TEXT 13

Date: 2015-10-07; view: 429.

Reading

Vocabulary

1.Match the following Ukrainian words with their English equivalents. Use your dictionary if necessary.

а) виробництво

б) просування

в) розподіл

г) вузький

д) падати, знижатись

е) давати в борг

є) потужність, об'єм

ж)спричиняти

з) реклама

и)спроба

і) економія, обумовлена зростом масштабу виробництва

ї) активи

й) випускати

к) знижка

л) припускати

м) внутрішній

н) коштувати

о) зовнішній

п) мати місце, траплятися

р) купувати

с) описувати

1.Read text 13 using your dictionary. Think of the suitable title of the text.

Economists use the term economies of scale to describe a situation in which production costs fall as the scale of the organization increases. We have already examined some of the factors that will cause this to happen, for example fixed cost per unit will fall as output rises (average fixed costs). Discounts for bulk purchasing might also reduce material costs. Economies of scale can occur in all aspects of a business's activities. We will examine them in this chapter with the emphasis on production.

Technical economies Technical economies of scale are the true production economies. These arise where the costs of expanding capacity increase more slowly than the increase in output. The fixed cost per unit will fall. As a simple example let us assume that it costs £100 000 to buy a machine with the capacity to produce 100 000 items, and £150 000 to buy a machine with a production capacity of 200 000. Assuming all other costs stay the same, the first machine will produce units at a cost of £1 while the second will produce units at a cost of 75p.

A business may have a machine that is operating at 50 per cent capacity, whilst the rest of the factory is operating at full capacity. If the business expands to the point where that machine can be operated at full capacity then production costs will fall.

Buying economies Buying economies do not come only from discounts. Purchasing is a specialized skill and someone with a narrow range of goods to purchase for his company is more likely to develop expertise in the products available, the reliability of the suppliers and an understanding of how often and in what quantities the products will be needed. Such a division of labour is possible only in a large business.

Marketing economies The costs of advertising, distribution and sales promotion are high and can be a large proportion of the total cost of a good produced by a small or medium-sized business. Large businesses can undertake advertising on a national scale secure in the knowledge that spread over their total output the addition to the cost per unit will be minimal. Should advertising increase demand for a product over and above the cost of the advertising (advertising elasticity of demand greater than one) there may be technical economies possible in addition to the marketing economies. In industries where the production unit is relatively small, either by tradition or because of the nature of the business, or the technology employed dictates relatively small-scale production there may be attempts to gain marketing economies by cooperation. Agricultural marketing boards are an example of such cooperation.

Financial economies Large businesses have more assets, more products and greater

reserves than smaller businesses. This reduces the risk of lending to them and they can, as a result, often negotiate loans at a lower rate of interest than smaller businesses. The risk associated with launching a new product is less traumatic for a large business with the resources to cushion the shock of failure.

Administrative economies These include not only the ability to pay for and use efficiently the services of the best management ability available, but also to employ sophisticated computer systems that would be beyond the financial resources of a small business.

The five economies of scale given above can be considered as internal to the business. Large industries and a concentration of an industry in one area can often benefit small firms as well as large. Separate administrative services, such as the computer processing of payrolls, are available to all firms. The provision of suitable educational courses by local colleges, maintenance services offered by independent companies and the existence of businesses specializing in the production of certain components can all reduce the costs of individual businesses. These are known as external economies.

2.Comprehension check.

Read the text more carefully. Are the following statements true or false? Correct the false ones.

1. Economies of scale can take place in all aspects of a business's activities.

2. Buying economies involve developing expertise in the products available, the reliability of the suppliers.

3. Marketing economies come only from discounts.

4. One of the functions of advertising is to increase demand for a product.

5. The smaller business the larger risk associated with launching a new product.

6. Administrative economies arise only from the ability to pay for and use efficiently the services of the best management.

3.Find and write down a word or words in the text that mean the same as the following definitions. They are in the same order as they appear in the text.

a) the size of something, especially when compared to other things;

b) a lower price than usual;

c) e) the amount that a person or machine produces;

d) a high level of special knowledge or skill;

e) a piece of information in a newspaper, on television;

f) things that you do in order to advertise a product and increase its sales;

g) something of value that a person or company owns;

h) to take the chance of something unpleasant happening;

i) lack of success.