Leave small informal comments to students initial posts. Agree or disagree (don’t point out their fault), have new insights on what they’re talking about or have something else to say about their post. 70-100 words each.
Walmart and general motors are two large companies. They both have strong sales when it comes to grocery and vehicles. However Walmart has more land and more units throughout the world. They have a larger land area and that leads to low cost of production. But they make very good money as a company. Now is general motors moves or tries tp expand there may be a slight decline in vehicle sales or company loss because high production cost.
Diseconomies of scale are an economic concept that a business sees that there is a increase in marginal cost when the output is increased. When businesses first start to expand they have problem finding the right people to take charge. For example management. Skilled workers. Workers that know how to efficiently make a product and use machinery to get the job done on a timely fashion.
Wal-Mart can produce products cheaply by having the resources to mass produce products, store the products that have been produced, outsourced labor, and have the capital to begin the initial product production. Wal-Mart has the capital to purchase resources in large quantities to produce their product. Buying resources in mass allows for a cheaper price per unit. Wal-Mart has large distribution centers (land) to hold the products that are mass produced. This is an example of something that can turn into a diseconomy of scale. Space that is taken up by inventory costs a corporation money. If a product that has been mass produced doesn’t sell at the rate that it was predicted that it would, it holds up space in the distribution center. At this point the company can either sell the product at a discount, or hold onto the product, meaning that they will need to allocate space for the new mass produced products coming in. Cheap labor is widely available to Wal-Mart because they outsource their production on many of their products. This could eventually work against them due to new legislation that taxes American companies that outsource.
General Motors can produce products cheaply enough to make a profit, but don’t have as much wiggle room as a corporation such as Wal-Mart. GM can outsource some of their labor such as steel production and parts production, but assembly takes place in the U.S. The labor to produce the parts is cheap enough that they are able to pay a standard wage to its workers in the U.S. Time is an issue with producing cars. If a 2016 model of a car is produced in a batch of 50,000 and only 2,000 sold within the first year, then the manufacturer gets stuck with a surplus that decreases in value every year as well as takes up valuable space.
General Motors can use specializations in different areas of the firm to create new innovations. The labor specializations give the company a competitive edge in the automotive market. General Motors also has several other firms under their umbrella and the company has efficient capital. This allows them to produce more output at a lower cost. Diseconomies of scale can occur as a firm expands and the managerial and labor sectors are not properly coordinated in areas of greatest need within production. Leadership issues have caused firms to fail. Many firms start small and some develop into larger companies but when managers do not have the experience to operate on a larger scale and convert by making decisions for the good of the firm diseconomies of scale will likely occur. A single controller of a large firm has too much responsibility. Executives must accomplish economies of scale by placing teams inside the firm to delegate tasks accordingly with the growth of the organization. Often times when one individual handles all of the firm’s revenue greed can be an issue.
Management advantages of outsourcing include cost advantages, increased efficiency, a better focus on other core areas, access to skilled resources, time zone advantages, etc. The list can go on and on. Ultimately, if a manager of a company utilized the process of outsourcing, then he/she would be able to make their service offerings better with high quality deliverables and shrink the time it takes for their product to reach the marketplace. Staffing flexibility is another key advantage of outsourcing. For instance, if an accounting department may be short a few people during tax season or auditing periods, then outsourcing these functions can provide the additional resources for a fixed period of time at a consistent cost.
The management advantages of outsourcing is being able to fulfill a weakness in the company from an outside source. It may be a little expensive however it could be cheaper to outsource a service than pay for training for internal employees. Since that job/department is outsourced, the company has more flexibility to focus on other matters that contribute to the companies core competencies.
At the organization that I currently work at, we outsource most of our IS services. We hired another company to make and manage the company website as well as handle our IT issues. We use to have a small department internally that would handle these issues, however throughout the years some retired and others left to different companies. They never got around to rehiring but they still needed someone to fulfill those duties for the company so they outsourced to a small IT service company. They come in frequently to check the software the company uses to conduct business. The only negative experience I’ve witnessed at the company is if something bad happens, like if the software crashes (which it has), it takes time for someone from the company to come in and fix the issue. Usually they aren’t able to come in until the afternoon or the next day due to other clients. During this time, the company is not able to create work orders, make payments, schedule deliveries, and other activities the company engages in through the crashed software. If we had our IT department internally, they would be able to solve the problem immediately.