied, multi-purpose line. M By Madonna combines between youthfulness and elegance and, as such, provides the fashion consumer with timeless, multi-purpose and multi-occasion designs. Distributed to fashion stores across the world, not to mention H&M outlets in March 2007, the line has tremendous market potential should the campaign succeed in capitalising upon both H&M and Madonna's market reputations and consumer appeals. 4 Situation Analysis 4.1 Goals The primary goal of this communication campaign is to create consumer awareness of them by Madonna line and disseminate relevant information regarding points of purchase, whether physical (stores) or virtual (web) locations. The secondary goal is to raise the visibility level of M By Madonna, in what has often been referred to as an increasingly retail-crowded consumer market environment and to establish awareness of the line as the optimal youth fashion choice. Other goals can be expressed as follows: Positioning of the line Branding Influencing positive consumer perceptions of he fashion line, thereby inciting the purchase