conomies of scale in manufacturing location

Economies of Scale

Economies of scale refer to the long-term cost advantages gained by production expansion. True, economies of scale benefit businesses by lowering long-run average costs and expanding production capacities. As a corporation grows in size, its marginal costs vary due to bulk-production discounts and marketing economies. Furthermore, unit costs continuously decrease due to the spread of fixed managerial costs and product enhancement operations (McConnell, Flynn, and Brue, 2013).

Apple and Toyota Motor

Apple and Toyota Motor are two companies from distinct industries that have been named to Forbes’ Global Leading 2000 list. Apple is a multinational technology business that creates and distributes a variety of goods such as the iPod, Apple TV, Mac personal computers, and iPhone handsets. Moreover, the firm offers online services including Apple Music and iTunes Store. On the other hand, Toyota motor is an automotive manufacturer. The company has its headquarters in Toyota, Japan. In a nutshell, these two multinational corporations benefit from diverse sources of economies of scale in their business operations.

Key words: Economies of scale, production, marginal costs

Unit 4 Discussion

Apple is an international company based in California. The firm designs and sells electronic products and software applications. Apple’s hardware products include iPod, iPhone smartphone, the Apple TV, and Mac personal computers. Besides, Apple provides online services including Apple Music, iCloud, iTunes Store, and iOS App Store. The multinational firm is ranked 9th on Global leading 2000 companies with its market value and sales at $752 and $217.5 B respectively. There are several significant sources of economies of scale in Apple. First, the company’s size is a significant factor. Apple operates across the globe and offers a substantial amount of products into the market. Secondly, the multinational company has effective advertising strategies for its products and services. Therefore, it advertises nearly all its products, hence reducing marginal costs as opposed to smaller firms that only advertises a few products. Finally, Apple offers its goods and services at affordable prices. As a result, the company has a better competitive position in the market as compared to its rivals (Gershon, 2013).

Toyota Motor

On the other hand, Toyota Motor is a Japanese automotive manufacturer. The company’s headquarters is based in Toyota, Japan. The firm is placed 10th on Forbes’ list of Global leading 2000 companies, with market value and sales at $171.9 B and $249.9 B respectively. Certainly, Toyota Motor is the world’s largest automotive manufacturer. Competent managerial systems are possible sources of economies of scale in Toyota motor. The automotive company has qualified and trained managers and employees who make profitable decisions (Carlino, 2012). Moreover, the company has good marketing economies. Equipment and machines are sold in bulk and inputs are procured at concessional prices. Consequently, the firm’s average selling costs have declined gradually.

References

Carlino, G. A. (2012). Economies of scale in manufacturing location: theory and measure (Vol. 12). Springer Science & Business Media.

Gershon, R. A. (2013). Digital media innovation and the Apple iPad: Three perspectives on the future of computer tablets and news delivery. Journal of Media Business Studies, 10(1), 41-61.

McConnel, C., Flynn, S., & Brue, S. (2013). Microeconomics (Brief Ed.). New York, New York: The McGraw-Hill Companies.