Long Run Costs and Economies of Scale
· Describe a potential business you might create and its product or service
Developing high technical products, Robot Company will assume to form. It will be based on the continuous research of developing brand new robots. Besides, facilities for manufacturing robots will be invested continuously. It is because that future targeting business should keep the level of high tech the highest.
· What size would it be?
It will start from very small firm. At the very first business, 3-4 friends who have the same major of robotics get together and work hand in glove. It is because this is technology-intensive industry so small quantity of production but highest cost for the specific customers will be appropriate at the beginning of it. However, on increasing the sales, its average cost may be decrease due to be able to buy bunch of raw materials at once and efficiency of labour. In that case, the size may be access to almost similar with large firm.
· What type and size of market would it target?
It will be targeted small and medium market because robot business can be applied to the process of manufacturing in the factories. At the beginning of the business, it starts small business with high average cost but if the size of firm increase to the medium or large level, its average cost will be deducted.
· What are some of its major costs, such as?
o Long-run costs
o Short-run costs
o Fixed costs
Short-run costs are what we can add according to the increase the demand of robot equipment such as labours and raw materials.
Long-run costs are about factors that can be variable during the long period. For meeting the increase demand, firms can build other factories or assembly lines and they are long run costs. Firms can enter and exit the market place.
Fixed costs are such as land, firm building and factory etc. On increasing the demand, they cannot be changed and just spread the cost to each unit manufactured. For example, the firm has to be equipped them regardless of the units demanded.
· Last, find a business similar to your idea by exploring the Internet. Post an additional paragraph on the business and its strengths and weaknesses in regards to the questions given above. Provide a link(s) to online information about the business.
This company is very specialized in that robot equipment and software industry. It hasn’t widely known to the public but most of the enterprises which have the manufacturing process automated use the ABB products.
Strength & Weakness
It is unique business so there are not many competitors. When they broaden the sales, they can approach even the small business firms. However, total average costs for manufacturing are too high. For example of fixed costs, when they started the business, initial fixed costs might be too high.
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