8. Contributions of LSOs

Question 1

Economies of Scale 1?

Answer 1

• Most of the advantages enjoyed by the large organisation come under the heading of economies of scale.

o The term refers to lower costs per unit of output as a result of operating on a larger scale. In other words, producing a lot results in each unit being produced more cheaply.

o Note that diseconomies of scale can set in if the organisation becomes too big and complex to be managed efficiently.

• Often referred to simply as market power, economies of scale can arise in a wide range of activities of the large corporation.

o Because of its scale, it might enjoy direct financial economies such as:
■ lower cost of finance
■ lower cost of transport

o Other economies of scale can be found in:
■ Production methods
■ Equipment and technology

Question 2

Positive Contributions of LSOs

Answer 2

■ Provide employment
Large scale organisations employ a large percentage of our total workforce.

■ Develop Australia’s industrial base
>what large organisations do will have an impact throughout industry and society.

■ Stimulate infrastructure growth
>Large organizations need facilities such as transport and communications systems/
> It is government that plans and provides these facilities.
>Because of the importance of large corporations, governments at all levels frequently plan infrastructure growth in consultation with likely corporate sector users.

■ Earn export income
>government is keen to promote exports for the foreign currency they earn. Large corporations are commonly large exporters.
> Investment in the production of manufactured goods has the dual benefits of:
1. Lowering spending on imports by Australians
2. Developing an industrial base for the export of secondary) products

■Gross domestic product
> LSO’s are responsible for more than 50% of Australia’s GDP.

Question 3

Negative contributions of LSOs?

Answer 3

 Carbon emissions and other pollution‐ Some LSO’s are also the main emitters of carbon into our atmosphere, contributing to climate change.

 Outsourcing to overseas countries‐ Many LSO’s have outsourced parts of their operations to other countries and jobs are lost in Australia.

 Downsizing‐ reducing staff members

 Importing machinery and raw materials‐It is bad if the company chooses imported resources over locally produced goods because our taxes will be paying for the goods.

o Knocks out smaller competitors
o Downsizing causes large-scale redundancy
o Inflation
o Pollution
o senior executives of LSOs are often paid heavy wages