Indiana Institute of Technology Economies of Scale Discussion

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Review all classmates’ posts, and choose two to comment on.Try to select classmates who do not yet
have feedback so that everyone receives feedback.
In your response to each classmate, please answering the following questions below:
a. Of the six (6) ways to achieve economies of scale identified by your classmate’s post, which
is most feasible for the company to pursue in increasing economic profit?
b. Why did you choose that way (in letter a. above)? Provide five (5) reasons for your choice
using microeconomic and macroeconomic concepts and terms in your response.
Note: Be sure to refer to the Discussion Board General Information – Requirements and
Guidelines (posted in Module 1 Activities and Assessments folder) to guide your discussion responses.
To post your response, open the discussion (by clicking on the title), then on the next window, click Create
Thread. Hint: you may wish to copy/paste the discussion questions into your response box so that you can place
your response next to each question.
Tina D.
Discussion Board 4B
COLLAPSE
Discussion 4B
Choose a company to use for this discussion.
I will be utilizing Molson Coors Inc. for this discussion.
Using the web, familiarize yourself with the company (review their website as well as recent
news about the company related to the company’s business operations, market share, or
overall profitability).
Molson Coors Inc., created from the merger between Adolph Coors Company (holding company of Coors Brewing
Co) and Molson Inc. in 2005, is the 5th largest beer company in the world. With 9.7 billion dollars in net sales
revenue in 2020, Molson Coors is sold in over 100 countries, has 42 breweries and has over 17000 employees.
Explain the company that you have researched, and its business model (i.e. how it makes
money).
Molson Coors uses a cost leadership and differentiation strategy. As with other beer companies, selling a high
volume of beer means setting a competitive price. The differentiation strategy entails selling products that are
“different” than the competition’s products. Breweries can accomplish this by using different ingredients, amounts,
and formulas to create new beers that taste different to appeal to consumers taste preferences. For example, Molson
Coors offers Coors and Cors Lite, but also brews craft beer such as Killian’s Irish Red, Redd’s Hard Apple, and Old
English.
Think about the six (6) ways that firms can achieve economies of scale, and describe how to
apply the following to the company in order to achieve economies of scale:
Specialization: How can this be applied to your business specifically to achieve economies
of scale?
Division of labor: How can this be applied to your business specifically to achieve
economies of scale?
Advanced technology: How can this be applied to your business specifically to achieve
economies of scale?
Automation devices: How can this be applied to your business specifically to achieve
economies of scale?
Quantity discounts: How can this be applied to your business specifically to achieve
economies of scale?
Financial strength (credit): How can this be applied to your business specifically to achieve
economies of scale?
Specialization: Specialization occurs when an individual worker can produce more units efficiently than another
worker with less experience, training, education, etc. In the case of Molson Coors, specialization occurs when
trained and highly skilled employees run the machinery and work with the equipment utilized to brew beer. Since
they are highly skilled, they would produce more than other workers without these skills and training.
Division of labor: Division of labor occurs when a job is split up into smaller tasks which are performed by a
specific employee who can essentially focus on that one specific task. Assembly lines utilize division of labor. For
example, Molson Coors implements division of labor by having one person in charge of packaging and another
solely in charge of quality control. Others each work on specific equipment along the production line.
Advanced technology: Implementing new software that could speed up the production line processes is a tactic to
reach economies of scale. For example, if Molson Coors implemented equipment that could produce several
different brands simultaneously or could reduce waste.
Automation devices: Replacing humans on an assembly line with automated devices will increase production speeds
resulting in economies of scale. Most of their production line is automated.
Quantity discounts: Since Molson Coors is a billion-dollar company, it can take advantage of buying raw materials
in bulk, taking advantage of quantity discounts that smaller companies are not able to do. This lowers per unit cost.
For example, they can take discounts if their raw materials for packaging such as cardboard, glass, and plastic are
bought in bulk quantities.
Financial strength (credit): Molson Coors is a billion-dollar company with a long history. If needed, they would be
able to purchase capital assets such as new equipment or facilities, whereas a smaller company could not. They
would also be able to borrow capital at a lower interest rate due to their credit being in good standing and a low-risk
company.
https://ir.molsoncoors.com/overview/default.aspx.
Discussion Board Post B.
Post #2
Jason W.
M4 Discussion B
COLLAPSE
Explain the company that you have researched, and its business model (i.e. how it makes
money).
The company I have chosen is Lowe’s. Lowe’s operates a network of home improvement retail
chains, with a view to providing high-quality, reliable products to customers across north
America. (Cleverism 2018). Lowes makes its money by selling these high-quality products to
customers like you and I who are either building new construction, remodeling a home,
upgrading appliances, or fixing a plumbing leak.
Think about the six (6) ways that firms can achieve economies of scale, and describe how to
apply the following to the company in order to achieve economies of scale:
Specialization: How can this be applied to your business specifically to achieve economies
of scale?
Lowes specializes in selling many products, for this discussion on specialization, I will focus on
the lumber sales. Lowes specializes in selling quality lumber at a fair price to their customers.
This specialization in lumber sales gives builders, contractors, and home-owners confidence in
the product they are purchasing. These returning customers and sales gives Lowes a competitive
advantage and they use the volume of lumber sold as leverage to purchase bulk lumber at
discounted rates from their suppliers. These economic of scales bulk purchases allows Lowes to
remain competitive in the market for their customer on price and quality.
Division of labor: How can this be applied to your business specifically to achieve
economies of scale?
Lowes utilizes division of labor with it’s employees by assigning the employees to a specific
department within the store. Using this division of labor is a benefit to the customers when
questions arise with the products. The department representative is knowledgeable in the specific
area of responsibility and can answer the customers question quickly and precisely to meet the
customers satisfaction. By assigning employees in a specific area reduces the tasks and questions
from other areas allowing the employee to focus and more efficient in one area of responsibility.
Advanced technology: How can this be applied to your business specifically to achieve
economies of scale?
Lowes knows that its is behind in technology and needs improvements in this area to keep up
with customer expectations and its competition. Lowes has put initiatives in place in effort to
improve in this area and renovating it technology platform. They are committed to changing their
price management system and adopting predictive scheduling tools as well as re-platforming
their website. They are also looking into mobile tools to make the customer user experience more
satisfying.
Automation devices: How can this be applied to your business specifically to achieve
economies of scale?
Lowes sells automation devices such as home security systems, Wi-Fi, speakers, and lighting.
Each of these automated systems are the latest on the market and Lowes provides a variety of
products to create a good customer experience. Lowes has contracts with the producers of these
automated devices creating a partnership between the two organizations. By limiting the
distribution of these devices, Lowes creates an economic of scale by leveraging these contracts
with these producers that limits the distribution supply chain.
Quantity discounts: How can this be applied to your business specifically to achieve
economies of scale?
Lowes provides quantity discounts on their products. This typically comes in the form of a sale
on products when multiple of the same product is purchase by its customers. A good example is
on outdoor solar lights. The price of one is more than if you purchase a package of ten. They can
apply this discount by selling more products but also buy reduced packaging and handling the
products by the Lowes associates. The reduced labor from the associates handling the products
allows Lowes to apply discounted rates to its customers.
Financial strength (credit): How can this be applied to your business specifically to achieve
economies of scale?
Lowes services roughly 20 million customers a week between Canada and the US. It 2020
Lowes employs over 300,000 employees and sales for 2020 nearly hit $90 billion. As of July
2021, Lowes has a financial ranking of 4.61 out of 10. This ranking puts Lowes in the safe zone.
(Gurufocus 2021). With Lowes ability to achieve this safe ranking, this allows them to borrow
money at lower rates than if they were ranked lower on the scale. Financial firms use the ranking
system to evaluate companies and their risk to create capital or equity in the markets.
Risenews.com. risenews.com – This website is for sale! – risenews Resources and Information.
(n.d.). Retrieved November 12, 2021, from https://risenews.com/5-key-technology-moves-lowesmaking-renovate-its-retail-business.
Loading… (n.d.). Retrieved November 12, 2021, from
https://www.gurfocus.com/term/rank_balancesheetNYSE:LOW/FinancialStrength/Lowesmpanies.
Lowe’s Companies, Inc. to host third quarter 2021 earnings conference call on November 17th.
Lowe’s Corporate. (n.d.). Retrieved November 11, 2021,
from https://corporate.lowes.com/newsroom/press-releases/lowes-companies-inc-hostthird-quarter-2021-earnings-conference-call-november-17th-11-10-21.
Lowe’s. Cleverism. (2018, February 24). Retrieved November 11, 2021, from
https://www.cleverism.com/company/lowes/#:~:text=%20Business%20model%20of%20Lowe%E2%80%99s%20%201%20Customer,whic
h%20the%20Company%20provides%20information%20on…%20More%20.

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Economies of Scale

Economic Profit

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