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Name: Instructor: Course: Date: Paper Analysis Analysis # 1 According to an article in the New York Times, Ford Group intends to implement a strategy that prices their Lincoln MKZ Hybrid in a similar way to its gas counterpart. While they do expect the gas engine to continue being their flagship car, it is also expected that the gas-electric hybrid will carve out a niche for itself.
Economies of scale are the cost advantage that comes from a product’s increased output. They arise due to an inverse relation between fixed costs per-unit and quantity produced. The more cars produced in this case, the lower the fixed cost per unit, as the cost is shared among a larger quantity of cars. They may also reduce unit variable costs due to synergies and operational efficiencies. Economies of scale are in two major types; external that arises from industry size and other extraneous factors and internal that arises from inside the firm (Motavalli 1). While benefits of this concept are obvious, I think they also impact on such areas as finance. For instance, a company like Ford Group would have a lower capital cost compared to smaller firms due to their ability to borrow at lower rates of interest. However, I believe that, even with this advantage, I think there is a finite upper limit to how Ford Group can grow in achieving economies of scale. When the hybrid car production reaches a specific number, it will be more expensive to manage due to bureaucracy, complexity, and operational inefficiency. The results from Ford Group are also hard to ignore. For instance, the model T line of production and task specialization were integrated with standardization, as can be seen in their hybrid plant. ...
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