Economies of scale occur when the marginal cost of the firm on production cuts. They can occur as a result of changes at the macroeconomic level, such as a reduction of borrowing costs or new infrastructure, or improvements at the business level. This means that the firm can sometimes exploit economies of scale, or lack of economies of scale, based on variables outside of his control.
In the nineteenth century economist Alfred Marshall was the first to be distinguished from internal economies of scale, which are controlled by the firm and external economies of scale which affect the industry as a whole. Marshall argued that external economies of scale will lead to positive externalities and significantly contribute to economic growth. The invention of the Internet has created external economies of scale for businesses of all types by reducing the cost and time required to gather information; interact with customers and partners, as well as to speed up operations.
Internal economies of scale can arise from different sources. Economic theory suggests that the scale effect occurs as firms begin to specialize in their activities. This specialization can occur in the production process, administrative process or the distribution process. For example, in the micro sense, the employees, using the keyboard can increase their marginal productivity is becoming a better typist, which reduces costs and time, each additional word typed.
Technical economies of scale can be achieved by improving production equipment and production processes that a firm uses. When Henry Ford introduced the Assembly line in his automobile factory, it significantly improved the economy of their company scale. By the time was other companies make it more efficient manufacturing process, the Assembly line has already moved from the stage of internal economies of scale.
Some large, reputable firms can implement financial internal economies of scale at the expense of borrowing at lower interest rates than their competitors. A lower rate of decline in interest expense on extension of capital. This allows additional units to be produced with less costs. At a more aggregated scale, financial external economies of scale may occur whenever the market rate of interest falls and borrowing costs decline across the economy.
Globalization has led large businesses to improve economies of scale, allowing them to achieve more cheap resources around the world. It may be cheaper, for example, the involvement of the workforce in labour-rich developing countries than in the United States. These scale not just to extend labour; any input resources obtained at a lower cost may reduce marginal costs, if the cost of search, transportation, or power does not wash out any income. Theoretically, globalization allows performance in the world should be the maximum, allowing more specialization, division of labor and economies of scale commensurate with the combined resources around the globe.