What Are The Advantages And Disadvantages Of A Large Business?


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Veronica Perera answered
The advantages of a large business is that they can enjoy economies of scale. This occurs when a business grows in size, the average costs per unit falls.
They enjoy bulk buying economies, technical economies, managerial economies and marketing economies of scale, financial economies of scale compared to small businesses.
Bulk buying means that they can enjoy purchasing in larger quantities and getting a discount from the suppliers.
Technical economies is where they can enjoy lower unit costs by using a larger machinery frequently which can produce larger quantities of output at any time.
Managerial economies means that they are able to employ specialist managers to cover up particular areas of the business and keep them fully employed at all times.
Marketing economies of scale means that larger businesses can afford to hire a sales team that could cover up a particular region, and undertake advertising even though they are expensive as they are able to cover up the expenses that are incurred.
Financial economies means that businesses are able to borrow loans and meet other financial obligations at a lower discount rate compared to small businesses because banks have confidence in them.
The advantage to the customer is that they will enjoy lower costs as a result.
Larger businesses are able to offer better customer facilities such as hire purchase agreements and better credit terms. They can also offer a wider range of goods and thus there is greater consumer choice.

The disadvantages are that larger businesses may act as monopolies and thus charging prices well above the average cost of production. Larger businesses tend to locate in the best areas and may not locate in areas that are lacking in business activity. So therefore government intervention is required.
Larger businesses may exploit consumers by convincing them to buy products that may be harmful to consumers, they may produce products cheaply and may not always be in a good condition. They may not label products and may persuade consumers to sign agreements that take their rights away and do not provide accurate information. Weights and measures may not be accurate and consumers may buy less than they had ordered.
Workers can also be exploited by discriminating them against others. They may be forced to work in dangerous conditions and pay them less than they demand. Workers may lose job security as a result.
Larger businesses produce products in the cheapest way possible, and this way has the most negative externalities. This can cause pollution and other environmental problems. Therefore government intervention is required.
Larger businesses may also experiece diseconomies of scale. This occurs when a business grows in size, the unit cost rises.
These are the advantages and disadavantages of larger businesses.

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