Scale of production means the size of the business operation.
It refers to the volume or quantity of goods that a company or organization produces in a given period of time.
Scale of production can be measured in terms of units produced, weight or value.
Different types of scale of production
There are three main types of scale of production:
- Small-scale production. This is typically characterized by the production of small batches of goods using relatively simple equipment and techniques. Small-scale production is often used for high-value goods or goods that require a high degree of customization.
- Medium-scale production. This is a step up from small-scale production, with larger batches of goods being produced using more sophisticated equipment and techniques. Medium-scale production is often used for mass-market goods or goods that require a moderate degree of customization.
- Large-scale production. This is the production of very large batches of goods using highly automated and specialized equipment. Large-scale production is often used for commodity goods or goods that require a low degree of customization.
Increasing scale of production
Increasing the scale means business expansion by employing more of all the factors of production such as land, labor and capital to produce more products.
Companies and organizations choose to increase the scale of production when it is most appropriate for their needs.
Factors that influence this decision include the size of the market, the cost of production, and the level of customization required.
Consequences of large scale of production
Increased scale may lead to both economies of scale and diseconomies of scale:
- Economies of scale. These are factors that lead to a decrease in Average Cost (AC) of making a product as a business increases the scale of its operations. It is good to become a large firm. These factors could be related to purchasing, technology, finance, marketing or management.
- Diseconomies of scale. These are factors that lead to an increase in Average Cost (AC) of making a product as a business increases the scale of its operations. It is not good to become too large. These factors could be related to management, communication, coordination or motivation.
In summary, the optimal scale of production for a company or organization will vary depending on the specific circumstances.
However, by understanding the different types of scale of production and the potential benefits and drawbacks of each, companies can make informed decisions about how to produce their goods.
