Importance Of Economies Of Scale
It is essential to grasp a thorough understanding of the concept of economies of scale, as they can be a key component in deciding the optimal and equilibrium size of firms and thus the structure of industries, the level of output and their prices. The magnitude of economies of scale depends upon the nature of the industry, i.e. the type of product produced.
Economies of scale can be further classified into internal …show more content…
Before moving ahead, it is important to quickly touch upon the mentioned shortcomings, which if properly addressed may bridge the gulf between diseconomies and economies of scale.
a) Limited access to financial markets: It is observed that majority of SMEs can’t easily access banks, mainly due to presence of high credit risks linked with absence of collateral and high SMEs credit administrative costs. Moreover, lack of reliable and competitive financial services in most of the developing nations, dampens the business competitiveness as cost of funds (interest) becomes sky