Question

Multiplant economies of scale have changed the American business landscape for the past 30 years.

What is the impact of such plants and compare their economies of scale with small businesses in your own hometown?

What would be an example of a company that has been able to bring about these multiplant changes and its impact on the local economy?

Answer 1

Multiplant economies of scale has drastically changed ease of doing business and has led to following advantages :

1. Reduced transportation costs
2. Better synergies in plant integration
3. Optimal allocation of resources
4. Lower cost of production and higher profitability
5. Better turnaround time
6. Higher scalability and accessibility in terms of distribution of products.

Such economies of scale is not possible for small scale steel producing units which lack sufficient capital expenditure and operating expenditure and hence their cost of production for higher quality goods is much higher.

Multiplant economies of scale is generally onserved in large multinational companies who specialise into mining and manufacturing industries like Rio Tinto, Anglo American, Shell, BP, Vedanta. They bring widescale production if multiple heavy engineering goods at lowest cost due to eceonomies of scale and various plants geographically located across world.