Edexcel Business A Level Revision

Internal economies of scale - The cost savings that can come about from the growth of the business itself e.g. as it increases the scale of its current operations this leads to a fall in unit costs. External economies of scale - The cost savings that come about from growth outside a business but within the market or industry in which it operates. All competitors benefit Growth - A common corporate objective which means expanding the sales revenue of a business, probably in the hope that profits will increase too. One reason for a business wanting to grow it to achieve economies of scale. By growing the scale of output, a business can achieve lower unit costs which can thereby improve a firm's competitiveness. Unit costs = Total production costs in period (£) / Total output in period (units) = £? How can economies of scale provide a Competitive Advantage?    The main types of Internal economies of scale are: Purchasing Technical Managerial Purchasing = B...

Maximum capacity - the maximum amount of output achievable if all resources are fully utilised. Capacity Utilisation - measures what proportion or percentage of the theoretical maximum possible outcome is actually produced. Under - utilization of capacity - means that some resources are not being used and production is not as high as it could be Over - Utilisation - means that the business is trying to produce more than its capital equipment was design for Unit costs - TOTAL COSTS (FC + VC) / CURRENT OUTPUT Within an individual business, capacity utilisation shows how much of the company's resources are actually in use. If all available resources, all labour, machinery and space are in use at any one time, the business cannot produce any more output and is said to be at 100% capacity utilisation. In the long run capacity CAN BE INCREASED by acquiring more resources e.g. bigger premises, more machinery, introducing a 3rd shift In the long run capacity CAN BE REDUCED...