After reading this article you will learn about:- 1. Concept of Large-Scale Production 2. Characteristics of Large-Scale Production 3. Causes 4. Classification 5. Disadvantages.
Concept of Large-Scale Production:
Large scale production or mass production means the production of items on large scale employing very specialized machines and processes. All specialized machines and processes are arranged in operation sequence to suit the product.
A large scale production unit is no longer a single family or small group of persons working with few cheap, simple tools or small quantities of raw material, but a compact and closely organised mass labour composed of thousands of individuals, cooperating with large quantities of expensive and intricate machinery through which pass a continuous and mighty volume of raw material on its journey to the hands of the consuming public.
Characteristics of Large-Scale Production:
Large scale production is carried with:
(a) Large quantities of raw material,
(b) Very specialized machinery,
(c) Huge capital,
(d) Huge and highly trained labour force, and
(e) Efficient and effective organization.
Causes of Large-Scale Production:
The following developments and causes led to the increased size of the business unit i.e., the large scale production:
(i) Specialization or division of labour.
(ii) Improvements in the means of transport. Without adequate transport facilities, large scale production would be impossible, for every increase in output requires an expansion of the market for the commodity and distribution over a wider field.
(iii) The development of the limited company too has been an important factor in making possible large-scale production involving huge amounts of capital.
(iv) There has been a great expansion in the demand for all kinds of things consequent on the rise in the standard of living that has taken place in recent tires. This is another cause for large scale production.
(v) The prospect of greater profits was a definite incentive to the producer to expand his scale of production, for many economies were open only to the large firm, thereby giving it the great advantage of lower costs than to smaller competitors.
(vi) In some cases the hope of securing a measure of monopoly power as a means of keeping up prices may have been a further spur to expansion.
(vii) Producers frequently put back into their firms a large proportion of their profits and thus many large-scale production businesses were built up.
Classification of Large-Scale Production:
The advantages of large-scale production may be classified as External and Internal economies of production.
1. Internal Economies:
Economies which any single firm enjoys by virtue of its own individual policy is termed as Internal Economies. Such economies are related to the administrative, technical and commercial spheres of business.
Some examples of internal economies are:
(i) Economy affected in the purchase of raw material, machinery, tools etc.
(ii) Economy on shop-floor.
(iii) Economy in by-products.
(iv) Economy in packing department.
(v) Economy in factory offices.
(vi) Economy in using transport.
(vii) Economy in sales department etc.
2. External Economies:
Economies open to an industry as a whole (say automobile industry) are known as External Economies. Such economies are enjoyed by an industry as a whole when most of the firms comprising it are concentrated in one area. For example, external economies may apply to a number of units manufacturing Sports Goods and located in one industrial area. Examples of external economies enjoyed by various firms can be such as obtained by the establishment of a bank, post office, a pucca road, bridge or a railway line which enters straight in the locality (i.e., industry).
External economies are those economies in production which depend on increase in the output of the whole industry rather than on increases in the output of the individual firms. External economies occur where an increase in the size of an industry leads to lower costs for the individual firms composing the industry.
Disadvantages of Large-Scale Production:
The large scale production suffers from the following disadvantages:
(i) Loss of motive of self-interest:
The interests of the sole proprietor and his firm are one, with the result that there is less waste and greater efficiency. This is because all the profit goes in the pocket of the sole proprietor. It is but natural that the man who owns his business is often spurred on by a pride of achievement that is unlikely to influence the salaried manager of a large-scale production unit.
(ii) Bureaucratic control:
The large firm is more impersonal than the small one. In a large firm, in order to ensure the carrying out of the policies, rules and regulations are necessary and must be strictly adhered to. This is not the case with a small firm.
(iii) Sluggish response to changes:
In a large firm, even to make changes for improvement, the manager will have to convince the Board of Directors to the soundness of the changes before he is allowed to make them; whereas, in a small firm changes in policy or organization can be introduced without delay by the proprietor.
(iv) Difficulty in managing:
As the firm expands, it becomes difficult to coordinate and control the activities of large number of persons working therein.