They can borrow loans at a lower rate of interests as they are less likely to go bankrupt The disadvantages are that larger businesses may act as monopolies and thus charging prices well above the average cost of production. But in a number of respects, small businesses are at a distinct disadvantage compared with their larger competitors. Its credit in the money market is high and the banks are only too willing to give advances. Large firms sometimes become overwhelmed by their administration systems. Problems in coordination: When a business grows beyond a particular size, problems arise in co-ordination. And a wrong decision may at times become damaging for the firm. This results in a loss of customers. This is due to the lack of supervision. The expenses of administration and distribution per unit of production in a big business are much less. Less efficient than big firms. A large-scale producer has generally to depend on foreign markets. There would be multiple divisions and departments. A small sugar factory has to throw away the molasses, whereas a big concern can turn it into power-alcohol. Low cost of credit reduces cost of production. Share Your Word File Owing to laxity of control, costs of production will go up. The modern factory system, with its extensive use of machinery and division of labour, is responsible for large-scale production. A larger firm can be safer from the risk of failure as it has a more diversified product range. Coordination of all their activities would prove to be difficult. A small concern will simply collapse under such a strain. Problems in coordination: When a business grows beyond a particular size, problems arise in co-ordination.There would be multiple divisions and departments. There is wasteful competition which does no good to society or to businessmen. Bureaucracy: Large firms can be overwhelmed by their administration system. As an enterprise can be defined as private business, it can thus be separated into two main categories which are small firms and large firms. With larger amount of capital and financial resources, the large scale firms can afford to spend more on research and experiments which ultimately lead to the discovery of new machines and cheaper techniques of production. Large-scale contracts: Large scale contracts are often profitable and can be only won by larger firms because smaller firms do not have the resources to carry out the work. In addition, being less well-known than its larger competitors, SMEs may find it more difficult to convey to their customers the security that a large company can offer them. Next, let’s check the advantages and disadvantages of a large-scale sharehouse. A large business can secure credit facilities at cheap rates. A … The large scale production is conducive for the development of technology also. A firm expands its scale of production for the purpose of earning larger profits and thereby derives many economies of large scale production which, in turn, help it in lowering the costs of production and increasing its productive efficiency. A business can range from a single proprietor enterprise to a large corporation which employs thousands of workers across multiple countries. ADVERTISEMENTS: Large companies have quite a few advantages over smaller companies, but smaller companies have a corresponding set of advantages over large companies. Objectives of the chapter Define “size” of firms in terms of turnover, employees and capital employed. Individual tastes are not, therefore, satisfied. Costs often rise on account of the dishonesty of employees or waste of material by them. This may not only affect current and future profit prospects but because of this, the very survival of the firm may even be threatened. (i) Economy of Specialized and Up-to-date Machinery: There is a large scope for the use of machinery which results in lower costs. Privacy Policy3. It is only in a large business that every person can be put on the job that he can best perform. A large producer can work it continuously and reap the resulting economies. Successful research may lead to the discovery of a cheaper process. Also, the amount of money spent on advertisement per unit comes to a low figure when production is on a large scale. Disadvantages of mergers Our mission is to provide an online platform to help students to discuss anything and everything about Economics. – Lots of Perks The pros and cons in summary: Advantages of mergers. A larger business can offer more advancement, a more recognizable name that could help in the execution of work duties and potentially more pay and benefits than a small business. The foreign markets may be cut off by war or some other upheaval. The limited availability of resources for use in other markets C. The lack of … An economy of scale is a range of factors that can benefit large firms and allow them to have some competitive edge over their smaller rivals, and is not just about buying in bulk.In the following essay I will be exploring the advantages and disadvantages to firms of them operating on a large scale. As a firm expands its scale of operations, it is said to move into its long run. Thus, the same amount of expenditure being distributed over a larger output results in a lower cost per unit. This means that the cost per unit in respect of rent comes to a much smaller amount. A. This is referred to as a diseconomy of scale, and it’s a major drawback that growing businesses need to pay attention to. The large-scale producer thus gets the best out of every person he employs. A large-scale producer cannot pay full attention to every detail. Large-scale producers must fight for mar­kets. 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