Accuracy of Data
Executive Summary The sizes of the firms and industry structure are determined by the economics factors, especially economies of scale and scope, the relation of market demand and supply, and the production costs. This essay tries to explain the variable structures in different industries, through these economics factors. ... This phenomenon is decided by certain economic factors, and the following addressing explains how these economic factors influent the industry structure. Factors that related to the firm sizes and industry structure The horizontal boundaries of the firms are mainly depended upon economies of scale and scope. ... 74) Due to the characteristics of different industries, the economies of scope and scale are inequable in each industry; hence, there are variable industry structure and firm sizes. ... Barrier to entry may be defined as a cost of producing which must be borne by a firm which seeks to enter an industry but is not borne by firms already in the industry. ... Consequently, these significant economies of scale and scope and high barrier to entry allowed larger firms to dominate the industry. A good example of this kind of industries is the Aluminum industry. Aluminum industry is a capital-intensive industry that a large portion of the total costs is tied up in fixed and semi-fixed costs. ... So, it can be said that the fixed cost and sunk cost of the Aluminum industry are very high, and there won’t be so many companies can afford this big mount fix cost. ... Then, Alcoa could get much greater economics of scale, that is, the cost per unit dropped more quickly as the volume of materials being processed increased. ... It can be illustrated by the apparel industry. ... So no one apparel firm can reduce its cost to a degree or achieve the economies of scale to dominate the industry.