How a Small Business can enjoy Economies of Scale.

[Etini]

Economies of scale is the cost reduction advantage that big firms and companies enjoy by virtue of them being involved in large scale production. While it is operationally meant for big firms operating and producing in a large capacity, small businesses can tactically take measures to enjoy economies of scale. Those measures are:

1) Joint order of production inputs with similar businesses: This would help all the small businesses in the joint order to reduce cost because they would be given discount due to bulk order.

2) Use cloud computing to automate some processes: This would reduce inefficiency and frees up space for employees to focus on more important tasks. It also reduces the cost of hiring staff.

3) Shared resources: If possible, share office space, power and tech resources with other businesses around to reduce the cost of utilities.

 

[King bell]

To scale economies, small businesses may streamline production processes, outsource services, purchase in giant amounts thereby negotiating price favorably with suppliers and pooling resources for marketing and advertising. Small firms can optimize their production processes to reduce waste by investing in technology. Outsourcing accounting or IT functions offers potential savings and access to specialized expertise. Buying raw materials in huge quantities allows for quantity discounts as well as lower unit costs. For instance, collaborating with other small businesses in order to negotiate better prices from the suppliers can also reduce expenses. Pooling resources for marketing and advertising could lead to getting more prominent placements at lower costs. In addition, online sales via marketplaces and e-commerce platforms give opportunities for small businesses to reach more customers and increase profitability through economies of scale.