<3.5 FIRMS> 

• Using the examples above as a guide, create your own slideshow to illustrate an example of each type of merger.

• LARGER SCALE means it is now COST EFFECTIVE to utilise LARGER MACHINERY, which MAKES LABOUR MORE PRODUCTIVE, meaning AVERAGE LABOUR COSTS FALL. 

• For example, as a coffee shop expands in size it can upgrade its expresso machine which allows for faster preparation of coffee.

LARGER SCALE means more workers & managers will be employed allowing for GREATER SPECIALISATION which MAKES LABOUR MORE PRODUCTIVE, meaning AVERAGE LABOUR COSTS FALL.

• LARGER SCALE means RAW MATERIAL ORDERS will also be LARGER meaning that SUPPLIERS WILL OFFER BULK DISCOUNTS, which will result in LOWER AVERAGE RAW MATERIAL COSTS. 

• LARGER SCALE means the firm has MORE FIXED ASSETS that can act as COLLATERAL (SECURITY FOR LOANS), meaning banks view them as LESS RISKY, and therefore offer them LOWER INTEREST RATES, which in turn LOWERS AVERAGE DEBT-SERVICING COSTS.

Using the concept of 'economies of scale' explain how TES managed to lower its average costs after 'doubling' the size of its campus. (Use the 4x economies of scale mentioned above with examples)

• The LARGER the SCALE of a business the WIDER the SPAN OF CONTROL & the LONGER the CHAIN OF COMMAND which inevitably leads to a higher amount of DELEGATION which can INCREASE THE POTENTIAL FOR MISMANAGEMENT

• These issues could easily result in costly errors that would result in HIGHER AVERAGE COSTS.

• The LARGER the SCALE of a business the LARGER the NEED FOR COMMUNICATION required to coordinate its operations, hence the POTENTIAL for MISCOMMUNICATION ISSUES GROWS.

• This can be especially problematic for MULTINATIONAL COMPANIES that have to deal with DIFFERENT TIMEZONES, CULTURES, and LANGUAGES.

• These issues could easily result in costly errors that would result in HIGHER AVERAGE COSTS.

• The LARGER the SCALE of a business the MORE ISOLATED and UNIMPORTANT the WORKERS MAY FEEL which can affect their productivity, which in turn RAISES AVERAGE COSTS.

Continuing our example, use the concept of 'diseconomies of scale' to explain how TES suffered rising average costs after trebling the size of its campus. (Use the 3x diseconomies of scale mentioned above with examples)