Things to consider before engaging into large-scale production

[Mellorando]

The term, “Large scale production” refers to the production of a commodity on a large scale with a large sized firm. It requires huge investments in plant and machinery. Large scale production can be carried out if the market size is large and expanding. A large-scale producer makes a saving in rent too. If the same factory is made to produce a large quantity of goods, the same amount of rent is divided over a large output. This means that the cost per unit in respect of rent comes to a much smaller amount.

What are the Motives for large scale production?
The following are some of the motives of large scale production.

1 Desire for economy.
2 Desire for increase in sales.
3 Desire for a large customer base.
4 Desire for large profits.
5 Desire to become a global company.
6 Desire for economic power.
7 Desire for continuous growth and
expansion.
8 Desire to increase demand.
9 Desire to overcome competition.
10 Desire to achieve monopoly status.
11Desire for achieving long term
profitability.


Advantages of Large Scale Production:
The following are the merits of large scale production:

1. Internal Economies:
Internal economies arise within the firm because of the expansion of the size of a particular firm. They are called the economies of scale.

2. External Economies:
External economies arise with the expansion of the industry. These are generally the result of large scale production and are associated with the advantages of localisation.

3. Division of Labour:
The large scale production is always associated with more and more division of labour. With the division of labour, per worker output increases. Hence, per unit labour cost is reduced in large scale production,

4. Use of machines:
The large scale production always makes use of machines. So, all the advantages of the use of machinery are available.

5. More Production:
The large scale industries can produce more goods. For instance, a big sugar factory can use molasses to make spirits and thus can reduce the cost of production of sugar.

6. Economies of Organisation:
With an increase in the size of the firm, the cost of management is reduced.

7. Low Cost of Production
The large scale production gives many types of economies. Suppose, there are two different factories, each producing 500 units of a commodity. For these two factories, there must be two managers. But if the scale of production is enlarged and in one factory we start producing 1000 units of the same commodity, the work can be supervised by one manager.
In this way, in the large scale production, the salary of one manager is saved. So, the cost of production is reduced.

8. Cheap and Easy Loans:

A large business can secure credit facilities at cheaper rates, because these firms enjoy credit and reputation in the market due to their fixed assets. Banks and other financial institutions willingly advance loans to these enterprises at a very low rate of interest

 

[Nite]

To a considerable extent, large scale production reduces the cost of production. Industries need power in great quantities in the form of coal, electricity, etc. Through large scale production, the industrialists can purchase that at cheap rates which reduces the expenditure per unit. And with the help of big machines the production can be made easily. Therefore, products that are manufactured by the big machineries are generally sold at a cheap rate. Yes, the division of labour in large scale production is large because in these units the machinery is used to a larger extent. So, the worker output for the use of machinery increases and all the benefits provided by the division of labour are reaped automatically.

Large scale production is also good for the workers, as they get nice accomodations, high salaries and other more facilities, which results in their improved efficiency.

 

[Kingsley]

Of course those things are essentially for us to consider before engaging in a large scale production. I know many will be of the opinion that one must access loans to start a large production. But that is not always true as start a large business or production requires the understanding of starting small. Many are so quick to think that for them to become great in business they must look for loans and start very big. And this thought line has gotten making into trouble today as they have used their inheritance as collateral to access laons. And the business failed woefully because they have failed to look at the business from the direction they were suppose to handle it from.

It is indeed so wrong to start thinking of having a large production outfit without starting from the scratch and gather all the necessary knowledge of the production process. When we start small we will help ourselves to have a more robust knowledge of how the business is suppose to withstand challenges at the more bigger picture.

This is the only way for us to get it right when we move to the business to a larger production outfit .