There are various factors influencing the economies of scale of an organization. They are generally classified in to two categories as Internal factors and External factors.
1. Labour economies: if the labour force of a firm is specialized in a specific skill then the organization can achieve economies of scale due to higher labour productivity.
2. Technical economies: with the use of advanced technology they can produce large quantities with quality which reduces their cost of production.
3. Managerial economies: the managerial skills of an organization will be advantageous to achieve economies of scale in various business activities.
4. Marketing economies: use of various marketing strategies will help in achieving economies of scale.
5. Vertical integration: if there is vertical integration then there will be efficient use of raw material due to internal factor flow.
6. Financial economies: the firm’s financial soundness and past record of financial transactions will help them to get financial facilities easily.
7. Economies of risk spreading: having variety of products and diversification will help them to spread their risk and reduce losses.
8. Economies of scale in purchase: when the organization purchases raw material in bulk reduces the transportation cost and maintains uniform quality
1. Better repair and maintenance facilities: When the machinery and equipments are repaired and maintained, then the production process never gets affected.
2. Research and Development: research facilities will provide opportunities to introduce new products and process methods.
3. Training and Development: continuous training and development of skills in the managerial, production level will achieve economies of scale.
4. Economies of location: the plant location plays a major role in cutting down the cost of materials, transport and other expenses.
5. Economies of Information Technology: advanced Information technology provides timely accurate information for better decision making and for better services.
6. Economies of by-products: Organizations can increase the economies of scale by minimizing waste and can be environmental responsible by using the by- products of the organization.