Convenience

(a) Standard economies-of-scale curve
Cost of production per unit ($)
Cost of production per unit ($)
B
Number of units produced
(b) Change in technology that shifts economies of scale
and may make small-business manufacturing possible
A
Original economies of scale
New economies of scale
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F I G U R E 5 . 4
Economies of Scale in Small-Business Organizations
Small businesses sometimes find it difficult to compete in manufacturing-related industries because of the
economies of scale associated with plants, equipment, and technology. As shown in (a), firms that produce
a large number of units (that is, larger businesses) can do so at a lower per-unit cost. At the same time,
however, new forms of technology occasionally cause the economies-of-scale curve to shift, as illustrated in (b).
In this case, smaller firms may be able to compete more effectively with larger ones because of the drop in
per-unit manufacturing cost.
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Part 2:
Planning
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Emphasizing Distinctive Competencies
As we defined in Chapter 3, an organization’s distinctive competencies are the aspects of
business that the firm performs better than its competitors. The distinctive competencies
of small business usually fall into three areas: the ability to identify new niches in estab-
lished markets, the ability to identify new markets, and the ability to move quickly to
take advantage of new opportunities.