Economies Of Scale In Mixed Economy

INTRODUCTION TO THE ISSUE Command Economy: •A socialist economy •An economy that is planned and controlled by a central administration.

•Market Economy: (a capitalistic economy) •Suppliers and buyers make the decisions about the production and consumption. •No Government interference. •Not planned or controlled by a central authority;

Mixed Economy •Mixture of socialist economy and capitalist economy. •Both the firms and a degree of state monopoly coexist. •All modern economies are mixed

EQUILIBRIUM: Economic Equilibrium: •Economic forces are balanced and economic variables will not in the absence of an external force. •It is the point at which quantity demanded and quantity supplied are equal. Market Equilibrium: •Market price is established through competition •Both buyers and sellers are agreed to buy and sell certain goods or services at a common price. •This price is often called the equilibrium price or market clearing price and will tend not to change unless demand or supply change.

FACTORS OF PRODUCTION: •factors of production (or inputs) are the resources employed to produce goods and services. i. Land ii. Labour iii. Capital

Returns to Scale “Returns to scale describes the relationship between the input and output of the firm.” Constant Returns to Scale: •A balanced change in all inputs leads to a proportional change in output

Decreasing Returns to Scale: •A balanced increase of all inputs leads to a less-than-proportional increase in total output

Increasing Returns to scale: •A balanced increase in all inputs returns more-than-proportional increase in total output. •This is also called Economies of Scale. Example: Let suppose, all inputs increase by a factor of 2, the resulted output should be:= constant return to scale •Output becomes twice = a decreased return to scale •Less than twice = an increased return to scale •More than twice

Economies of Scale Internal Economies of Scale: Bulk-buying economies • As businesses grow they need to order larger quantities of production inputs. So they will order more raw materials. As the order value increases, a business obtains more discounts and lower prices for the raw materials. Technical economies • Businesses with large-scale production can use more advanced machinery (or use existing machinery more efficiently). A larger firm can also afford to invest more in research and development. Financial economies • Through financing and taking loans by investing or sponsoring in the profitable projects or campaigns Marketing economies • Particularly promotional methods such as advertising and running a sales force Managerial economies • As a firm grows, there is greater potential for managers to specialize in particular tasks (e.g. marketing, human resource management, finance). Specialist managers are likely to be more efficient as they possess a high level of expertise, experience and qualifications compared to one person in a smaller firm trying to perform all of these roles.

Economies of Scale External Economies of Scale: • Transport and communication links improve • Training and education becomes more focused on the industry • Other industries grow to support this industry

Organization: Mitchell’s Fruit Farms Ltd. Introduction: • • • • •

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Established in 1933 Earlier named Indian Mildura Fruit Farms Ltd. After Independence, named "MITCHELL’S Fruit Farms Ltd." First food company with ISO 9001 accreditation in 1998 Quality raw materials, fresh from its own farms Tomatoes, Strawberries, Raspberries, Plums, Pineapples, Pears, Peaches, Oranges, Mangoes, Lemon, Guava, Grapefruit, Garlic, Cherries, Banana, Apricots, Apple. Export to USA, UK and Middle East Sugar and Pineapple is imported. Some quantity of mango is also imported.

VISION & MISSION: • To be a leader in the market by serving with quality products • To attract and retain its skilled management by fostering innovations, promotes and rewards initiatives. • To achieve profitable growth. PRODUCTS: • Jams, Jellies & Marmalade • Sauces & Ketchup • Squashes • Pickles • Confectionery (Candies & Chocolates) • Canned Food

Mitchell’s Economies of Scale Land / Farms • Mitchell’s has its own fruit farms where they have their own processing and growing facilities. These farms are producing raw material for the company Large Scale Production (Bulk-buying economies) • Mitchell’s is producing over 50 products which are countrywide available and producing at large scale. Human Resource (Managerial economies) • Considers its employees its most important asset. • Management and employee skills are constantly being updated through training courses and study tours both at home and abroad. Research and Development & Quality Control (Technical economies) • Massively investing in and keeping emphasis on quality control • R&D looks up to the new idea generation, newly formed samples • Quality Control section ensures quality of the product • QC Section is equipped with a main up-to-date laboratory, two line-control labs for the Groceries and Sugar Confectionery divisions, an incubation lab

SWOT ANALYSIS STRENGTHS: Tasty & Quality products. • Mitchell’s was the pioneer in the field of squashes, • They have export quality products in Pakistan. • Provide vast product lines. • Mitchell’s can compete in the field of food industry with other international companies because of ISO Standard quality products. • WEAKNESSES: High cost of the products. • • Lack in promotional and advertising campaigns.

OPPORTUNITIES: • Introducing new varieties of food products. • Can grow towards technological advancement in the field of food processing industry. • New distribution channels and increasing marketing trend.

THREATS: • • • • • •

Political instability. Petroleum prices inflation Increasing security threats in the country. Increasing competition in the market. Retention of key staff critical Possible negative publicity.

CONCLUSION • Mitchell’s is the largest and 1st ISO 9001 Certified food producing company in Pakistan. It was analyzed that the company having the well repute in the market, what they offer and what they produce the consumer accepted it with warm welcome. • Trying to maintain a same graph of satisfaction level and give customer a quality, fresh farm products direct from their own farms • Mitchell’s is concerned about the external information pertains to social, economic, political and technological trends and product/market environment. The information is analyzed to identify its strengths and weaknesses. Mitchell’s possess a nationwide smooth distribution policy. They are investing money on quality assurance of the products and R&D department is working a lot to keep their quality going.

Recommendations & Suggestions • Mitchell’s needs to take full advantage of having its own fruit farms. As it produces its own raw materials, therefore, products prices should be reduced more to a common man level. Its products should easily be available at all stores. It should improve its advertising campaign. It should further look into more areas which can benefit it with economies of scale such as marketing.