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A global business has adopted a strategy which aims to lower the average cost of its product by increasing output - HSC - SSCE Business Studies - Question 6 - 2016 - Paper 1
Question 6
A global business has adopted a strategy which aims to lower the average cost of its product by increasing output. What is this strategy called? (A) Outsourcing (... show full transcript
Worked Solution & Example Answer:A global business has adopted a strategy which aims to lower the average cost of its product by increasing output - HSC - SSCE Business Studies - Question 6 - 2016 - Paper 1
Step 1
What is this strategy called?
Answer
The strategy adopted by the global business is referred to as Economies of Scale. This concept describes the cost advantage that arises with increased output, which allows the business to reduce the average cost per unit. As production scales up, companies can often distribute fixed costs more widely, leading to improved profit margins.